Free trade and the national interests
Free trade and the national interests
Endy M. Bayuni, The Jakarta Post, Santiago
Is forging trade liberalization measures, at a time when the
economy is still struggling to get back on its feet, really in
the best interest of the nation?
President Susilo Bambang Yudhoyono definitely thinks so, which
is why he traveled all the way to Chile last weekend -- spending
70 hours flying there and back, and less than 60 hours in its
capital, Santiago -- to attend the Asia Pacific Economic
Cooperation (APEC) summit.
The trip and the timetable of back-to-back meetings, which he
himself described as "inhuman" because it left little time to
rest, was part and parcel of his economic policy to bolster
exports.
The economic rationale is as follows: Indonesia needs to
increase its exports to accelerate annual growth of gross
domestic product to the targeted 6 percent to 7 percent and
create the millions of new jobs needed to curb its massive
unemployment.
In today's complex world, trade is a multilateral game: If
Indonesia wants to export, it must also open its markets to
foreign goods.
In the past, APEC was one of the forums through which
Indonesia negotiated to ensure mutually open markets with the 20
trading partners in the grouping. Although no agreement is
legally binding, APEC members are morally obliged to abide by the
deals they make, especially since they are all endorsed by their
heads of state.
On the other hand, trade liberalization under the World Trade
Organization (WTO) -- of which Indonesia is also a member -- is
binding and the APEC summits have been used effectively to push
negotiations at the WTO.
Indonesia has also entered into binding free trade agreements
(FTAs) within the Association of Southeast Asian Nations (ASEAN).
ASEAN, for its part, has established FTAs with its East Asian
partners, Japan and China.
Indonesia cannot excuse itself easily from its free trade
obligations, especially since Susilo, along with the 20 other
APEC leaders, reaffirmed on Sunday at the end of the Santiago
summit their commitment to the so-called Bogor Goals of setting
up an Asia-Pacific free trade and investment area.
The goals, set out at the 1994 APEC summit in the West Java
town of Bogor under the Soeharto administration, give a deadline
of 2010 for developed countries and 2020 for developing
countries.
The Asian financial crisis of 1997-98 had, however, put a
damper on these earlier moves to dismantle trade and investment
barriers among APEC member countries.
Meanwhile, a rising anti-globalization movement arose across
the world in response to the negative impacts of trade
liberalization measures: increased poverty, particularly for weak
and marginalized groups, and a growing gap between rich and poor
countries.
To further undermine the credibility of the free trade, many
countries that once championed the concept, including the United
States, imposed trade barriers such as extending subsidies to
protect their industries and workers in response to political
pressures.
Such consequences thus beg the question as to whether
Indonesia should once again embrace free trade fully, the way it
did in the 1990s.
Still fresh in the minds of many people is Soeharto's famous
-- and now infamous -- remarks in explanation of his initiative
to launch the 1994 Bogor Declaration: "Like it or not, and ready
or not, we have to join free trade in this era of economic
globalization."
Little could he know then that many would later hold him
accountable for moving too soon and too fast in dismantling trade
barriers, leaving Indonesia, like many other "Asian Tigers",
vulnerable to speculative forces, especially in the financial and
stock markets.
Indonesia, more than any other country in Asia, paid the heavy
price of too much free trade, many anti-free trade economists and
activists argue today.
Not so fast, said Aburizal Bakrie, the chief economy minister.
"The financial crisis would have happened all the same, with
or without Indonesia moving toward trade liberalization measures
in the 1990s," the Coordinating Minister for the Economy said in
Santiago.
Indonesia did learn its lessons from that episode to be on a
sure footing once again in embracing free trade now, he said.
Aburizal, formerly chairman of the Bakrie Group, said at the
end of the day, the benefits of free trade still outweighed the
risks, so Indonesia actually had only one course.
Susilo went one step further: "We will move forward with
globalization. In the past, we failed to take full advantage of
free trade and to curtail or minimize the excesses of
globalization. We're not going to make that mistake again."
Indonesia can continue to embrace free trade and at the same
time protect some of its industries -- and jobs too -- against
imports by using the "injury clause" permitted under the WTO
rulings. This is something that Indonesia had not applied enough
in the past while other countries, including the U.S. and Europe,
invoked them freely in the name of protecting national interests.
Susilo has thus ordered Minister of Trade Mari Elka Pangestu
to come up with a new trade strategy, one that seeks to bolster
Indonesia's exports.
But no export strategy -- no matter how well it is designed to
tap free trade -- can change Indonesia's fortunes unless it is
complemented and supported by other measures at home.
For one, Indonesian products must be competitive, and most
Asian countries today inevitably benchmark their products against
China, which can manufacture just about any and every product
cheaply, more efficiently and of international quality standards.
This means Indonesia must eliminate the many factors that have
hampered its economic recovery: corruption, legal uncertainties,
market distorting subsidies, inflexible wage policy, rising labor
militancy and poor economic infrastructure.
Implemented holistically -- that is, in the international and
domestic spheres -- embracing free trade can be in the greater
interest of the nation.
Susilo and his Cabinet must now return home from Santiago to
face the daunting task of turning the dream of free trade
benefits, including more jobs, increased income and greater
prosperity for the people, into a reality.
Endy M. Bayuni, The Jakarta Post, Santiago
Is forging trade liberalization measures, at a time when the
economy is still struggling to get back on its feet, really in
the best interest of the nation?
President Susilo Bambang Yudhoyono definitely thinks so, which
is why he traveled all the way to Chile last weekend -- spending
70 hours flying there and back, and less than 60 hours in its
capital, Santiago -- to attend the Asia Pacific Economic
Cooperation (APEC) summit.
The trip and the timetable of back-to-back meetings, which he
himself described as "inhuman" because it left little time to
rest, was part and parcel of his economic policy to bolster
exports.
The economic rationale is as follows: Indonesia needs to
increase its exports to accelerate annual growth of gross
domestic product to the targeted 6 percent to 7 percent and
create the millions of new jobs needed to curb its massive
unemployment.
In today's complex world, trade is a multilateral game: If
Indonesia wants to export, it must also open its markets to
foreign goods.
In the past, APEC was one of the forums through which
Indonesia negotiated to ensure mutually open markets with the 20
trading partners in the grouping. Although no agreement is
legally binding, APEC members are morally obliged to abide by the
deals they make, especially since they are all endorsed by their
heads of state.
On the other hand, trade liberalization under the World Trade
Organization (WTO) -- of which Indonesia is also a member -- is
binding and the APEC summits have been used effectively to push
negotiations at the WTO.
Indonesia has also entered into binding free trade agreements
(FTAs) within the Association of Southeast Asian Nations (ASEAN).
ASEAN, for its part, has established FTAs with its East Asian
partners, Japan and China.
Indonesia cannot excuse itself easily from its free trade
obligations, especially since Susilo, along with the 20 other
APEC leaders, reaffirmed on Sunday at the end of the Santiago
summit their commitment to the so-called Bogor Goals of setting
up an Asia-Pacific free trade and investment area.
The goals, set out at the 1994 APEC summit in the West Java
town of Bogor under the Soeharto administration, give a deadline
of 2010 for developed countries and 2020 for developing
countries.
The Asian financial crisis of 1997-98 had, however, put a
damper on these earlier moves to dismantle trade and investment
barriers among APEC member countries.
Meanwhile, a rising anti-globalization movement arose across
the world in response to the negative impacts of trade
liberalization measures: increased poverty, particularly for weak
and marginalized groups, and a growing gap between rich and poor
countries.
To further undermine the credibility of the free trade, many
countries that once championed the concept, including the United
States, imposed trade barriers such as extending subsidies to
protect their industries and workers in response to political
pressures.
Such consequences thus beg the question as to whether
Indonesia should once again embrace free trade fully, the way it
did in the 1990s.
Still fresh in the minds of many people is Soeharto's famous
-- and now infamous -- remarks in explanation of his initiative
to launch the 1994 Bogor Declaration: "Like it or not, and ready
or not, we have to join free trade in this era of economic
globalization."
Little could he know then that many would later hold him
accountable for moving too soon and too fast in dismantling trade
barriers, leaving Indonesia, like many other "Asian Tigers",
vulnerable to speculative forces, especially in the financial and
stock markets.
Indonesia, more than any other country in Asia, paid the heavy
price of too much free trade, many anti-free trade economists and
activists argue today.
Not so fast, said Aburizal Bakrie, the chief economy minister.
"The financial crisis would have happened all the same, with
or without Indonesia moving toward trade liberalization measures
in the 1990s," the Coordinating Minister for the Economy said in
Santiago.
Indonesia did learn its lessons from that episode to be on a
sure footing once again in embracing free trade now, he said.
Aburizal, formerly chairman of the Bakrie Group, said at the
end of the day, the benefits of free trade still outweighed the
risks, so Indonesia actually had only one course.
Susilo went one step further: "We will move forward with
globalization. In the past, we failed to take full advantage of
free trade and to curtail or minimize the excesses of
globalization. We're not going to make that mistake again."
Indonesia can continue to embrace free trade and at the same
time protect some of its industries -- and jobs too -- against
imports by using the "injury clause" permitted under the WTO
rulings. This is something that Indonesia had not applied enough
in the past while other countries, including the U.S. and Europe,
invoked them freely in the name of protecting national interests.
Susilo has thus ordered Minister of Trade Mari Elka Pangestu
to come up with a new trade strategy, one that seeks to bolster
Indonesia's exports.
But no export strategy -- no matter how well it is designed to
tap free trade -- can change Indonesia's fortunes unless it is
complemented and supported by other measures at home.
For one, Indonesian products must be competitive, and most
Asian countries today inevitably benchmark their products against
China, which can manufacture just about any and every product
cheaply, more efficiently and of international quality standards.
This means Indonesia must eliminate the many factors that have
hampered its economic recovery: corruption, legal uncertainties,
market distorting subsidies, inflexible wage policy, rising labor
militancy and poor economic infrastructure.
Implemented holistically -- that is, in the international and
domestic spheres -- embracing free trade can be in the greater
interest of the nation.
Susilo and his Cabinet must now return home from Santiago to
face the daunting task of turning the dream of free trade
benefits, including more jobs, increased income and greater
prosperity for the people, into a reality.