Industrial Sovereignty Post-US Supreme Court Ruling

Jakarta (ANTARA) - The global trading landscape today presents a significant irony. The weakening of protectionism in the heart of a developed nation simultaneously creates both opportunities and threats for developing countries.

When the US Supreme Court overturned President Donald Trump’s reciprocal tariffs, the “America First” policy suddenly lost its legal footing.

This ruling is not merely a domestic matter for Washington, but rather a signal of the erosion of the legitimacy of the International Emergency Economic Powers Act (IEEPA) in regulating global trade flows.

Amid this instability, Indonesia’s position within the BRICS bloc becomes a crucial instrument for renegotiating its economic standing and industrial sovereignty on the international stage.

This global paradox aligns with the thinking of Dani Rodrik, an economist from Harvard University. In his theory, “The Global Governance Paradox,” Rodrik reminds us that the ambition of economic integration often clashes with domestic political sovereignty, creating systemic uncertainty that weakens developing countries without solid industrial policies.

The US Supreme Court ruling proves this point; Trump’s policies failed because they clashed with the US Constitution. However, for Indonesia, this reduction in tariffs for Asian countries will be meaningless if the “foundations” of the national industry are still weakened by the increasingly apparent symptoms of early deindustrialization.

Amid the opening of global markets, the pulse of our manufacturing sector—as reflected in the Purchasing Managers Index (PMI)—is actually struggling, remaining below the expansion threshold since mid-2024.

The consistent decline in the index indicates that the processing sector is trapped in a zone of stagnation. The problem stems from a harsh reality: weak orders and stockpiles of goods, which are not just statistical figures but rather a cry from an ecosystem that is losing competitiveness due to long-standing “high-cost economics.”

We are witnessing a painful contradiction: external pressures are easing, but domestic industries are facing internal pressures.

This situation requires us to revisit the thinking of Soemitro Djojohadikusumo, a prominent Indonesian economist. In his concept of a national economic structure, Soemitro emphasized that industrialization is not just about building factories, but rather an effort to transform the economy from a colonial model that only exports raw materials into a national economy based on local value addition.

For Soemitro, economic independence can only be achieved if there is synchronization between monetary, fiscal, and sectoral policies that support the strengthening of domestic production structures.

Without this synergy, global economic openness will only turn Indonesia into a market for the products of other countries’ industries.

Nobel laureate economist Joseph Stiglitz echoes this view. He warns that without active industrial policies, opening up markets will only trap developing countries as suppliers of raw materials or dumping grounds for foreign products.

It is impossible for our products to compete in the international market if energy costs, natural gas prices, and logistical inefficiencies continue to be a heavy operational burden.

Without precise structural reforms, the tariff reductions in America will only create a stage for regional competitors, such as Vietnam, while Indonesia remains a spectator in its own country, flooded with imported goods.

Indonesia needs more effective strategic steps to stem this deindustrialization:

First, a total regulatory audit and synchronization of spatial planning. The government must break down sectoral egos that hinder investment. Industrial zones must transform into self-contained “one-stop” ecosystems, where all operational permits are completed before investors build factories. Land uncertainty is the main enemy of industrialization.

Second, protection of the domestic market through mandatory SNI (Indonesian National Standard). Standardization is not just about quality, but also a legal instrument for protecting the market internationally. Customs supervision must be strengthened with an early detection system for dumping practices to stem the flood of substandard goods that disrupt local prices. The domestic market is the first line of defense for industry.

Third, recalibration of the local content (TKDN) calculation mechanism. We must stop being just physical assemblers of foreign technology. The weight of TKDN must be shifted to the aspects of design and research & development (R&D). Local innovation must be at the heart of production so that state spending truly flows into the pockets of domestic industries and strengthens the value chain in accordance with Soemitro’s vision.

Fourth, acceleration of technology through aggressive fiscal incentives. The transition to Industry 4.0 and green technology requires real support. Extending tax holidays for industries that retrofit energy-efficient machines is urgently needed. As the UNIDO report states, economic resilience depends on the strength of the industrial structure that links upstream to downstream.

Fifth, revitalization of human resources through total partnerships. Vocational curricula must be fully integrated with the real needs of industry. The “learn, intern, work” concept must ensure that graduates have ready-to-use technical skills, so that the cost of retraining in companies can be significantly reduced. Humans are the driving force behind the transformation of the economic structure.

Ultimately, Indonesia’s economic sovereignty will not be born from the compassion of Washington DC’s policies, but from the courage to make a total correction to the domestic industrial structure.

The US Supreme Court ruling is only opening a small window; what determines whether we become winners or losers is the determination to stem deindustrialization.

It is time for Indonesia to use its status in BRICS and the weakening of US legal authority to renegotiate a dignified trade position.

Strengthening manufacturing is a strategic necessity so that Indonesia does not get stuck in a middle-income trap forever.

*) Rioberto Sidauruk is an observer of strategic industries, currently serving as an expert staff member of the AKD DPR RI.