RI should reap benefits from information era

By Djauhari Oratmangun

GENEVA (JP): The recent Asia Pacific Economic Cooperation (APEC) summit in Manila has endorsed the Information Technology Agreement (ITA) by calling for its conclusion in the forthcoming WTO ministerial meeting, which will take place next week in Singapore.

This endorsement has not come as a surprise to most countries, because since the QUAD's (the U.S., European Union, Canada and Japan) ministerial meeting in Seattle in September 1996, these countries have been actively pursuing this issue through bilateral approaches.

But is Indonesia benefiting from ITA?

This question needs an answer. To do so, we need to educate the industry sector on ITA.

The proponents of ITA agreed that the reality is there to prove it: We are now living in the era of the information super- highway. We cannot prevent technology advances in information technology (IT) products such as computers, semiconductors and others which are rapidly influencing the way business is conducted.

The recent World Bank Report has predicted that the information technology sector will be the largest industry in the world in the next century, and will provide the foundation upon which most other industries will be built.

Realizing that IT products would facilitate the advent of the information age, the QUAD, in particular the United States, suggested that there should be a "multilateral agreement" to reduce tariffs on them.

This agreement aims to give businessmen better access to IT products and to provide greater scope for competition. At the same time, consumers will also benefit from cheaper IT products, such as PCs. The QUAD is aiming to reach an agreement on IT products to coincide with the Singapore Ministerial Conference, in order to achieve free trade in IT products by the year 2000.

The QUAD's objective through ITA is the agreement by the ITA signatories to eliminate barriers to trade -- especially high tariffs on IT products -- by the year 2000, with the staging of tariff cuts beginning in 1997.

According to the first proposal presented by the U.S., the product coverage of ITA will include computers, hardware products, semiconductors and integrated circuits, software, telecommunications equipment and other IT products such as semi- conductor manufacturing equipment. In general terms, the IT products to be covered by ITA include calculators, computers, computer parts, telecommunications equipment, magnetic media, resistors, printed circuits and semiconductors, and integrated circuits.

Recognizing the importance of the ITA and realizing the eagerness of the proponents, as well as being under pressure to have an ITA before the Singapore conference, many IT producing countries, particularly in Asia, have prepared a "request list" to be included in the product coverage of the ITA.

As a member of APEC, which has also endorsed the ITA, Indonesia needs to benefit from the opening of the IT foreign markets. The domestic industry, which is heavily dependent on the use of IT products, will benefit from the "lower import tariff on IT products". At the same time, Indonesia can also protect its IT producers which are still in the early stages of development.

Indonesia has been considered both as a "potential" producer and as a big consumer of IT products. Forecasts put the total value of trade in information technology products somewhere over US$400 billion. Whether Indonesia can also benefit from a share of that amount will depend on how it will proceed with the negotiations and how strongly the private sector will pursue it through market intervention.

The consumer is certain to benefit from the cheaper IT products on the domestic market, due to the "lower import tariff". How the industry will benefit from the ITA is again another question. However, according to the proponents, the ITA will help industries, businesses and consumers to move decisively into the information age by lowering costs, improving productivity, increasing the speed and accuracy of information exchanges as well as the viability of new businesses and consumer services, and promoting interregional industrial cooperation. Thus, it is important to eliminate tariffs which, in essence, are a tax on information, competitiveness and productivity.

For Indonesia, the price of a personal computer will be cheaper as a result of the elimination of the import tariff. For the industries such as the textile industry, which also depends on IT products such as computers, production costs will be lower. Therefore, the product itself will be more competitive in the world markets. The problems for Indonesia as a potential producer of IT products is how to protect its IT industries in their early stages of development, since they are not ready yet to compete with the IT producers from big countries such as the U.S. and Japan, as well as the European Union.

However, if we look at the win-win solution pointed out by experts, the Asian countries will be able to sell their products cheaper in the U.S. and Europe, while their own consumers at home will be able to buy cheaper PCs and software.

As the information age is already around the corner, Indonesia was right to agree to endorse the ITA at the APEC meeting. However, we also need to be very cautious and active in securing the benefits which parties to the agreement can expect. This kind of expectation has to be achieved through Indonesian negotiations in the field, in particular in Geneva, where the APEC leaders' decisions have been actively followed up by ITA proponents, and in Singapore during the ministerial conference, where the ITA is expected to be reached.

Steps which Indonesia needs to take in approaching ITA include:

a. Along with the ASEAN countries, trying to negotiate for the greatest amount of flexibility, as provided by the longer timeframe. Therefore, Indonesia should argue against the suggested year-2000 deadline, taking into account the fact that Afta will come into effect by 2003.

b. Along with the private sectors/industries, studying the list of the product coverage as proposed by the proponents and analyzing whether Indonesia could benefit from it in both the short and long term.

c. Using the flexibility agreed by APEC leaders to prepare as comprehensive a "request list" as possible to be included in the product coverage of the agreement. In preparing the "request list", Indonesia should concentrate more on products with dual purposes, namely to benefit the domestic consumer (including the business community) and to gain market access in the U.S. and Europe by protecting the domestic IT industries which are still in their early stages of development.

d. In preparing this "request list", the government should consult closely with the IT industries, as well as with state-own companies which deal with telecommunications agencies, such as INDOSAT and others, since the proposed coverage of the ITA also includes telecommunications equipment.

Indonesia should also make use of its willingness to join ITA as "bargaining power" for other purposes in the international trade arena. The Singapore Ministerial Conference on the WTO, which the APEC leaders have set as a target date on which to agree on the ITA, is only days away. Therefore, we should act quickly if we want to gain as much as possible from ITA, as time is running out.

The countries which will derive the greatest benefits from the opening of the market that ITA will create are the big powers and, in particular, the original proponents. Otherwise, President Clinton would not be lobbying so actively at the APEC meeting to back the IT tariff proposal.

Djauhari Oratmangun,an observer of international trade negotiations, currently works in Geneva.