RI to protect 398 categories of goods in ASEAN-China FTA

Zakki P. Hakim, The Jakarta Post/Jakarta

The Indonesian government has submitted nearly 400 categories of sensitive and highly sensitive goods to be excluded from the liberalization scheme set out under the planned ASEAN-China free trade area (FTA), according to a senior official.

The FTA plan is expected to be signed by leaders of the ASEAN member countries and China during a summit in Vientianne, Laos, later in November.

The Ministry of Trade's director for regional cooperation, Eliver Radjagoekgoek, said that the Indonesian list of goods to be protected from trade competition had actually surpassed the limit agreed during the initial trade talks, although it had later been accepted.

"They want to limit the number of sensitive goods, but we can't reduce our list," Eliver told The Jakarta Post recently.

Indonesia's list of sensitive sectors consists of 348 tariff categories covering, among other areas, the automotive and electronics industries, as well as their component industries, a few branches of the textile industry and the chemical industry.

Meanwhile, the highly sensitive list consists of 50 tariff categories that include rice, sugar, soybeans, corn and several other food staples.

ASEAN and Chinese economic and trade ministers agreed to establish an FTA by 2010 with the six founding members of ASEAN, and by 2015 for the newer members.

During the 36th ASEAN Economic Ministers (AEM) meeting in Jakarta in September, talks with China resulted in the finalizing of the agreements on trade in goods and services and on dispute settlement mechanisms, which will be formalized in Laos.

The Association of Southeast Asian Nations' founding members are Brunei, Malaysia, Indonesia, the Philippines, Singapore and Thailand, while Cambodia, Laos, Myanmar and Vietnam joined later.

Under the FTA plan, most goods (there are around 3,900 categories of goods) traded between ASEAN and China will have zero import tariffs by 2010 under what is termed the normal track I scheme. Import tariff cuts will start on Jan. 1, 2005.

Meanwhile, trade in some 490 categories of goods will be fully liberalized by 2012 via the normal track II scheme.

There are a total of 5,250 categories of goods traded between ASEAN and China.

"The 490 categories, or what is termed the normal track II list, resulted from domestic industry requesting to have some flexibility in the liberalization process," said the ministry's deputy director for inter and intra regional cooperation, Retno Kusumo Astuti.

She acknowledged, however, that some local industries might complain about the government's proposed list of sensitive and highly sensitive products, as manufacturers whose products are included on the list would face tariff walls when exporting to China, thus disadvantaging them when competing with other ASEAN producers.

One example of this occurs in the case of stearic acid produced in Indonesian. While Malaysia has liberalized the sector, thus allowing producers to export to China at low tariff rates, Indonesian producers will have to face higher tariff barriers as the government continues to protect the sector. Consequently, local producers face the risk of losing more China market share. Stearic acid is a palm oil derivative.

Retno said that the protection followed an industry request to be excluded from an advance ASEAN-China trade liberalization program known as the Early Harvest Package (EHP).

The industry recently urged the government to fix the situation. The Ministry of Trade had then to renegotiate the agreement with its Chinese counterpart to have stearic acid included in the EHP.

"Local industries have been rather reluctant to deal with a free market. It is an attitude that will hamper Indonesian market access to China," Retno said, adding that neighboring countries such as Thailand were more aggressive in opening up their markets.

Indonesia's total trade with China last year reached US$10.2 billion, producing a surplus of over $1 billion for Indonesia.

Indonesia's top five exports to China last year were oil and gas, wood and wood panel, pulp and paper, organic chemicals and equipment such as printers and compact disc (CD) drives.

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RI tariff liberalization scheme under the ASEAN-China FTA

Tariff categories Total tariff categories 5,250 Early Harvest Program 449 Sensitive/Highly Sensitive 398 Normal Track II 490 Normal Track I 3,913

Note: The tariff groupings are based on the six digit tariff categories of the ASEAN Harmonized Tariff Nomenclature (AHTN)

Source: Ministry of Trade