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

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.

.TB3.00" 3.60"

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