U.S. may fund RI team for FTA study

Adianto P. Simamora, The Jakarta Post, Jakarta

The U.S. may help finance an independent Indonesian team to study the feasibility of forging a free trade pact between the two countries, underscoring Washington's intent to push open the biggest market in Southeast Asia.

Following last week's visit of U.S. Trade Representative Robert B. Zoellick to Bali, both governments will launch studies on a free trade pact against the backdrop of similar initiatives across the region involving the U.S. government.

"We will soon set up the independent team after we receive a grant from the U.S.," Minister of Industry and Trade Rini MS. Soewandi said on Monday.

She did not elaborate on the amount of the grant, but said the money would be used to hire the members of the independent team.

Director General of Bilateral Trade Pos M. Hutabarat said the team would study the impact of a free trade deal with the U.S. from the Indonesian perspective.

"The team will gather data in the field and map out the commodities that are ready to compete against U.S. products," Pos explained.

He said the team's work would take between six months and one year period, but he could not say when it would start its work.

Rini met with Zoellick in Bali last week where both agreed to move toward a free trade pact, pending the outcome of the study.

The agreement comes on the back of a series of U.S.-backed bilateral free trade initiatives across the region.

Zoellick, representing the world's largest economy as well as the region's largest export market, has been actively touring Southeast Asian countries to open talks on free trade pacts.

Singapore was the first to welcome the idea, and after two years of talks is now close to signing a final deal with Washington.

The U.S.' move into Indonesia follows plans for a free trade pact between members of the Association of Southeast Asia Nations (ASEAN) and Japan and China.

Under two separate deals signed early this month, ASEAN plans to pull down trade barriers with Japan and China by 2010.

Bilateral free trade talks are sweeping the region and elsewhere in the world, signaling the frustration of governments over slow progress at the World Trade Organization (WTO) and in other projects, such as the Asia Pacific Economic Corporation (APEC) forum.

Washington hopes that by approaching countries individually for a free trade pact, it could push others into following suit under a strategy Zoellick has called "competitive liberalization."

Experts have said that Indonesian exporters risked being pushed aside by competitors from countries that had already signed free trade agreements.

Much of what Indonesia's exporters sell to the U.S. is also produced by other ASEAN members. The U.S. is Indonesia's biggest export market, accounting for some 16 percent of its total export sales.

Likewise, Indonesia with a population of more than 210 million people and an estimated 30 million-strong middle class represents the region's biggest market.

So far, Indonesia enjoys an average trade surplus of US$3.5 billion a year, with exports amounting to some $7 billion.

The country's main exports to the U.S. are garments, textiles, footwear and shellfish. While agricultural products like cotton, maize, and wheat dominate U.S. exports to Indonesia.

But pundits here warned that the situation could reverse itself once Indonesia opened its doors to heavily subsidized U.S. agricultural products. The local service sector is also deemed as being vulnerable to foreign competition.

"The government must ensure that Indonesia will not end up only serving as a market for the U.S.," said Indonesian Chamber of Commerce and Industry executive Soy Pardede last week.