Indonesia has asked to re-write a new regional trade pact with China, citing fears of job losses due to a flood of cheap Chinese imports across various sectors, officials said yesterday.
The government has sought to maintain 228 tariff lines for another two years rather than cut them as required under the ASEAN-China Free Trade Area (ACFTA), which Jakarta first signed in 2002 and took full effect on Jan. 1.
“The letter of notification on negotiations to discuss modifications to the 228 tariff items was submitted on December 31,” Trade Ministry official Gusmardi Bustami said.
Indonesian Trade Minister Mari Pangestu has refused to comment on the pact and would not say if a formal request for further protection had been sent to ASEAN.
Industry ministry spokesman Muhdori said a two-year reprieve from zero tariffs was required in sectors including electronics, machinery, furniture, steel, textiles and chemicals.
The ACFTA comprises a market of 1.9 billion people, making it the largest trade pact in the world in terms of population. It has a combined GDP of some US$6 trillion and a total trade volume of US$4.3 trillion, ASEAN figures show.
Indonesian industry bodies have complained that the government has failed to prepare domestic producers to compete with Chinese goods, a failure acknowledged by the industry ministry spokesman.
“The reason for the delay is because we want local industries to be ready for competition with imported goods,” Muhdori said.
Indonesian Furniture Producers Association executive director Tanangga Karim welcomed the government’s request for a delay amid fears that hundreds of thousands of Indonesian workers could lose their jobs.
“A local computer desk made from particle wood sells for about 600,000 rupiah [US$65.4]. A Chinese computer desk made from similar materials can sell for about 400,000 here,” Karim said. “The free trade agreement between ASEAN and China will spell huge job losses at the big furniture makers here. Tens of thousands of employees could be laid off soon.”
Indonesian Employers Association chairman Sofyan Wanandi said that while some sectors would benefit from cheaper Chinese inputs and access to Chinese markets, on the whole the ACFTA was bad for Indonesia.
“Our products can’t compete with cheap Chinese products and as a result many factories will close down and there will be unemployment,” he said.
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