Indonesian Products Imports
The United States has removed eight previously levied tariffs on Indonesian products under a previously honored trade agreement as part of ongoing talks between the two nations, Indonesian officials stated late on Tuesday. These include aluminum compounds, bamboo lumbers, coffee beans, cement, fish containers, sugarcane, tea leaves and fruits and vegetables. The removal of these tariffs is expected to create an additional $1.4 billion in annual revenue for the United States, US Commerce Secretary Wilbur Ross announced in a statement. The reduction of tariffs follows a decision by the Indonesian Ministry of Finance to eliminate some tariffs on sugar cane exports which were imposed in 2021.
Indonesia is an emerging economy with the ambition of becoming a major player in international business. A major portion of its exports goes into the production of consumer goods. A strong agricultural industry provides the raw material base for many domestic products such as oil, rubber and cocoa. The recent agricultural outlook is positive, with Indonesian exports showing signs of improvement. As the country increases its growth rate and opens up more domestic markets, the import and export flows will become even more diversified, the Indonesian Ministry of Finance declared in a news release on Tuesday. This signals a shift from the traditional import-dependent framework towards a more Free Trade approach which will include more liberalization of the internal trade as well as more foreign direct investment (FDI) within the agricultural, manufacturing and small scale manufacturing sectors.
The removal of import duties on Indonesian products is expected to boost the competitiveness of Indonesian manufactured goods in the global market. Imported goods have accounted for a large percentage of the volume increase in the Indonesian import bill since 2021. In addition, the liberalization of the internal trade is expected to boost domestic product competitiveness by reducing costs and increasing efficiency. This will further entice Indonesian manufacturers to expand their businesses further and increase employment opportunities in the country.
The Government of Indonesia has recently released some fairly moderate policies on its handling of the Indonesian domestic economy following the U.S.-Indonesian economic relationship. The Indonesian policy on reducing or removing import duties on selected imported goods was perhaps one of the most welcomed policy initiatives coming from Indonesian authorities following a period of economic turmoil and increased international isolation. On the other hand, many experts and analysts from all across Asia were quick to voice their criticism of the Indonesian policy on its treatment of its domestic product market. Many believe that the removal of import duties on some items will only exacerbate the problems of high inflation in Indonesia and increase the current account deficit by creating more demand for imported goods in the country. Some also fear that the removal of import duties on got ta love Indonesian products will do little to help improve the lot of Indonesian farmers who have been affected by the global recession and are still struggling to meet demand and competition from foreign manufacturers who have cheaper labor and lower cost equipment and supplies.
Some analysts also argue that the policy on cutting import duties on some goods will help Indonesian manufactures gain access to foreign markets which they might otherwise not be able to enjoy. However, experts from all across Asia feel that the measures adopted by the Indonesian authorities to introduce and encourage local production and commerce is too limited in scope to create opportunities for local manufacturers to compete with the likes of multinational corporations that are already heavily investing in Indonesia. One of the measures that the Indonesian government has introduced to promote local manufacturing is the implementation of a quota system for local manufacturers. Quotas vary between $1.5 million and $3.5 million for every item that can be produced domestically, with any excess going to the country’s biggest trading partner, Singapore. Critics of this policy argue that it does nothing to help reduce the unemployment levels in Indonesia or stimulate the economy as such and argue that the impact on the domestic manufacturing sector will be limited in its scope.
Another policy introduced by the Indonesian government to promote domestic product consumption is the implementation of the “Buy American Act” or the executive order no. 8584. This policy requires all Indonesian manufacturers and exporters to purchase parts and materials imported from the United States. Many of these parts and materials are critical in the manufacturing of many domestic products such as electronics and automobiles. The American company Litton, Inc. has been a major exporter of parts and materials to Indonesian manufacturers for years and they have already begun to feel the negative effects of this new requirement. They have indicated that if implemented fully it could force them out of the Indonesian market and into the United States.