Indonesia chases trade deals with EU, US

Southeast Asia’s largest palm oil producer seeks to retain its privileged trade status with the US and sign an EU deal.

Indonesian President Joko Widodo stands in front of an Indonesian flag
Indonesian President Joko Widodo, who was recently sworn in for his second term, has made increasing palm oil exports one of his administration's top trade priorities [File: Achmad Ibrahim/Reuters]

Indonesia wants to expedite talks on a trade deal with the European Union and complete within a month a review of trade with the United States, the president and new deputy foreign minister said on Friday.

“I have set a target for the vice minister to finish negotiations with 14 to 15 countries with whom we need trade deals, especially with the European Union,” President Joko Widodo told a news conference where he introduced Vice Foreign Minister Mahendra Siregar, who has been assigned to conduct “economic diplomacy”.

Indonesia has been negotiating a free trade and investment agreement with the EU since 2016. However, relations became strained by the European Commission’s decision to phase out palm oil from transport fuel by 2030 and the imposition of anti-subsidy duties on Indonesia’s biodiesel exports.

Siregar said that Widodo, commonly known as Jokowi, also wanted him to ensure Southeast Asia’s biggest economy retained its privileged trade status with the US, known as the Generalized System of Preferences (GSP), which gives Indonesia reduced tariffs on about $2bn of exports.

Last year, the US Trade Representative’s Office said it was reviewing the GSP eligibility of Indonesia, India and Kazakhstan, based on concerns over compliance with services and investment criteria. The GSP facility for India was revoked in June.

Getting the GSP eligibility extended “could have a massive impact which could double the size of our trade with the US”, said Siregar, who earlier this year moved to Washington, DC as Indonesia’s ambassador to the US.

Washington has a number of demands for Indonesia to maintain its GSP status, which has mostly been fulfilled, including relaxing its data storage rules.

US Commerce Secretary Wilbur Ross is scheduled to visit Jakarta next month.

Jakarta’s main foreign trade strategy would now be overseen by the foreign ministry under the president’s direct guidance, Siregar said, instead of the trade ministry.

Indonesia’s palm oil industry is also one of Widodo’s trade priorities and he wants to increase exports to more than $25bn a year, Siregar said. Exports of palm oil and derivatives in 2018 were $16.5bn, according to government data.

Source: Reuters