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Indonesia Urged to Halt Protectionist Measures

Country's economic growth is cited in WTO report.

GENEVA — Indonesia has been urged by the U.S. and other key trading partners to stop backsliding into new protectionist measures and scrap cumbersome import measures that apply to a broad range of products, including textiles and apparel.

This story first appeared in the April 16, 2013 issue of WWD.  Subscribe Today.

“It appears that the forward momentum of liberalization that had created so much hope for Indonesia has been replaced by economic nationalism and protectionism,” said Michael Punke, deputy U.S. Trade Representative.

Punke said Indonesia has introduced and implemented an array of trade and investment restrictions, including “import licensing requirements, trading rights limitations, pre-shipment inspection requirements, foreign equity restrictions, local content and domestic manufacturing requirements.”

Punke told a two-day review session of Indonesia’s trade regime hosted by the World Trade Organization that ended on Friday that Washington is also concerned the Asian nation of 244 million people, the fourth most populous in the world, “continues to restrict access to more and more sectors of its market by making its regulations even more complicated, disruptive, trade restrictive and expansive.”

The European Union’s WTO ambassador, Angelos Pangratis, also took aim at Indonesia’s recent drift away from market-opening policies.

“The EU would like to convey its growing concerns about the trade policy trends in Indonesia, especially regarding the increasing number of laws and regulations that are having systemic consequences for foreign operators’ access to Indonesia’s market,” he said.

Similarly, the Indian delegation said some recent policy announcements “could adversely affect the confidence of investors and trading partners.”

Countries in the Asia-Pacific region, including China and Australia, also took Indonesia to task.

“Indonesia’s import procedures tend to be complicated,” said Yi Xiaozhun, China’s WTO ambassador. Its import licensing regime, Yi said, “is rather complex and needs more transparency.”

Australia said more needs to be done by Indonesia “to address regulatory uncertainty and to facilitate trade.”

A report prepared by the WTO for the review session notes that around 20 percent of Indonesia’s tariff lines are affected by import licensing requirements that have expanded since the previous review six years ago.

“Many are in place to implement policies designed to protect domestic production such as rice, sugar, certain textiles and textile products,” the report said.

The report outlines that textile and apparel products are subject to pre-shipment inspection by surveyors who have been approved by the Indonesian authorities and import licensing requirements.

Turkey, which exports textiles and industrial products to Indonesia, indicated the increase in import licensing requirements “has a strong potential to negatively affect Indonesia’s trade relations.”

The WTO report also shows that Indonesia, a low-cost exporter of textiles and apparel, imposes high tariffs on imports of textiles and apparel. In 2012, for 842 textile lines tariffs averaged 9.4 percent, and for 348 apparel lines tariffs averaged 14.5 percent, substantially higher than the 7.4 percent average for all industrial goods. However, for five cotton lines, tariffs averaged only 4 percent, much lower than the 10.5 percent average for all agricultural goods, the WTO said.

On the plus side, trading partners lauded Indonesia’s strong economic performance during the global financial downturn.

Bayu Krisnamurthi, Indonesia’s deputy minister of trade, told delegates that since 2007, the economy grew by an average of 6 percent a year, and in 2012 it expanded 6.2 percent.