Editorial: Indonesia must avoid economic gunboat diplomacy

The Star

17 hours ago

Don't panic: Even if time is running out, states must avoid premature concessions because US trade policy remains in flux, with legal challenges ongoing. — 123rf
THE clock is ticking as a deadline nears for Indonesia to hash out a trade deal with the United States or risk punishing tariffs imposed on almost all Indo-nesian goods shipped to the world's largest economy.
These are not your usual trade negotiations, where two or more countries come together as equals to reduce import tariffs on each other's export goods. Instead, Washington unilaterally imposed so-called reciprocal tariffs on dozens of countries and is now seeking concessions to lift them.
There is no mutual aspect here, where both sides agree to open their markets for imports from the other, thereby unlocking the economic benefits of comparative advantage.
The US aims to strong-arm Indonesia to import more from them even while they would import less from this country, and because that runs counter to economic logic, Washington is relying on tariffs to subdue market forces.
The crude case the US has put forward to justify its policy is that trade partners export more to the US than they import from it.
Indonesia has enjoyed a trade surplus with the rest of the world for several years running, and bilateral trade with the US accounts for a major chunk of that. Data published by Statistics Indonesia last week showed that the country's overall trade surplus shrank to almost zero in April, with a particularly stark drop in the surplus vis-à-vis the US.
That could be a one-off, however, and it won't take the pressure off negotiators in talks with Washington. But the bigger question is why Indonesia should have to justify itself at all.
If a country makes shoes and clothing and other products and offers them at prices appealing to US consumers, what is wrong with that? We are not forcing our products onto anyone. For Washington to just look at the bilateral trade balance and point to a US trade deficit as supposed evidence of unfair practices is overly simplistic and unfair.
If the administration of US President Donald Trump wants to make a case against Indonesia, it is going to have to be more specific. Indeed it could, because we are certainly not beyond reproach when it comes to trade practices.
Far from it. Washington could legitimately point to local content requirements and food import restrictions as the two most salient areas of Indonesian protectionism.
On the other hand, we could point to the Inflation Reduction Act, the CHIPS Act, the Build America, Buy America Act, and steel import tariffs as US protectionism.
These, not the trade balance, are issues we should negotiate around, in good faith, with the aim to improve mutual market access. With one month to go until America's reciprocal tariffs are to enter into force, the US piled pressure on foreign negotiating teams last week by urging them to present their best offers. We must avoid premature concessions, because the US trade policy remains in flux, with legal challenges ongoing.
South Korea's newly elected President Lee Jae-myung said last week his administration was in no rush to clinch a deal with Washington. That appears to be the smart way to go about it.
Coordinating Indonesia's approach with Asean and other regional trade partners will maximise leverage. The tariff threat is part of Trump's negotiating tactics. No need to be intimidated by something as trivial as a ticking clock. — The Jakarta Post/Asia News Network