Free trade delay with China sought: Ministry

Tuesday, July 14, 2009 8:07 AM
Mustaqim Adamrah , The Jakarta Post , Jakarta Mon, 07/13/2009 9:48 AM Business

Bowing to pressure from textile producers, the Industry Ministry has agreed to reassess the costs and benefits of the China-ASEAN free trade agreement, and may even propose a postponement.

Textile producers argue the full implementation of the agreement next January, which would see an end to all import tariffs, would amplify the already unbearable pressure from the influx of Chinese goods.

The Indonesian Textile Producers Association (API) has admitted local producers are not ready to compete against their Chinese counterparts, should the FTA’s implementation go ahead as scheduled.

Chinese producers, the API says, are greatly leveraged by huge government subsidies, creating unfair global business competition.

Recognizing the reality, the Industry Ministry has vowed to launch a joint study with corresponding bodies in other ASEAN countries on the impact of the FTA specifically on the domestic textile industry.

“The requested delay can be carried out,” Ansari Bukhari, the Industry Ministry’s director general for metal, textile, machinery and miscellaneous industries, told The Jakarta Post recently.

“But first, we need to study and talk with other ASEAN members.”

ASEAN comprises of Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Burma, Cambodia, Laos and Vietnam.

API deputy chairman Ade Sudrajat suggested that prior to opening up its markets to China, ASEAN countries should try to improve trade within the region.

“Textile and garment trade between ASEAN members is still small, accounting for only 7 percent of the US$29.6 billion recorded in 2008 for total textile and garment exports from the region,” he said.

“We need to boost this to at least 20 percent before moving forward with an FTA. Otherwise, it will be us losing without competing.”

He said he had spoken with ASEAN Federation of Textile Industries (Aftex) secretary-general Andrew Hong about concerns over the FTA implementation.

Hong, Ade went on, had promised to speak to other players in ASEAN about the matter. Arryanto Sagala, the Industry Ministry’s director for textile industries, along with Harbrinderjit Singh Dillon, executive director of the NGO Partnership Governance Reform, agreed that direct competition with China would be useless at this juncture.

“It’s hard for us to compete in many aspects,” Arryanto said.

“For instance, China has resources to produce cotton thread, while Indonesia has to import cotton.”

Other advantages that China has include longer working hours and lower operational costs, due to massive production capacity, he said.

“Indonesia and China are not comparable,” he said.

Dillon said all FTAs, including the ASEAN—China FTA, negotiated by “[Trade Minister] Mari [Elka Pangestu] are mistakes”.

“All free trade agreements must be delayed for another three years, when the economy recovers, as export markets are not reliable right now,” he said.

“The Indonesian government must lobby China and other ASEAN governments to delay the FTA. Don’t make agreements that will put our development in danger.”

Neither Mari nor Diah Maulida, the Trade Ministry’s director general for international cooperation, responded to the Post’s inquiries.