IMPACT ON INDONESIA’S TRADE RELATIONS
The deal might affect Indonesia’s trade relationships in other ways. Indonesia has concluded comprehensive trade agreements with several major partners, including Australia, China, India, Japan, New Zealand and South Korea. It is close to finalising one with the European Union, and it recently launched negotiations with the United Arab Emirates.
If US firms are granted preferential treatment and zero-tariff market access, these partners might question Indonesia’s commitment to fair competition – or demand comparable terms.
Beyond trade, the agreement risks eroding Indonesia’s carefully maintained strategic neutrality. Indonesia has long sought to balance its relationships with the US and China, but this deal could be seen as a lurch toward the US, exposing the country to escalating pressure to choose a side.
As Indonesia becomes increasingly politically entangled with one giant – with far-reaching economic and strategic consequences – it is at risk of becoming economically dependent on the other.
Over the past decade, Indonesia’s trade with China has more than doubled, reflecting deepening economic ties. While Indonesia exports mostly commodities and processed metals to China – especially nickel, iron and steel, mineral fuels and vegetable oils – it imports high-value machinery, electrical equipment, vehicles and plastics from the country.
In the face of challenging trade relations with the world’s two mightiest powers, Indonesia’s government deserves credit for seeking trade assurances. But the deal that it secured with the US lacks clarity, transparency, mutuality, and strategic vision.
As a result, it may turn out to be largely symbolic, bringing only a slight reduction in short-term costs. In the long term, it might prove economically and even geopolitically damaging.
Source: CNA
