Following last week’s announcement of a trade deal between Indonesia and the U.S., on July 22 the two countries released a joint statement on the framework for negotiating the anticipated agreement. The statement confirms that the agreement will build upon the existing U.S.-Indonesia Trade and Investment Framework Agreement of 1996 and discloses some details of the deal that were not included in the initial announcement.
- Elimination of most tariffs on U.S. exports: Indonesia is to eliminate 99% of tariff barriers on U.S. industrial, food and agricultural products that it exports to Indonesia.
- Establishment of a 19% tariff for Indonesian goods: The agreement will establish a 19% duty on originating goods of Indonesia. The statement also suggests that the U.S. may designate certain commodities that it does not produce domestically that may be subject to reduced tariffs, but does not specify those commodities.
- Rule of origin: The countries are to negotiate facilitative rules of origin to ensure that they are the primary beneficiaries of the agreement.
- Nontariff barriers: The countries will work together to address Indonesia’s non-tariff barriers, including:
- Exempting U.S. goods from local content requirements;
- Accepting vehicles built to America safety and emissions standards;
- Recognition of FDA certificates and prior marketing authorizations for medical devices and pharmaceuticals and eliminating certain labeling requirements;
- Exempting U.S. exports of cosmetics, medical devices, and other manufactured goods from certain unspecified requirements;
- Resolving intellectual property issues identified in USTR’s Special 301 Report (which, in its most recent edition cited Indonesia’s lack of effective enforcement against widespread piracy and counterfeiting, as well as overbroad exceptions in Indonesia’s Copyright Law);
- Addressing concerns with conformity assessment procedures;
- Removing import restrictions or licensing requirements on U.S. remanufactured goods or their parts;
- Eliminating pre-shipment inspection or verification requirements on imports of U.S. goods; and
- Adopting good regulatory practices.
- Barriers to U.S. agricultural products: The negotiations will work toward the elimination of various barriers to allow U.S. food and agricultural products greater access to the Indonesian market, including:
- Exemptions for U.S. food and agricultural products from import licensing regimes, including commodity balance requirements;
- Ensuring transparency with respect to geographical indications;
- Providing permanent Fresh Food of Plant Origin designation for all applicable U.S. plant products; and
- Recognition of U.S. regulatory oversight, such as by accepting certificates issued by U.S. food regulatory authorities.
- Barriers to digital trade: Indonesia will address barriers to digital trade, including:
- Providing certainty on the ability to transfer personal data from Indonesia to the U.S.;
- Elimination of existing HTS tariff lines on “intangible products”;
- Suspending related import declaration requirements for “intangible products”;
- An immediate and permanent WTO moratorium on customs duties on electronic transmissions; and
- The implementation of the Joint Initiative on Services Domestic Regulation.
- Steel excess capacity: Indonesia will join the Global Forum on Steel Excess Capacity and take measures to address global excess steel capacity.
- Protecting labor rights: Indonesia will prohibit the importation of goods produced by forced or compulsory labor and amend its labor laws to protect freedom of association and collective bargaining.
- Environmental protection: Indonesia will adopt measures to improve forest sector governance and combat trade in illegally harvested forest products, encourage a resource efficient economy, implement the WTO Agreement on Fisheries Subsidies, and combat unregulated fishing and the illegal wildlife trade.
- Industrial commodities:The statement suggests that Indonesia will remove restrictions on exports to the U.S. of industrial commodities, including critical minerals.
- Economic and national security cooperation: Under the agreement the countries will strengthen economic and national security cooperation and enhance supply chain resilience and innovation.
- Investment/trade commitments: The statement also takes note of certain bilateral commercial deals between the two countries, which include:
- The procurement of aircraft ($3.2 billion).
- The purchase of agricultural products ($4.5 billion).
- The purchase of energy products ($15 billion).
The joint statement indicates the trade agreement will be negotiated and finalized in the coming weeks. We will continue to monitor developments in this space.
