Negotiating FTAs: Challenges and Opportunities for Indonesia
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1 Negotiating FTAs: Challenges and Opportunities for Indonesia Jakarta, 5 September 2017 Perdagangan Sebagai Sektor Penggerak Pertumbuhan dan Daya Saing Ekonomi, serta Penciptaan Kemakmuran Rakyat By Ni Made Ayu Marthini, Director of Bilateral Negotiations Directorate General of International Trade Negotiations Ministry of Trade, Republic of Indonesia
2 OUTLINE 1. INDONESIA S INITIATION TO ENTER NEW BILATERAL NEGOTIATIONS a. THE URGE TO REFORM b. THE NECESSARY TO STRENGTHEN/IMPROVE COMPETITIVENESS c. THE COMMITMENT TO BE A WORLD CLASS NATION 2. INDONESIA S PREVIOUS EXPERIENCE IN BILATERAL TRADE 3. INDONESIA S CURRENT FTA NEGOTIATIONS: STATUS AND DEVELOPMENT 4. KEY FTA NEGOTIATING ISSUES AND CHALLENGES FACED BY INDONESIA 5. DO S AND DON TS IN NEGOTIATIONS 6. OPPORTUNITIES FOR INDONESIA FROM THE FTA NEGOTIATIONS 7. FUTURE PROSPECT FOR INDONESIA S FTA NEGOTIATIONS 2
3 1. INDONESIA S INITIATION TO ENTER NEW NEGOTIATIONS 3
4 a. THE URGE TO REFORM: TRIGGERED BY THE GLOBAL AND REGIONAL TREND BREXIT: anxiety among EU countries Trump s New Protectionism Regional and Global Value Chains Internet of Things (the fourth industry revolution) Around the Globe: The Protectionism sentiment is on the rise The increase of competetiveness among countries The uncertainty of future trade mechanism under WTO regulation Domestic Challenges: 1. Developing the required infrastructure to have strong competitive advantage for national economy 2. The unpromising Economic Outlook
5 b. THE NECESSARY TO STRENGTHEN/IMPROVE COMPETITIVENESS FTA AGREEMENT AS ONE OF FACTORS TO STRENGTHEN NATION COMPETITIVENESS (EXAMPLE: VIETNAM) Migration of furniture industry and handicraft to Vietnam Indonesian Furniture and Consumers Association (AMKRI) stated that there were several foreign companies migrating to Vietnam to seek efficiency on cost of production. Vietnam has competitive advantage: 1) ease of doing business; 2) very efficient bring a profit up to 30% for exporters, and 3) FTA agreement with EU. 30% of factories in Batam were planning to move to Vietnam (source : ) SAMSUNG has top up the investment in VIetnam as much as USD 3,38 billions. (source: ) Taiwanese furniture investor in Sidoarjo migrated to Vietnam (source: ) LG ELECTRONICS has top up the investment as much as USD 1,5 M (Sumber: ) 5
6 c. THE COMMITMENT TO BE A WORLD CLASS NATION By having trade agreements with trade partners, Indonesia will be forced to: build infrastructure to improve connectivity roads, airports, ports improve the quality of human resources increase competitiveness increase its ease of doing business deregulation, transparency Indonesia has the basic ingredients: demography, natural resources, but it is the reformation and development that will make Indonesia to be a world class nation 6
7 2. INDONESIA S PREVIOUS EXPERIENCE IN BILATERAL TRADE Indonesia-Japan Economic Partnership Agreement (EPA) concluded in 2017, implemented in 2008 Indonesia-Pakistan Preferential Trade Agreement (PTA) concluded in 2012, implemented in
8 3. INDONESIA S CURRENT FTA NEGOTIATIONS: STATUS AND DEVELOPMENT 8
9 RCEP ONGOING NEGOTIATIONS Indonesia-Australia CEPA Current status: 8th Round of Negotiation (July 2017) 9th Round of Negotiation (October 2017) To be concluded in 2017 Indonesia-Chile CEPA Current status: 3rd Trade in Goods (TIG) Negotiation (June 2017) 4th Trade in Goods (TIG) Negotiation (November 2017) To be concluded in 2017 Indonesia-EFTA CEPA Current status: 12th Round of Negotiation (March 2017) To be concluded in 2017/2018 Indonesia-Iran PTA Current status: 3rd Round of Negotiation (July 2017) To be concluded in 2017/2018 Indonesia-European Union CEPA Current status: Intersession Meeting follow up of 2nd Round of Negotiation (June 2017) 3rd Round of Negotiation (September 2017) Regional Comprehensive Economic Partnership (RCEP) Current status: 19th Round of Negotiation (July 2017) PERUNDINGAN PERDAGANGAN INDONESIA 2017/2018 COMPLETED/ON REVIEW AGREEMENTS Indonesia-Japan EPA Implemented: 2008 Current status: Proposed Early Harvest (2017) Target: General Review to be concluded in 2018 Indonesia-Pakistan PTA Implemented: 2013 Current status: Review concluded (2017) First meeting of the Expansion/Deepening of PTA to be held February 2018 ASEAN-Hong Kong FTA Completed: 2017 Current Status: Planned to be signed in September/November 2017 UPCOMING NEGOTIATIONS Indonesia-Turkey CEPA Current status: Launched (July 2017) First Meeting: October 2017 Indonesia-Peru PTA Current status: Joint Study finished First Meeting: November 2017 Indonesia-Mozambique PTA Current status: Proposed (2017) Indonesia-Nigeria (ECOWAS) PTA Current status: Proposed (2017 Indonesia-Kenya (EAC) PTA Current status: Proposed (2017) Indonesia-Egypt FTA Current status: Proposed (2017) Indonesia-SACU PTA Current status: Proposed Feasibility Study Indonesia-Sri Lanka PTA Current status: Joint Feasibility Study (2017) Indonesia-Bangladesh PTA Current status: Proposed (2017) Indonesia-Taiwan ECA Current status: Review Feasibility Study Indonesia-EAEU TIGA Current status: Proposed JSG (2017) Indonesia-GCC PTA Current status: Proposed Feasibility Study ASEAN-Canada FTA Current status: Proposed Joint Feasibility Study CEPA = Comprehensive Economic Partnerhip Agreement; EPA = Economic Partnership Agreement, PTA = Preferential Trade Agreement; CECA = Comprehensive Economic Cooperation Agreement; FTA = Free Trade Agreement; TIGA = Trade in Goods Agreement 13
10 FORMS OF AGREEMENT: PTA, TIGA, FTA, CEPA Preferential Trade Arrangement/PTA: The scope of the agreement is to reduce/take out few of export tariff which becomes the interest of partner country. In this agreement, ROO is also applied to ensure the originating status of product which is exported to partner countries. Other arrangement such as SPS, TBT, facilitation are also applied based on WTO and existing regulation (based on MFN regulation). Trade in Goods Agreement/TIGA: The scope of the agreement is to reduce/take out all of export tariff. The agreement also covers other rules such as ROO, SPS, customs procedures & facilitation, TBT, IPR, trade remedies which are based on Wto-plus. In certain cases, some countries are proposing additional arrangement such as geographical indications (GIs) arrangement. Free Trade Agreement/FTA: The scope of this agreement is to liberalize sector of product, services and investment. The agreement covers other rules such as ROO, SPS, customs procedures & facilitation, TBT, IPR, trade remedies which are based on Wto-plus. In certain cases, some countries are proposing the agreement to include other aspect such as ecotech. Comprehensive Economic Partnership Agreement/CEPA: The scope of this agreement covers in liberalization, facilitation, ecotech, rules, and other specific issues such as SMEs, GIs, competition, sustainable development, SOEs, government procurement. 10
11 4. KEY FTA NEGOTIATING ISSUES AND CHALLENGES FACED BY INDONESIA Stakeholder Engagement: It is difficult to engage with interministries/agencies (different sense of level of urgency, different interest and vision, communication issues, bureaucracy, culture) Complicated Regulations: Some regulations need to be revised to meet standards of trade partners (especially if the trade partners are developed countries) Human Resources: quantity, lack of experiences and capacity, thus recruitment and capacity building are very essential Getting Support from Public (including Private Sectors): Some people are reluctant in opening domestic market for foreign producers; Indonesian producers are sometimes too comfortable with domestic and traditional markets Implementation/Utilization of Trade Agreements 11
12 5. DO S AND DON TS IN NEGOTIATIONS Negotiation is being hard on issues, soft on people. Don t see it as a contest Don t bargain over positions Don t attack people Don t focus on differences Don t search for the right solution See it as a joint effort, think Win-Win Solve a problem jointly Attack the problem Focus on common interests Be creative, brainstorm multiple options to choose from Other tips: control yourself, calm and measured; know your substances; focus; get enough sleep; do your role professionally as a chief negotiator, deputy/alternate, member of delegation (supporting/technical). 12
13 6. OPPORTUNITIES FOR INDONESIA FROM THE FTA NEGOTIATIONS Indonesia will have the privileges in having full preference scheme which is agreed upon the FTA agreement Indonesia will be able to retain the access of existing markets and penetrate to new markets (with new country patners) Indonesian products will be competitive in its FTA partners markets Indonesia will get access to cheaper raw materials or capital goods for domestic industries Indonesian consumers will get more preferences and affordable consumers goods 13
14 7. FUTURE PROSPECT FOR INDONESIA S FTA NEGOTIATIONS By end of this year, Indonesia will have template for almost all bilateral agreements (PTA, TIGA, CEPA) Using a template will make it easier for Indonesia to accelerate or open new bilateral trade negotiations with its trade partners FTA Center to disseminate the FTA information to stakeholders 14
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