Indonesia’s US trade deal faces a sovereignty reckoning at home

Indonesia went to Washington to negotiate a trade deal and came home with more than 200 obligations to America’s nine. A day after the signing, the US Supreme Court struck down the legal basis for the tariff threat that had driven the whole exercise – for a time, at least. Detractors have likened this “agreement on reciprocal trade” to a blank cheque and a surrender of Indonesia’s sovereignty. The government, for its part, calls it a win-win. The deal was signed by President Prabowo Subianto on February 19, when a threatened 32 per cent US tariff on Indonesian exports still seemed like it might come to pass. It fixed that rate at 19 per cent and secured zero-tariff access for 1,819 goods, including palm oil, coffee, cocoa, rubber and spices, that are central to the Indonesian economy. In exchange, Jakarta agreed to extend tariff exemptions to more than 99 per cent of American goods and strip away key non-tariff barriers – among them some local content requirements and halal certification – for US companies operating in Indonesia. It also committed to commercial deals and investment flows worth around US$33 billion in the US, including buying some US$13.5 billion worth of Boeing jets for flag carrier Garuda Indonesia. Then the US Supreme Court ruling landed and the argument began in earnest. ‘Naked persuasion’ To hear Coordinating Minister for Economic Affairs Airlangga Hartarto tell it, the deal is a “win-win solution” for both sides. Indonesian exports to the US grew 12 per cent last year, despite the tariff climate. “This is what makes the US feel that Indonesia is enjoying its market, but the US is not enjoying the Indonesian market,” Airlangga said on Monday. “Therefore, a win-win solution was created.” Indonesia would not be walking away from the agreement, he said, noting that the US’ zero-tariff rate on textiles and apparel alone helped protect a sector that sustained roughly 20 million Indonesians. Critics see the deal from a different perspective, however. The 1,819 products granted zero-tariff entry to the US represent, by some estimates, just 2 per cent of Indonesia’s total exports, while the US market accounts for only about 10 per cent of the country’s export trade. The Centre of Economic and Law Studies think tank has sent a formal letter of objection to the Ministry of State Secretariat urging Prabowo to notify Washington of Indonesia’s immediate withdrawal, raising at least 21 objections to provisions it said violate national interests. Last Sunday, nearly 80 civil organisations and 65 academics launched a public petition denouncing the agreement as “clearly inconsistent with the spirit of the constitution”, noting it was hammered out with minimal public participation and without proper parliamentary consultation. “This is a shameful deal,” said economist Yanuar Rizki, one of the petition’s signatories. “We may have tried to persuade the US to lower tariffs, but I didn’t expect us to be this naked in our persuasion.” Indonesia has yet to ratify the trade agreement, which would become effective 90 days afterwards. The time frame set for ratification was 60 days from the day of signing. Yet the deal’s opponents will not have an easy time convincing the House of Representatives to block it. Some 81 per cent of legislators belong to Prabowo’s ruling coalition. Herman Khaeron, a lawmaker on a parliamentary commission that oversees trade, told local media outlet Tempo on Sunday that no ratification date had yet been set because parliament was still in recess. This left a narrow window for action, according to Rizki. “We need public pressure to encourage the House not to ratify,” he said. “Domestic resistance could force the government to tell Washington that we can’t ratify this treaty.” The China factor Tariff rates are not the only point of contention. Threaded through the trade deal are provisions that economist Rimawan Pradiptyo calls “poison pills” – clauses that constrain Indonesia’s freedom to do business with countries not aligned with Washington’s interests. Jakarta has agreed to act against foreign-owned companies operating in Indonesia whose practices, such as exporting goods to the US at below-market prices, are deemed harmful to American trade. It accepted Washington’s demand to curb what the US described as excessive production and exports by foreign‑owned miners of nickel, cobalt, bauxite, tin, copper and manganese – a provision analysts see as a direct attempt to curtail Chinese dominance of Indonesia’s critical mineral sector. The country also opened its critical mineral exports to American firms and pledged “expedient development” of its rare earth sector with the US. “Indonesia seems to be a vassal state of the US,” said Rimawan, who is a senior lecturer at Gadjah Mada University in Yogyakarta. “We have no problem with China, but the US is ordering Indonesia to comply with US policy, which means we must be hostile to China.” That risked inviting economic retaliation, he said. Possibly from Russia as well. “This [deal] is a blank cheque for the US,” Rimawan said. “Indonesia is obliged to comply with their policies, even for ones that don’t currently exist.” Placing restrictions on free trade at the behest of a hegemonic power would violate Indonesia’s non-aligned foreign policy stance, he argued. Rimawan also warned that complying with the deal would require amending or creating at least 117 domestic regulations in “a storm of institutional revolution” that would take years to complete. If we can’t fight the bully, we join the gang Riandy Laksono, Indonesian economist Other observers were more optimistic. Muhammad Habib, an international relations researcher at the Centre for Strategic and International Studies (CSIS) Indonesia, said that some provisions of the deal, such as enhanced labour rights and stronger environmental protections, should be welcomed. He also pushed back on the idea that it would force Indonesia to choose sides. “I don’t think the agreement forces Indonesia to side with the US permanently,” he said. “US companies still need Indonesia to collaborate with various countries, including China. The situation isn’t that black and white.” Economist Riandy Laksono, a fellow CSIS researcher, has argued that the deal is less a commercial transaction and “more about security alignment and projecting US values”. “We are told to be hostile to America’s enemies, who could be our source of investment,” he told a panel discussion on February 27. “This agreement, however, can save us from US mischief in the future. If we can’t fight the bully, we join the gang. From the government’s perspective, at least we’re now in the gang.” Whether membership of that “gang” is worth the blank cheque, the dozens of regulations and the shadow it casts over decades of non-alignment is for the House of Representatives to decide.

Indonesia’s US trade deal faces a sovereignty reckoning at home

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Nearly 80 civil groups and 65 academics have signed a petition urging parliament to block ratification of the ‘shameful’ deal

Nearly 80 civil groups and 65 academics have signed a petition urging parliament to block ratification of the ‘shameful’ deal