Jakarta. Indonesia is avoiding suing the US at the World Trade Organization (WTO) as Jakarta tries to talk things over first, including in matters related to their tariff deal.

Indonesia has had ups and downs in its trade relations with the US. They clinched a long-awaited tariff agreement last month, but Jakarta quickly came under fire at home as economists warned the terms would heavily benefit Washington. The Donald Trump 2.0 administration also launched two separate trade practices probes into Indonesia after the US Supreme Court ruled that the tariff policies — which culminated in the aforementioned trade pact — were illegal. 

In a recent hand-picked interview with senior journalists and analysts in his Hambalang home, President Prabowo Subianto was asked about the deal’s controversial terms. The retired army general tried to assuage the worries, saying that Indonesia and the US had agreed to discuss problems that arise post-deal via a council.

“If there are matters that are not satisfactory or conflict with our interests, we will establish a council. If I’m not mistaken, this [council] is not included in other countries’ [US] trade pacts,” Prabowo said.

“We will resolve the matters at the council before going to the WTO. … But please remember that I always prioritize our national interests. We can terminate agreements that we find to have jeopardized our national interests."

The preamble of the 45-page trade accord states that it recognizes a 1996 memorandum of understanding on the trade and investment council. This body will have government representatives of both sides who will sit at the same table to remove impediments to trade and investment flows, according to the decades-old document.

Indonesia is also taking on this “dialogue first” approach in response to the fresh investigations. 

Shortly before the Eid break, Washington launched a probe into Indonesia’s excess industrial capacity and another into the latter’s failure to block imports of goods made with forced labor. The Indonesian government had begun consulting with the US side. Jakarta has started seeking advice from the private sector as it gathers evidence to back its argument. 

The Jakarta Globe asked Edi Prio Pambudi, a senior official at the Coordinating Ministry for Economic Affairs, whether Indonesia would consider lodging a WTO lawsuit following the investigations.

“Let’s see where this goes first. Why do we have to quickly jump to a conclusion and sue? We have a forum to consult. We [Indonesia] would not want the US to sue us, right? So we are embracing a soft [approach]. That’s why we make agreements,” Edi replied.

Indonesia has had legal battles with Washington at the global trade court, some of which are related to Jakarta’s agricultural import restrictions. In his first term, Trump had threatened to withdraw his country from the WTO. Washington also blocked new appointments to the organization’s appellate body — a group of experts in charge of hearing the appeals. The body stopped functioning because it didn’t have enough members in late 2019. The paralysis persists to this day, as any appointments require the consensus of all WTO member states. 

The February agreement all started with Trump’s reciprocal tariffs against Indonesia and the rest of the world. Under the deal, the US trimmed its tariffs on Indonesian goods from the originally threatened 32% to 19%. In exchange for the cuts, American goods can enter Indonesia duty-free. Southeast Asia’s biggest economy also agreed to scrap other non-tariff measures. In less than 24 hours after the signing, the US Supreme Court ruled that Trump did not have the power to impose the reciprocal tariffs. The US swiftly introduced new-but-temporary global tariffs of 10%, even though Trump had threatened a higher rate of 15%. The latest probes could offer the Trump government an avenue to rebuild his tariff regime.

Add as a preferred source on Google +