Negotiating FTAs: Challenges and Opportunities for Indonesia Jakarta, 5 September 2017 By Ni Made Ayu Marthini, Director of Bilateral Negotiations Perdagangan Sebagai Sektor Penggerak Directorate General of International Trade Negotiations Pertumbuhan dan Daya Saing Ekonomi, Ministry of Trade, Republic of Indonesia serta Penciptaan Kemakmuran Rakyat
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 The Ministry of Trade of the Republic of Indonesia The Ministry of Trade of the Republic of Indonesia 2
1. INDONESIA ’S INITIATION TO ENTER NEW NEGOTIATIONS The Ministry of Trade of the Republic of Indonesia The Ministry of Trade of the Republic of Indonesia 3
a. THE URGE TO REFORM: TRIGGERED BY THE GLOBAL AND REGIONAL TREND BREXIT: anxiety among EU countries Domestic Challenges: 1. Developing the required Trump’s New infrastructure Protectionism to have strong competitive Around the Globe: advantage for • The Protectionism national sentiment is on the rise economy • Regional and Global The increase of 2. The Value Chains competetiveness among unpromising countries Economic Internet of Things • The uncertainty of future Outlook 2017 (the fourth industry trade mechanism under revolution) WTO regulation The Ministry of Trade of the Republic of Indonesia The Ministry of Trade of the Republic of Indonesia 4
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 : http://bisnis.liputan6.com/, 2016 ) • SAMSUNG has top up the investment in VIetnam as much as USD 3,38 billions. (source: www.thanhniennewd.com, 2014 ) • Taiwanese furniture investor in Sidoarjo migrated to Vietnam (source: http://www.antaranews.com/, 2015) • LG ELECTRONICS has top up the investment as much as USD 1,5 M (Sumber: www.vietnam.briefing.com, 2016) The Ministry of Trade of the Republic of Indonesia The Ministry of Trade of the Republic of Indonesia 5
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 The Ministry of Trade of the Republic of Indonesia The Ministry of Trade of the Republic of Indonesia 6
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 2013 The Ministry of Trade of the Republic of Indonesia The Ministry of Trade of the Republic of Indonesia 7
3. I NDONESIA’S CURRENT FTA NEGOTIATIONS: STATUS AND DEVELOPMENT The Ministry of Trade of the Republic of Indonesia The Ministry of Trade of the Republic of Indonesia 8
PERUNDINGAN ONGOING NEGOTIATIONS UPCOMING NEGOTIATIONS Indonesia-Turkey CEPA PERDAGANGAN 1 Current status: Launched (July 2017) First Meeting: October 2017 Indonesia-Australia CEPA INDONESIA Indonesia-Peru PTA 1 Current status: 8th Round of Negotiation (July 2 Current status : Joint Study finished 2017) 2 0 1 7 / 2 0 1 8 First Meeting: November 2017 9th Round of Negotiation (October 2017) Indonesia-Mozambique PTA To be concluded in 2017 3 Indonesia-Chile CEPA Current status : Proposed (2017) Current status: 3rd Trade in Goods (TIG) Negotiation 2 Indonesia-Nigeria (ECOWAS) PTA COMPLETED/ON REVIEW 4 (June 2017) Current status : Proposed (2017 4th Trade in Goods (TIG) Negotiation (November 2017) AGREEMENTS To be concluded in 2017 Indonesia-Kenya (EAC) PTA Indonesia-Japan EPA 5 Current status : Proposed (2017) Indonesia-EFTA CEPA 3 Implemented: 2008 Current status: 12th Round of Negotiation 1 Indonesia-Egypt FTA (March 2017) Current status: Proposed Early Harvest (2017) 6 Current status : Proposed (2017) To be concluded in 2017/2018 Target: General Review to be concluded in 2018 Indonesia-SACU PTA Indonesia-Iran PTA 7 Current status : Proposed Feasibility Study 4 Current status: 3rd Round of Negotiation (July 2017) Indonesia-Pakistan PTA To be concluded in 2017/2018 Indonesia-Sri Lanka PTA 8 Current status : Joint Feasibility Study (2017) Implemented: 2013 2 Indonesia-European Union CEPA Current status: Review concluded (2017) Indonesia-Bangladesh PTA 9 First meeting of the Expansion/Deepening of Current status : Intersession Meeting follow up of 5 Current status : Proposed (2017) 2nd Round of Negotiation (June 2017) PTA to be held February 2018 3rd Round of Negotiation (September 2017) Indonesia-Taiwan ECA 10 ASEAN-Hong Kong FT A Current status : Review Feasibility Study Regional Comprehensive Economic Indonesia-EAEU TIGA RCEP 11 3 6 Completed: 2017 Partnership (RCEP) Current status: Proposed JSG (2017) Current Status: Planned to be signed in Current status: 19th Round of Negotiation (July Indonesia-GCC PTA September/November 2017 2017) 12 Current status : Proposed Feasibility Study ASEAN-Canada FTA 13 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
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 http://ditjenppi.kemendag.go.id
4. KEY FTA NEGOTIATING ISSUES AND CHALLENGES FACED BY INDONESIA • Stakeholder Engagement: It is difficult to engage with inter- ministries/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
5 . DO’S AND DON’TS IN NEGOTIATIONS • Negotiation is “being hard on issues, soft on people” . Don’t see it as a contest See it as a joint effort, think Win-Win Don’t bargain over positions Solve a problem jointly Don’t attack people Attack the problem Don’t focus on differences Focus on common interests Don’t search for the right solution 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
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