Indonesia rebuffs China’s Global South trade drive

Beijing’s strategy to boost trade relations with countries in the Global South to diversify away from closing Western markets has taken a hit with Indonesia’s announced intention to impose a 100-200% tariff on China’s labor-intensive goods.

Over the past few days, several Indonesian officials have said that the world’s fourth most populous nation is drafting regulations to impose anti-dumping duties and safeguard measures on cheap Chinese products such as textiles, footwear, electronics, ceramics and bags.

Finance Minister Sri Mulyani Indrawati said on June 27 that she will work with the Minister of Trade and the Minister of Industry to formulate regulations about imposing Anti-Dumping Duties and Safeguard Measures (ADD and SM) on Chinese products. 

The measures will help Indonesia mitigate the effects of the ongoing trade war between China and the United States, Indonesian Trade Minister Zulkifli Hasan said on June 28. The new China-specific tariffs will take effect once the related regulation is issued, he said. 

He added that as the US has already imposed tariffs on imported ceramics and clothes, Indonesia could also do the same to ensure its small manufacturers can survive and thrive. 

Indonesia’s new tariffs coincide with China’s plan to push forward its Global South strategy, which relies on emerging markets in Southeast Asia, Africa and South America to absorb Chinese goods that face trade barriers in the US amid the ongoing Sino-US trade war.

Budi Santoso, the trade ministry’s director-general of foreign trade, said Monday that local textile associations have requested the government to step in after an influx of cheap products reportedly hurt their businesses. He said the Indonesian Trade Safeguards Committee is investigating the issue and will report to the government in due course.  

Ristadi, the president of the Confederation of Indonesian Workers’ Unions (KSPN), said last month that at least 13,800 textile workers have been laid off this year as local textile makers closed their factories after the domestic market was increasingly flooded with imported goods. He said the actual number of lay-offs could be as high as 50,000.  

Ristadi said the wave of closures was triggered primarily by a change in regulations earlier this year that relaxed import restrictions on ready-made garments. 

“It is unfair that Indonesia changed its own import regulations to import more goods but then criticized China’s so-called ‘overcapacity’,” He Wenping, a professor at the Institute of West-Asian and African Studies (IWAAS) at the Chinese Academy of Social Sciences (CASS), wrote in an article published on Monday. 

She asserted China will not accept any behavior that slanders Chinese products in the name of “overcapacity” and that Indonesia should rethink its trade policy if it plans to seek China’s help in boosting its tourism sector. 

According to Indonesia’s Central Statistics Agency, the Southeast Asian country’s bilateral trade with China fell 14.7% to US$127.1 billion in 2023 from $149.1 billion in 2022. 

During the same period, China’s exports to Indonesia fell 12.8% to $62.2 billion from $71.3 billion while China’s imports from Indonesia plummeted 16.5% to $64.9 billion from $77.7 billion. 

Indonesia’s trade surplus with China contracted to $2.7 billion last year from $6.4 billion in 2022. Indonesia’s exports to China include raw materials such as awaruite (an alloy of nickel and iron), lignite, coal and palm oil.

China’s exports to Indonesia include broadcasting equipment, telephones, computers, construction trucks, iron bars and electrical appliances.  

Last year, China shipped about $500 million worth of toys, $1 billion of footwear, $2.5 billion of textile products and $430 million of ceramic products to Indonesia. These four types of light industry products represented about 7% of China’s exports to Indonesia. 

Didi Sumedi, director general for National Export Development at Indonesia’s Ministry of Trade, said in early 2024 that the country aims to boost its exports to China back to about $65-70 billion this year. 

“The reason for Indonesia to impose a 200% tariff on Chinese goods is far-fetched,” a Sichuan-based columnist called Xiaoying wrote in an article published on Tuesday. “Can the proposed new tariffs really resolve Indonesia’s problems from the origin?”

Women working in a silk factory in China. Photo: Wikimedia Commons, Lindsay Maizland

The pseudonymous writer argued the pressure faced by Indonesian enterprises did not come from Chinese goods but rather from the changing environment in global trade markets. While China has maintained its competitiveness by upgrading its industries, Indonesia should also try to figure out its own strengths, the writer opined. 

“Blindly imposing tariffs against China will hurt the foundation of Sino-Indonesia relations and cause more problems to Indonesian trade,” Xiaoying wrote. “I think Indonesia will not choose to walk away from China as the two nations have very broad prospects for cooperation.”

Other Chinese commentators said India’s recent discussion of imposing tariffs on Chinese steel imports is another example of Asia’s rising protectionism. They said the spillover effect of the Sino-US trade war will have an impact on not only regional economic cooperation but also international relations.

Developing nations should “work together to be a stabilizing force for peace and contribute to resolving conflicts around the world,” Chinese President Xi Jinping said in a speech during the Conference Marking the 70th Anniversary of the Five Principles of Peaceful Coexistence in Beijing on June 28. 

Xi said the Five Principles of Peaceful Coexistence were initiated by China to protect the interests and pursuits of small and weak countries from power politics.

China’s paramount leader added that the principles categorically oppose imperialism, colonialism and hegemonism, and have laid an important intellectual foundation for a more just and equitable international order.

In 1953, then-Chinese Premier Zhou Enlai first proposed the Five Principles of Peaceful Coexistence during negotiations with the Indian government over border issues regarding Tibet, which has been called Xizang by Beijing since last year.

In June 1954, Zhou visited India and Myanmar and issued joint statements with the two nations’ leaders, affirming the five principles as the cornerstone for guiding their relations.

The Asian-African Conference held in Indonesia in 1955 further solidified the importance of the five principles, leading to the emergence of the Non-Aligned Movement, which perhaps ironically in the wake of the impending 100-200% tariffs was championed by Indonesia to strengthen the political leverage of the Global South in negotiations with developed nations. 

Read: Beijing: new Treasury rules amount to ‘decoupling’

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