Handshake deal: Airlangga speaks at an economic conference in Bali. The economic affairs minister, also head of the Indonesian delegation in tariff negotiations, says that the bilateral talks are over and the process is now in the legal drafting stage. — AFP
JAKARTA: The government is looking to sign a bilateral trade agreement with the United States by the end of this month as the two sides aim to iron out details left open in a handshake deal announced in July.
Coordinating Economy Minister Airlangga Hartarto, who heads the Indonesian delegation in the tariff negotiations, told reporters that the bilateral talks were over and the process was now in the “legal drafting” stage, which would “hopefully be finished this October”.
The Indonesian delegation has scheduled at least six virtual meetings with the US Trade Representative (USTR) Office over the coming weeks and plans to fly to Washington at the end of the month to sign the Agreement on Reciprocal Trade (ART), which would make Indonesia one of the first countries to do so.
The archipelago was also among the first to secure a framework tariff agreement with the US government that brought the duties imposed on Indonesian exports down from a threatened 32% to 19% in July, in exchange for various concessions, only to find out later that other South-East Asian countries would receive the exact same rate without as many concessions.
The virtual meetings are not expected to result in a tariff lower than the agreed-upon 19%, a figure deemed to be cast in stone.
Rather, the talks will focus on details that remained unaddressed in the handshake deal, such as the list of commodities exempted from the so-called reciprocal US tariff.
Airlangga said “it’s not final until it’s signed” but added that it was “almost certain” that palm oil, natural rubber and cacao would be subject to 0% import duties.
Washington has agreed to exempt most of the agricultural commodities the United States is unable to grow itself, and Jakarta is looking to add more commodities to the list, but no details have been revealed.
The intersession meetings, the first of which took place last Wednesday, would also cover the subject of non-tariff trade barriers, in which Indonesia committed to taking down various measures and generally deregulate imports as part of its concessions to the United States.
The US government entered a shutdown last Wednesday due to a budgetary impasse within the US Congress, which brought nonessential federal operations to a temporary halt that will last until lawmakers find a bipartisan resolution on the budget.
Hundreds of thousands of federal workers are furloughed during the shutdown, but the USTR Office is retaining more staff than it used to during past funding lapses, Politico reported.
Airlangga told reporters last Friday that the shutdown had halted the US-Indonesian bilateral online meetings on the trade pact.
The US Embassy in Jakarta and the USTR did not respond to enquiries on the matter. Washington has not enforced the agreed reciprocal tariffs with any country yet, since enforcement requires ratification of the ART, which is expected to take months once an agreement has been signed.
Depending on whether Jakarta categorises the ART as an agreement requiring just a presidential regulation to ratify or a law involving the House of Representatives, the ratification process could take either three to six months or six to 12 months, said Permata Bank chief economist Josua Pardede.
He said that, “even after ratification, the reciprocal tariffs could only be put in operation once the technical regulations and systems are ready”.
Josua estimated that the tariffs could become fully effective in early or mid-2026, assuming that the agreement was signed by the end of this month and the ratification process was swift, “which should give enough time” for regulatory and system readiness, but he noted it would be pushed back if the ratification required legislative approval.
“From the governance and business certainty side, it’s not ideal to enforce tariffs before all key implementing regulations are in place. — The Jakarta Post/ANN
