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Statement by Ambassador Michael Punke at the Sixth WTO Trade Policy Review of Indonesia

Statement by U.S. Ambassador to the WTO Michael Punke at the Sixth WTO Trade Policy Review of Indonesia

World Trade Organization
Geneva, Switzerland
April 10, 2013

*As Prepared for Delivery*

Thank you, Chair. The United States appreciates the opportunity to participate in Indonesia’s sixth Trade Policy Review. We warmly welcome Indonesia’s delegation, led by Indonesia’s Vice Minister of Trade, Mr. Bayu Krisnamurthi.

Indonesia is the world’s 17th largest economy and the largest in Southeast Asia. Indonesia enjoyed robust economic growth over the past five years, with an average annual GDP growth rate of 5.9 percent from 2007 to 2011. As the Government of Indonesia’s report notes, Indonesia’s economy was among the top worldwide performers, with a 4.6 percent GDP growth rate, during the difficult global conditions of 2009. Goods exports reached almost $204 billion in 2011, double the $101 billion in 2006.

The United States-Indonesia trade and investment picture demonstrates the importance of our bilateral commercial relationship. The United States and Indonesia traded $26.0 billion in total two way goods trade last year. Our most recent data shows that in 2011, bilateral trade in services totaled $2.1 billion and U.S. foreign direct investment (FDI) in Indonesia was $11.6 billion. We are committed to further strengthening our bilateral relationship through our Trade and Investment Framework Agreement, or TIFA, which we signed in 1996. As TIFA partners, we are focusing on expanding trade in agriculture and non-agricultural goods, investment and services.

Five years ago during Indonesia’s last Trade Policy Review, the United States commended the Indonesian government for pursuing a campaign of trade reform and liberalization. We were encouraged by the steps Indonesia had taken in the years after the Asian financial crisis to open its economy. Those steps contributed to Indonesia’s strong economic growth over the last five years, as Indonesia has benefited greatly from its participation in the world economy. However, in the last couple years, it appears that the forward momentum of liberalization that had created so much hope for Indonesia has been replaced by economic nationalism and protectionism. Indonesia’s report highlights that it is adopting policies designed to promote domestic production, move the Indonesian economy up the value chain to a higher level of development, and achieve agriculture self-sufficiency. While elements of these objectives are understandable, we have serious concerns about the import substitution and restrictive market access policies that Indonesia is using to achieve them.

Indonesia has introduced and implemented a wide array of new trade and investment restrictions since its last TPR. These include import licensing requirements, trading rights limitations, pre-shipment inspection requirements, foreign equity restrictions, local content and domestic manufacturing requirements, and export restrictions, including taxes and prohibitions. We are also highly concerned about Indonesia’s frequent use of safeguard investigations that do not appear to meet a number of the requirements of the WTO Agreement on Safeguards. In addition, we are monitoring troubling developments related to the new Law on Food, as well as the draft Trade and Industry Laws.

We have conveyed our continuing and deepening concerns about these trade policy trends in Indonesia to the Indonesian Government to little effect. In the face of the growing concerns expressed by its trading partners, Indonesia continues to restrict access to more and more sectors of its market by making its regulations even more complicated, disruptive, trade restrictive, and expansive, as they affect more and more sectors of the economy. We are troubled by these measures that appear to be inconsistent with Indonesia’s WTO commitments. For instance, Indonesia’s trade-restrictive measures applied to horticultural products, animals, and animal products have created a complex web of import licensing requirements that, along with quotas, have the effect of unfairly restricting U.S. and other foreign exports. Despite our repeated efforts to engage bilaterally and in the WTO on these issues, our concerns have not been addressed and, as a result, we turned to the formal WTO dispute settlement proceedings earlier this year to find a solution. We do not turn to this mechanism lightly. Litigation is an action of last resort. We remain open to finding a solution that will allow us to focus our attention on improving our trade relationship.

Indonesia is a market of huge potential, with an economy of 240 million people and more than 60 million low-income Indonesian workers projected to join the middle class in the coming decade, significantly increasing already strong consumer demand. As a leading developing country, Indonesia is well positioned to reap the benefits of further trade liberalization.

Indonesia has sought a larger leadership role on the international stage, as chair of APEC and host of the WTO Ministerial in Bali this year. The United States looks forward to working with Indonesia and other WTO Members on ensuring successful outcomes for these meetings. But Indonesia’s policies to restrict market access are not in keeping with those of a country seeking to take a global leadership role on trade.

We have submitted a number of specific questions on these and other issues. The United States appreciates Indonesia’s responses to our written questions, which we are carefully reviewing. We look forward to discussing further Indonesia’s trade policy regime, both on those issues where we are already cooperating as well as on issues that pose challenges to our trading relationship. We remain committed to working with Indonesia and our other WTO partners to strengthen and build on the WTO’s rules-based foundation. We thank the delegation of Indonesia for its participation in this important process.