Discourse: ‘Free trade for the sake of fair trade’

The Jakarta Post | Tue, 01/24/2012 10:03 AM A | A | A |-Klipping The Jakarta Post

The new trade minister, Gita Wirjawan, has been much lauded as well as criticized for his controversial ban on raw rattan exports. Speaking to The Jakarta Post’s Linda Yulisman and Andi Haswidi, he explains his view on Indonesian trade policies and why one should think twice before calling him a protectionist. Below are excerpts from the interview:

Question: Former trade minister Mari Elka Pangestu said last August that exports could grow between 18 and 20 percent this year. Is this target still realistic considering the economic crises in our traditional export destinations?

Answer: It’s relevant in terms of our having to work hard toward it. But, is it realistic? Probably not, given the fact that there’s been an apparent decline in economic activities in the Western European economy and US economy.

For sure, we will have to be much more proactive with respect to our traditional markets to achieve an increase of over and above whatever we achieved in 2011, which was a record, and this is attributable to what Bu Mari achieved in the past, the foundations that
she set.

But, I think it will take time to cultivate the new non-traditional markets in Africa, Eastern Europe, the Middle East, Central America and South America. But, I think for the purposes of 2013 onward, probably we will be able to maintain a much broader base of export destinations.

We will focus on nontraditional markets and we will also focus on a higher degree of value-added components in whatever exports we market. That policy basically will be geared to making sure there are more value-added components in what we export.

Do you have an annual target set already?

I think if we can achieve a 5 to 10 percent increase in 2012 over last year’s number, that would be an achievement already, given the fact that Europe is going through a very, very difficult time. The United States is also going through a difficult time and for sure, there are many countries outside Europe and the United States that we export our goods and services to, that are linked to the declining economic activities in Europe and United States.

So, we are not completely decoupled; there are a lot of places that we can actually think about exporting to in Asia Pacific, in other parts of the world. These are actually intermediary toward the end game in Europe and the US.

You mentioned developing exports to nontraditional markets. How would you rate the success of these measures?

We are not at a point where we can evaluate whether we have been successful, but as for confidence and prospects with respect to the non-traditional markets, yes, those exist. For example, Africa. Seven out of the 10 highest-growth economies in the world in the last decade have been in Africa, whether it’s Nigeria, or other countries, Botswana, South Africa. These are all, I think, rising economies that we have to pay
attention to.

South Africa in itself is a US$380 billion economy, very big, half the size of our economy. There are 1.5 million Indonesians and Indonesian descendants living in Capetown. These are people who basically traveled over to South Africa 200 years ago from Sulawesi and Java. They have the same tongue as we do, so it is impossible for them not to like Indonesian consumer products.

The way I think about it, if we trade with another country, the combined GDP and whatever, the trade has to be at least 1 percent of the combined GDP.

You have been touted as a champion of protectionism following the ban on rattan exports and your statement on the so-called “great barrier wall”. How do you respond to that?

I am not against exports. I am much more in favor of exporting goods that have value added. Does that put me in the protectionist box? I am not so sure.

Secondly, I make the argument that we have detected and identified hundreds, if not thousands of products — food and/or non-food — which are non-compliant with the rules and regulations with regard to safety, security, health and environment. Have I come up with these new rules and regulations? No. I am only applying the rules. So the bar has been set and I am only making sure that we go up to the level of the bar which has been set.

Does that make me a protectionist? Or is the perception of me being a protectionist being created by people who want to see me as a protectionist? There’s a difference. If you want to see me as a protectionist, you will see me as a protectionist.

But, time will tell, as to whether we’re doing the right things. Now, it is tough when we announce thousands of products are in violation [of the rules]. It will be tough to do that without stirring people’s emotions. Why? Because people have vested interests. They have vested interests in making sure that the goods that we consume stay in violation
of the rules.

Former minister Mari was known for her active engagement in liberalization of trade through free-trade agreements or other kinds of economic partnerships.

So am I. I was responsible for making sure that the tariff with New Zealand and Australia got ratified in time, so we could get it into effect on Jan. 10 with ASEAN, New Zealand and Australia. I am in favor of that.

I also basically make sure that the consultation on the study that was done on the South Korea and
Indonesia comprehensive economic partnership got started. But it’s going to be free trade for the sake of fair trade. Now you can justify any free trade cooperation with anybody, especially if we have a strong investment thesis behind that.

I think it becomes difficult when you send bauxite to another country and you end up buying cameras. There needs to have fair and balanced trade components between two countries. That’s the spirit I want going forward. That does not make me antiliberal. That does not make me anti-free trade. But it depends. If you want to perceive me as anti-free trade, feel free.

Look, I think, protectionism is defined when any particular government is subsidizing a particular sector or some sectors with a huge amount of money to the extent that it does create a policy distortion.

You’re talking about the US and Europe?

Yeah. They spend about a $100 billion dollars for the agriculture in the US and about $75 to $80 billion in the European Union. That seems protectionist. You should call the EU the great wall of whatever. The greatest. Now, I mean, that’s fair when people say things like that.

In response to potential rising protectionism following the crisis, what will the government do, because countries, for example Brazil, are upgrading their trade security personnel?

It’s happening everywhere. Obama is just now consolidating some of its agencies and they are going to strengthen their consumer protection. Brazil, as you noted. India, they’re taking a more stringent stance with respect to goods and services coming into the country.

I think that’s the concern that we’re seeing; the rate that multilateralism does not work, regionalism and bilateralism would take place in a bigger way.

When there is bilateralism, increasing degrees of bilateralism, there tends to be one country that benefits more than the other country, which doesn’t benefit as much. But, at the same time people will react by taking a more protectionist posture.

I think that’s the danger that we have to prevent and avoid. But again, going back to our tariff regime; we have awaited an average tariff regime of 6.8 percent across the board for all the goods and services that come into the country, they get charged 6.8 percent as compared to China at 10 percent, India at 14 percent.

Now, how can anybody call Indonesia protectionist? That’s pretty misplaced. We will go by the principle of whatever rules and regulations have been promulgated. We will be in a position to make sure that they are implemented in accordance with the spirit of law.