Tuesday, 31 July 2018 00:00

Changing Challenge from US-China Trade War to Opportunity

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Changing challenges into opportunities is what the Indonesian government should do to face a trade war between the two world economic giants, the United States of America –USA and China. Increased trade war triggered by the imposition of import duties on certain goods by both countries has made the demand for commodities on each side weakened.

In response to this situation, the Indonesian government should be able to utilize the trade war with various strategies that can increase exports, both to the USA and China.

The Indonesian Ministry of Trade has short-term (6 months), medium-term (18 months), and long-term (3 years) strategies to address this. The short-term measure is the bilateral approaches with the USA and China.

In the short term, Indonesia will request the extension of the Generalized System of Preferences (GSP) program or the exemption of import duty (zero percent) on the import of certain goods from developing countries to the USA.

Related to the opportunity to fill the US and Chinese trade gap, Indonesia has the potential to fill the imported products of China that are blocked by the USA, such as fruits, steel, and aluminum. Indonesia is also likely to fill the US imported products banned by China, such as steel and aluminum.

With China for example, Indonesia can take advantage of the ASEAN Plus China trade agreement.  Almost 95 percent of the commodities produced by Indonesia can be marketed to the USA. So, if there is a shortage of supply, Indonesia can fill it.

The current weakening of the rupiah should make the competitiveness of Indonesia's export products much stronger, instead of making import costs increased. Thus, it is necessary to control imports, especially consumer goods. Import must be calculated based on needs and scheduled in a bid to properly suit the needs.

For the medium term, the Ministry of Trade will encourage the utilization of preferential tariff agreements and lower tariffs on raw materials and capital goods. As for the long term, there will be diversification of exports to non-traditional countries.

What the government is doing today is essentially on the right track, especially in the face of the ongoing trade wars between the United States and China. It is expected that the strategy will be able to transform the challenge into an opportunity for Indonesia's economic growth.

Read 17 times Last modified on Friday, 03 August 2018 09:12