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BY :JAYANTY NADA SHOFA
NOVEMBER 05, 2020
Jakarta. Indonesia stands to benefit from trade with the United States, regardless of who wins the US 2020 presidential election, as the total exports and imports to and from the world's largest economy expected to double to $60 billion with a healthy trade surplus in the next two years.
The challenger Joe Biden from Democrat Party is on course to beat incumbent Republican president, Donald Trump, as the poll stands on Thursday. Although the candidate's approach to trade cannot be more different, one hard fact remains. Contemporary geopolitical competition dictates that the US could not afford to lose the largest Southeast Asian economy.
Just last week, the Trump administration granted an extension for the Generalized System of Preferences (GSP) that exempts the duty on many Indonesian export commodities to the US. Trade Minister Agus Suparmanto said Indonesia was quick to follow up with a proposal for a limited trade deal with the US.
“The extension of GSP and a limited trade deal will positively impact the US-Indonesia trade by increasing it to $60 billion in 2024. Businesses should make use of this GSP,” Agus told BeritaSatu TV on Wednesday.
The GSP slashes tariffs to promote economic growth for developing countries. While Indonesia remains a GSP beneficiary country, the US terminated India's preferential trade status last year.
For Indonesia, keeping up with whoever wins the White House is more than just out of mere curiosity, especially since the US is one of its strategic trade partners.
Agus said the US is Indonesia's second-largest export destination in non-oil and gas exports after China. In 2019, the US-Indonesia's total trade value reached $27.6 billion, with exports reaching $18.3 billion and $9 billion for imports. This resulted in a surplus of $9.3 billion.
The Indonesian Chamber of Commerce and Industry (Kadin) sees GSP as the key to boost Indonesia's trade competitiveness.
"Whoever wins the election, we still need market intelligence data on the flagship products, potential products as well as our competitors because we are competing with other countries," Kadin's deputy chairwoman Shinta Kamdani said.
The government needed to provide reliable market intelligence to prepare exporters seeking to use the GSP or promote export to the US, Shinta said.
Bilateral vs. Multilateral
Fithra Faisal Hastiadi, an economist from the University of Indonesia, said both contenders have their own international partnerships preference. While Biden prefers regional trades, Trump favors bilateral ties.
Fithra said Trump’s liking towards bilateral partnership is evident in the US Secretary of State Mike Pompeo’s recent visit to Indonesia. The US also expedited the GSP process, although Indonesia lost the beneficiary status for being a developed country and contributing to the US trade deficit.
“Trump’s bilateral approach is more promising, especially with a limited trade deal that can be much deeper and more comprehensive,” he said.
Under Barack Obama's administration, Biden tried to penetrate Asia through the Trans-Pacific Partnership (TPP), a proposed trade agreement among 12 nations, including Japan, Australia, Peru.
Fithra pointed out Biden's possibility of reviving Obama's legacy, the TPP after Trump withdrew the US from the proposed trade deal.
"If Biden is elected, we would see more regional partnerships, or perhaps, he would revive the TPP. Or eventually, we would see a free trade agreement (FTA) in the Asia-Pacific," he said.
In Asia-Pacific, there is currently the Regional Comprehensive Economic Partnership (RCEP) under negotiation. The agreement involves the ten Asean member states and Australia, China, Japan, New Zealand, and South Korea. India was initially a part of the negotiation but opted out in 2019.
"Both tracks, the TPP and RCEP, would meet in the end, that is an FTA in the Asia-Pacific," Fithra said.
According to Fithra, Indonesia has a profitable position thanks to relations with the US, China, and Japan. In the post-pandemic world, great powers like the US would also try to move away from China to expand its portfolio.
"One of their targets is Asean. Be it, Trump or Biden, the business process will always involve Indonesia," he said.
China-US Conflict
China's rising power would cast shadows on the US status quo and provide plenty of potential flashpoints in the next four years, regardless of who won the US presidency, Michael A. Witt
the professor of strategy and international business at Insead, a graduate business school.
"Conflict will remain a dominant theme for Sino-US relations under President Biden. China is a rising power that threatens US predominance, which is true no matter who is president," Witt said in an emailed statement to the Jakarta Globe.
"Historically, such power transitions have tended to result in a major war. Nuclear weapons are likely to prevent this, but a cold war 2.0 remains a distinct possibility," he said.
Witt said China territorial claims in the South China Sea, the Senkaku/Diaoyu Islands, and Taiwan would likely continue meeting opposition from the US under President Biden.
"President Biden is more likely than his predecessor to make the mass incarceration of the Uighur minority in China a foreign policy issue. And sources of economic friction will likewise persist, such as issues around market access and state support of Chinese firms," Witt said.
He said Biden would also be less confrontational to the US allies in defending its interests against China, an approach that should benefit Asean countries.
"For instance, the United States may offer a free trade arrangement and improved military cooperation to its partners in the region. In this context, there is potential for Asean countries to play off China and the United States against each other to extract larger benefits for themselves," Witt said.
Witt argued that the US lifting the visa ban on Indonesia’s Defense Minister Prabowo was the latest example that the process is already begun under the Trump administration.
Either Biden or Trump, Indonesia Wins
Indonesia stands to benefit from trade with the United States, regardless of who wins the US 2020 presidential election.
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