Trade Agreement, Just Pragmatic Choices of the Government?
China finally decided to retaliate on United States (US), by setting a new import tariffs, ranging from 5 to 25 percent on US$60 billion goods, including frozen vegetables and liquefied natural gas, said an official statement on Monday (05/13) - Photo: Special

JAKARTA (TheInsiderStories) – Indonesia is currently actively negotiating an investment treaty. The agreement that is being negotiated is not just a traditional Bilateral Investment Treaty (BIT), but has been at the level of a Free Trade Agreement (FTA) or Comprehensive Economic Partnership Agreement (CEPA).

On March 11-15, the government is negotiating the Indonesia-European Union Comprehensive Economic Partnership Agreement (I-EU CEPA) and Indonesia-Australia CEPA.

Previously,  on Dec 16. 2018, Indonesia has signed the Indonesia-Europe FTA. Including on Oct 11. 2018, Indonesia signed a bilateral investment agreement with Singapore. And on February, the government held a Regional Comprehensive Economic Partnership (RCEP) negotiation between ASEAN and its six economic partner countries.

However, all of these international trade and investment agreements have never been disclosed to the public, especially regarding the content or text of the agreement, including economic liberalization commitments made by the Indonesian government. Even the consultation process was not opened to the public, making it difficult to control and provide input, especially the analysis of the impact that the agreement would have.

Even though FTA or CEPA is not only a matter of export-import but all aspects of people’s lives related to intellectual property rights, agriculture, and food, health, education, digital economy, environment, labor, etc.

Therefore the FTA is not merely a matter of market access, but the “Rules” must be negotiated which regulate the legal principles of how the state carries out its obligations to implement the agreement, including what the state can and should not do in making domestic regulations.

The provisions of rules in the FTA also have the potential to cause social and human rights impacts and conflict with the constitution. For example, the principle of transparency, non-discrimination, regulation coherence (harmonization of national law), dispute resolution mechanisms, rachet, standstill, prohibition of performance requirements.

Because of its broad impact, trade and investment agreements must be considered as very important agreements so that the Indonesian Parliament, must oversee, criticize, and analyze the long-term impacts that will be caused. Therefore, the role of the Parliament should be present and active when the Government plans, negotiates and will enter the ratification process.

During this time, the presence of the Parliament in the discussion of international trade and investment agreements was only present in the final process before ratification, namely only as a stamper without considering the good and bad for the nation and the state in the long term. Because this agreement will also affect state sovereignty and potentially conflict with the Constitution.

The global economic turmoil that has an impact on Indonesia’s current account deficit often raises panic in the Indonesian Government. Even the decline in Indonesia’s trade performance continues to put pressure on the national economy. In the end, the urgency to complete various negotiations on trade agreements as soon as possible became the pragmatic choice of the Government in order to improve export performance.

This chosen policy shows that the government mindset is very narrow to see trade cooperation, only exports, and imports. Because if the government only pursues the target of increasing the value of exports in the near future, the way is not by signing many FTA. But improving national regulations makes it easier for investors to invest in Indonesia.

Indonesian credible association, Koalisi Masyarakat Indonesia Untuk Keadilan Ekonomi noted, there are three things that have caused the decline in Indonesia’s export performance: Indonesia’s exports still rely on exports of raw materials and commodities that have no added value; Indonesia’s leading commodity products are still dominated by low-tech products; trade creation in trade liberalization continues to create a high level of dependence on imported products.

According to the association data, evidence that FTA is not a solution to increase exports is because the average utilization of FTA by Indonesia in driving Indonesia’s export performance is very low, only by 30-35 percent. Even with more and more FTA being signed, that opened the door to Indonesian imports.

Indonesia-Australia CEPA, for example, actually increases imports rather than exports. This is because there is no opening of market access for agricultural products including plantations owned by Indonesia to Australia.

In the Ministry of Trade data, Australia so far has opened tariffs of up to zero percent for Indonesian agricultural products such as coffee, rubber, wood, chocolate, and paper. The concept of the powerhouse economy that is carried out will increase the use of raw materials for agricultural products from Australia to be processed in Indonesia rather than using local agricultural products.

Therefore the Parliament must conduct an active critical study of international trade and investment agreements for their impact on the economy, social, environment and human rights. It is better if in this campaign period a number of ratification and negotiation processes for the FTA must be postponed to ensure that the rights and fate of the Indonesian people are protected as mandated by the Constitution.

The motive for making international investment agreements must focus more on economic reasons than other reasons. Do not let the making more thick with political or non-economic content. For example, it is only an arena for improving the image of the government, namely a large number of international investment agreements born in the regime.

If the way of thinking is like this then if at any time there is an international investment agreement that is actually detrimental to Indonesia and should be terminated, the Government will not do it for fear that it will damage its image.

In addition, many international investment agreements have been signed, ratified and entered into force, but in fact, there are many parts that have not yet been negotiated and will be completed later with the work program scheme. This shows that indeed what is being pursued is the moment of signing, not the completion of the negotiations as a whole.

Knowledge of the targets to be achieved from partner countries must be clearly known when it will begin negotiations, not in the final stages of negotiations. In addition, the making of international investment agreements is also important because it is not only intended to attract foreign investment, but also to keep existing foreign investors from leaving to other countries, especially competitors.

Written by Lexy Nantu, Email: