Photographer: Dimas Ardian/Bloomberg

Indonesia Can't Figure Out Why it's on Trump's Trade Hit List

  • Southeast Asia’s biggest economy on ‘trade abuse’ probe list
  • Pence visit aimed at deepening strategic and economic ties

Indonesia is seeking to stay out of U.S. President Donald Trump’s bad books, using a visit by his deputy Mike Pence next week to reassure on its commitment to free and fair trade.

Officials in Jakarta were left scrambling after the country made it onto a list of nations Trump has ordered probed for potential trade abuse. While Southeast Asia’s largest economy had previously avoided Trump’s cross-hairs, it runs a sizable trade surplus with the U.S.

Pence’s trip, which also takes in South Korea, Japan and Australia, marks his first official visit to Asia. He will stress the U.S. commitment to alliances and partnerships in the region, the White House has said. Yet nations on his itinerary -- South Korea, Japan and Indonesia -- are included in the trade abuse probe that Trump says is aimed at cracking down on "foreign importers that cheat.”

“We continue to regard the U.S. as a strategic partner in terms of trade, in terms of economic cooperation, investment,” said Iman Pambagyo, director general for international trade negotiation at Indonesia’s Trade Ministry.

“But at this time of global economic uncertainty we are puzzled with the signal being sent from Washington, including the inclusion of Indonesia as a country causing a huge deficit with the U.S. and the filing of an anti-dumping petition for biodiesel,” he said. “It really concerns us."

Indonesia’s Surplus

"We want to understand the policy direction in terms of trade from Washington because when we talk about deficits I think you cannot ask for surpluses from all countries,” Pambagyo said.

Indonesia ran a surplus with the U.S. of $13 billion last year, largely via exports of textiles, footwear, fishery products and natural resources. It initially escaped Trump’s focus even as he signaled a new era of U.S. protectionism upon taking office. But the probe has sparked consternation among some of Indonesia’s most senior officials and ministers.

Read more: Inside Japan’s plan with Pence visit to avoid Trump’s wrath

Indonesia hasn’t been completely out of the glare over protectionism. It is disputing a complaint before the World Trade Organization brought by the U.S. in relation to horticultural products, animals and animal products. And it’s now being targeted by U.S. biodiesel producers.

The National Biodiesel Board Fair Trade Coalition claims Indonesian and Argentinian producers are selling at prices below production costs while benefiting from "illegal subsidies" at home. The group, which seeks tariffs of more than 23 percent on Argentina and 34 percent on Indonesia, filed a petition last month with the U.S. Commerce Department and U.S. International Trade Commission.

‘Best Way’

Pambagyo said Indonesia was prepared to respond to the petition and was considering the “best way” forward”. Indonesian government officials have since met with representatives from the local biodiesel industry. "We will engage actively in the process," he said. "It is quite important for Indonesia to make sure our market access to the U.S. is not being jeopardized by this allegation."

Fadhil Hasan, executive director of the Indonesian Palm Oil Association, said the issue should be raised by Indonesia’s leaders with Pence when he visits. Indonesia would not be able to compete if anti-dumping tariffs were imposed, he said.

China, with a surplus of $330 billion, tops the list of the nations caught up in the 90-day investigation into the U.S. trade deficit. The study will also examine alleged currency misalignments and constraints imposed by the WTO. The outcome will help guide Trump’s trade policies.

‘Anticipatory Steps’

Indonesia’s Coordinating Minister for Economic Affairs Darmin Nasution said last week the government would await the results of the probe. “Intensive communications are maintained with that country,” he said, referring to the U.S., adding “anticipatory steps” could be taken.

Pence will meet with President Joko Widodo and Vice President Jusuf Kalla, as well as U.S. and Indonesian business leaders. Foreign Ministry spokesman Arrmanatha Nasir said terrorism and maritime cooperation are also likely to be discussed. "This is an opportunity for both countries, both for the U.S. and for Indonesia to better understand how we can evolve and develop our relationship going forward," he said.

An ongoing contract dispute between the Indonesian government and U.S. mining giant Freeport-McMoRan over the company’s operations in Indonesia is also likely to be discussed.

Lin Neumann, managing director of the American Chamber of Commerce in Indonesia, said the visit was a chance to reassure on trade ties.

“There are always trade and investment issues between the United States and Indonesia,” he said. “There have been for years and there will be for years going forward at various times, but I don’t think there’s anything so dire that it’s going to derail the relationship.”

— With assistance by Eko Listiyorini

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE