Main Clauses of US-Indonesia Free Trade Agreement

Abstract

Bilateral FTA is not a major element of Indonesia's trade diplomacy and policy. Indonesia prefers to promote FTA through ASEAN Free Trade Agreement (AFTA). Nowadays, Indonesia begins to consider more seriously the role of bilateral FTAs, especially with industrial countries. Concluding FTA with advance industrial countries, such as the U.S., will greatly influence Indonesia's economic and legal reform agenda. Even though a US -Indonesia FTA will not happen in the near future, however, the current economic relationship between both countries might pave the way for a closer relationship in the years to come. However, there are several issues that need to be addressed before both countries conclude the FTA. The issues are: (a) Whether it is possible for Indonesia to engage in a free trade agreement with the U.S.; (b) what obstacles might be faced by both countries in implementing the FTA; and (c) what kind of provisions should be designed to minimize the problems. The study shows that the US-Indonesia FTA has a prospect to be concluded because of the benefits gained by both countries. However, there are significant problems in implementing it. The problems mainly arise in agriculture, investment and IPRs issues. The problems will still remain, unless Indonesia continues to strengthen its legal system and enforcement, encourage transparency, improve facilities and seriously deal with the corruption issues. Conversely, the US also needs to lower its trade liberalization standards and provide some exceptions in relation to public interest.