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RI raises the bar on protection

Date:2014-02-13 Author:admin Click: Time
After three years of deliberation, the House of Representatives passed on Tuesday the countrys first-ever comprehensive trade law, which enables the government to limit exports and imports to protect local industries and markets. In order t

After three years of deliberation, the House of Representatives passed on Tuesday the country's first-ever comprehensive trade law, which enables the government to limit exports and imports to protect local industries and markets.

In order to protect domestic interests, the law will allow the government to restrict exports of commodities to anticipate steep price increases in global markets or to ensure sufficient domestic supply. 

The law will also provide the legal foundation for import restrictions to develop or protect certain industries. 

Deputy House Speaker Pramono Anung, who led the plenary meeting, said the law was balanced heavily in favor of domestic interests as reflected by, among other factors, support for local production.

"Speaking frankly, the legislation is a gift to all of us, in almost 80 years we've never had a law concerning trade that addresses our drawbacks in the sector," he told lawmakers and government officials attending the meeting.

Indonesia is one of the largest global suppliers of key commodities, including palm oil, coal, tin, nickel, bauxite. Last month, the government introduced export bans on unprocessed mineral ores, aimed at stimulating the local processing industry and creating jobs. 

Deputy Trade Minister Bayu Krisnamurthi said after the plenary session that the comprehensive law would replace other previous regulations, which partially arranged trade, referring to the 1934 regulation on distribution and enterprise, the 1961 Law on goods, the 1962 Law on goods under supervision and the 1965 Law on warehousing.

"The law affirms our standpoint that Indonesia does not fully embrace free trade. What we seek is a balance between market efficiency and the protection of various local stakeholders."

The law stipulates the government's key role in a wide range of commercial matters, including the promotion of local products, control over domestic circulation of basic goods and imports and exports.

In international trade, the government will be allowed to restrict exports due to a variety reasons, such as to ensure the fulfillment of domestic needs and to guarantee the availability of raw materials for the local processing industry, while also curbing imports to help develop domestic industry and maintain the trade balance.

In addition to this, the law also provides authority to lawmakers in matters relating to international trade. The government is required to consult with the House prior to the negotiation of free-trade pacts. 

Ratification by the House is also required for any such pact to be implemented. 

The Trade Ministry's director general for international trade cooperation Iman Pambagyo said consultation between the government and the House on trade pacts would be positive as it would help ensure the benefits of any trade deal for the country.

"Engagement by the legislative body will provide a strong endorsement of the country's need for any international trade agreement," he said.

In response to the newly passed law, Padjadjaran University economist Titik Anas said that the increased authority given to the government by the law was "worrisome" because the government could intervene in almost all aspects of trade.

"If the implementing rules do not specify when the government is required to step in, the law will have a negative impact on the business climate," she said, adding that the technical rules had to provide detailed conditions for government intervention. 

While the law received majority support from lawmakers, the National Awakening Party (PKB) faction objected to an article that governs trade preferences the country can grant to least-developed countries (LDCs).

PKB senior politician Lukman Edy said the article was ironic as it contradicted the spirit of a law that was supposed to protect domestic interests. 

"If we provide preferences to LDCs, that will eliminate the protection we've put in place for our own industry," said Lukman, a former disadvantaged and least-developed regions minister.

Other key points in the trade law

Article 22: The government supports the use of locally made goods through promotion and the dissemination of information or marketing and will implement the mandatory use of goods according to existing law.

Articles 25-27: The government manages the availability of basic and/or important goods domestically at affordable prices.

Article 54: The government can restrict exports and imports in national interests.

Article 83: The government can consult the House of Representatives during talks on international trade agreements with the country's trading partners.

Article 85: The government, with the approval of the House, can review or cancel international trade agreements asserted by law.

Article 97: To achieve the goals of the trade arrangement, the president can set up a national trade committee.

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