Overview of Indonesia"s trade policy during the 1990"s

As a result, Indonesia has much to gain and little to lose from adopting a pro-active free trade position during tariff negotiations in the World Trade Organization (WTO). Indonesia, could, for example, offer to reduce its own tariff bindings in return for meaningful market opening measures in other countries, including tightening the requirements for anti-dumping duties. Reduced tariff bindings would have little impact on Indonesian industries, since those bindings are very high and are far above actual tariffs. The Pakmei "95 tariff reform package, which is based on tariffs before 1995, has now been in affect for several years. The tariff targets for some items are zero since Indonesia did not produce the items before May 1995. It is thus possible that the package will lead to tariffs that are higher for upstream products than for downstream products. This results in negative effective protection for some industries, making it more difficult for downstream producers in these industries to compete internationally. As a result, it may be necessary to review the final targets of Pakmei and to make adjustments for some tariff lines. If such a review is conducted, it is recommended that the principles underlying Pakmei be maintained. In other words, low and identical protection for all economic sectors should form the cornerstone of Indonesia"s tariff policy in the future. (Author abstract, modified)