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«——【Preamble】】 ——»
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Since May 14 this year, the White House announced tariffs on products related to China's new energy and chip industries, many countries around the world have responded.
Surprisingly, Indonesia's trade minister, Zulkifli Hassan, publicly stated on June 28 that he would impose tariffs of 100 to 200 percent on some Chinese products to mitigate the impact of the Sino-US trade war.
What are the benefits of doing this in Indonesia? Why target China on the issue of tariffs?
According to US media reports, the commodities that Indonesia is preparing to impose tariffs on this time are mainly shoes, clothing, ceramics, and other small commodities that China produces relatively large.
As for the reason, Minister Hassan also made it very clear, he believes that after Chinese companies are sanctioned by the West, some small goods with large export volumes will be sold to these countries. If Indonesia is flooded with these low-cost and high-volume imports, then the country's small and medium-sized enterprises will inevitably suffer.
Therefore, he believes that since the United States can impose 200% tariffs on ceramics and clothing, then of course we can also do this, in order to ensure the living environment of small and medium-sized enterprises.
Indonesia's largest textile shopping mall
In fact, Indonesia's drafting of this bill is both surprising and not surprising.
Surprisingly, Indonesia was still very dependent on China for its export trade last year, with US$27.8 billion worth of exports accounting for 16.7% of Indonesia's total export trade.
At present, China's palm oil is imported from Indonesia and Malaysia almost all year round, and the Philippines' previous more than 200 tons can be basically ignored after this year, while Indonesia accounts for more than half of the total imports.
Once Indonesia imposes tariffs on Chinese goods, China's relevant companies will inevitably reduce their imports of Indonesian palm oil, which is really more than worth the loss.
The reason for this is that in addition to the high value-added goods such as industrial equipment parts, small goods that are less than US$3 can account for about 10% of China's dominant exports to ASEAN.
Although the proportion of these goods alone is not much, plastic sandals make more money than iron ore, which in itself shows that the import volume of the former is much greater than that of the latter.
For ASEAN countries, where manufacturing is generally underdeveloped and there is a special need for manufacturing to generate income, the large and cheap "Made in China" will indeed have an impact on their local goods of the same type, which is also the reason given by Indonesia when drafting the bill. However, this is not an excuse for Indonesia to impose tariffs on Chinese goods.
The gold content of "Made in China" is well known, and the influx of Chinese goods into the Indonesian market has not happened in the past two years. At the same time, after the expansion of the "BRICS" countries this year, the Indonesian foreign minister also expressed his intention to join the "BRICS" countries.
Since the establishment of a strategic partnership between Indonesia and China in 2013, China has also given preferential treatment and assistance in many aspects. For Indonesia, like other ASEAN countries, they also want to catch the high-speed train of China's economy in the process of bilateral trade with China. In contrast, Indonesia's behavior of "eating and smashing pots" does make people feel infuriating.
Indonesia's special geographical environment determines that they need to develop more industries to support their more than 200 million people. However, if Indonesia had not undertaken some industries in China, Japan and South Korea in the past two years, only light handicraft industries with low added value would have been developed at this stage.
In the first quarter of this year, Indonesia's textile imports climbed in January, February and March almost every month. In Indonesia's view, this increase in imports shows that Chinese products have had an impact on their domestic industries.
However, from an objective point of view, Indonesia's continuous expansion of textile imports also shows that their distributors prefer Chinese goods, which are not very competitive compared to local goods, and are in urgent need of industrial transformation.
Bilateral trade between China and Indonesia has been on the rise. Since the establishment of the strategic partnership between the two sides, especially driven by the "Belt and Road", Indonesia's steel industry, high-tech industry, and manufacturing industry are constantly exploring their own potential and developing in the direction of diversified structure.
Indonesia is now the largest economy in Southeast Asia without joining the BRICS, which is enough to explain the problem.
In this case, it does not matter if Indonesia sacrifices some of the low-value-added light handicraft and manufacturing industries, because doing so will help guide China's mid-to-high-end industrial chain to enter the country, which is more conducive to the development of Indonesia's national economy.
Now the Indonesian side does not know whether it is short-sighted, or intends to follow the European and American sanctions on Chinese companies for "overcapacity", and actually hopes that China will export funds and technology to Indonesia at the cost of opening up its own local market, and does not want to contribute neither work nor effort in the whole process.
For most third-world countries, in the face of Western countries' frequent involvement in the Indo-Pacific strategy and events in Eastern Europe, the best way to improve their industrial competitiveness as much as possible while protecting themselves is to sacrifice part of the low-value-added terminal industrial chain to attract Chinese companies to invest in their homes. After all, Chinese companies are also for efficiency, and it is impossible for them to use their own money to help these countries carry out industrial transformation.
A positive case in point is Malaysia. As the first ASEAN country to establish diplomatic relations with China, Malaysia has become China's largest trading partner in the face of pressure from the West, rather than "decoupling" from China.
The situation in Malaysia and Indonesia is similar, and the perennial exports to China are mainly some industrial parts and low-end metal products, and cotton textile products account for a large proportion.
But at the same time, Malaysia is well positioned to take advantage of the opportunity to become a trading partner with China. From 2013 to 2019, although the trade deficit has increased year by year, Malaysia's exports of mechanical and electrical products and industrial products have also increased year by year.
This shows that China has always been equal and autonomous in trade cooperation with its neighbors. At the beginning, Malaysia did not have product characteristics in all aspects of the industrial structure, and the complementarity in the import and export trade accounted for a strong proportion.
However, once Malaysia can make use of its local advantages to develop characteristic industries, China can also import high value-added goods such as integrated circuits and computers from Malaysia, which is very beneficial to the long-term development of both sides.
If Indonesia blindly looks at the small profits in front of it and abuses the trade protection policy like the West, not only will its own country's handicraft industry become more and more involved, but in the end, it will not be able to roll up and will not have the spare energy to engage in industrial innovation, and it will only hurt itself.
Resources:
Relations between China and Indonesia——2018-05-04·Huanqiu.com
More ruthless than the United States, this country plans to impose tariffs of up to 200% on Chinese products ——2024-07-02·Australia.com
In response to the impact of the trade war, Indonesia plans to impose a maximum of 200% import tax on Chinese goods-2024-06-30·Sin Chew.com