JAKARTA: Indonesia is expecting to boost its exports to the US as the world’s biggest economy has recently renewed tariff reductions on several products under its generalized system of preference (GSP).
US President Barack Obama signed on Monday legislation which provides a legal basis for an import tariff reduction on several products including some from Indonesia.
The legislation is a renewal of a tariff system that expired nearly two years ago.
Gusmardi Bustami, a special staffer to the trade minister, said Tuesday that with the signing of the legislation, the shipment of manufactured goods was expected to rise between 10 percent and 20 percent from around US$1.8 billion seen last year.
“That measure will certainly give a major boost to our exports to the US, particularly at this time when demand douses across the globe. This will help our producers tap into the market where economic recovery is underway,” he told The Jakarta Post in a phone interview.
Introduced in 1976, the tariff system has eased import duties on 4,800 items that are mostly produced in 122 developing and least-developed nations, thereby giving advantages for the country’s finished goods producers as well as customers.
Indonesia was the fourth biggest beneficiary of US GSP after India, Thailand and Brazil although it still lagged behind its peers in utilizing the facility.
The total value of goods that should have been covered by the facility in 2014 was $18.7 billion and Indonesia’s shipments accounted for $1.7 billion, or 8.8 percent, of the overall figure.
Topping the list of Indonesian products that have benefited from the GSP are radial tires, wood products, rubber gloves, musical instruments, tires, porcelain, palm oil products, jewelry and footwear, according to data from the Trade Ministry.
The facility expired at the end of July 2013 and attempts to renew it were not easy following a lengthy political process in US Congress.
Ultimately, President Obama signed the legislation which rules the GSP is slated to take effect on July 29 and last until Dec. 31, 2017.
Gusmardi said that in line with the goal to raise export value, Indonesia would also push diversification of products eligible for GSP to 1,000 items from 652 items previously with glasses, food and beverages included in the line-up.
Indonesian Footwear Association (Aprisindo) chairman Eddy Widjanarko welcomed the US move, saying that the approval from the US government would provide Indonesian exporters with certainty about the sustainability of the tariff reduction.
He also said that without the discount, US importers would pass the duties directly to Indonesian exporters, thereby forcing them to lower their prices.
“But, the GSP will not really help push up our exports to the US or enhance the competitiveness of our footwear there,” Eddy said.
Indonesia’s exports to the US amounted to $19.4 billion last year, up slightly by 0.8 percent from 2013.
From January to May, sales of goods to the country reached $6.4 billion, down 0.84 percent from the past year.
