THE Indonesia has proven resistant to the demands of the trade agreement USAfearing that they will limit their autonomy, particularly in the critical minerals and energy sectors, which could impact their relations with China and Russia, according to sources close to the negotiations.
Since the United States and Indonesia reached a framework agreement in July setting a 19% tariff, the Trump administration has pressured Jakarta to accept terms that could restrict its relationship with China, one of its largest foreign investors, according to sources who requested anonymity due to the confidentiality of the negotiations.
The impasse has generated tensions with Washington and threatens to destabilize the agreement. THE Trump administrationPA has accused Indonesia of reneging on its previous commitments and believes the deal risks collapsing, the Financial Times and Reuters reported this week, citing unnamed U.S. officials.
The trade demands that Indonesia considers new include clauses that would allow Washington to terminate the deal if Jakarta signed other deals deemed detrimental to U.S. interests, according to one of the sources. Economy Minister Airlangga Hartarto and US Trade Representative Jamieson Greer plan to hold a virtual meeting this Thursday to discuss the issue, the source added.
Asked Wednesday about the status of negotiations, Greer confirmed that tomorrow’s meeting was planned, but declined to comment on details of possible friction.
“We have confidentiality agreements between us and Indonesia throughout the process. But I will say this: I think it is significant that we signed agreements at the ASEAN conference in October with Malaysia and Cambodia,” Greer said at an Atlantic Council event. “I wish Indonesia was in the same situation.”
The main sticking point is cooperation in the development of critical minerals, a priority area for the United States due to China’s dominance in the supply chain, as well as in oil and gas investments, according to sources familiar with the matter. The United States has said any partnership in this sector must exclude third parties, which would impact Indonesia’s relations with China and Russia, which are major investors in the country’s mining and energy sectors.
Indonesia said on Wednesday, in response to the US accusations, that negotiations were ongoing and that it hoped to soon reach a deal “beneficial for both sides”.
“There are no specific issues in the negotiations and the dynamics of the process are normal,” Haryo Limanseto, spokesperson for the Coordinating Ministry of Economic Affairs, told Bloomberg.
Under the July deal, Indonesia agreed to buy about $19 billion worth of U.S. products, including 50 Boeing planes, and eliminate tariffs on U.S. imports.
The Southeast Asian country also agreed to remove some requirements, including local content rules, that made it more difficult to sell U.S. products in the country. At the time, President Donald Trump said he negotiated directly with Indonesian President Prabowo Subianto to finalize the deal.
Since then, Trump has announced a series of trade agreements and frameworks with Thailand, Cambodia, Vietnam and Malaysia, with similar commitments to reduce tariff barriers, particularly on industrial and agricultural products.
However, concerns over sovereignty and relations with China emerged in agreements signed with Malaysia and Cambodia in October, which included clauses aimed at aligning or limiting those countries’ policies. For example, the agreement with Malaysia states that the United States can terminate it “if Malaysia enters into a new bilateral free trade agreement or preferential economic agreement with a country that harms the essential interests of the United States.”
Separately, China last month requested clarification from Malaysia and Cambodia on parts of their agreements that raised “serious concerns” in Beijing, without specifying which ones.
The issue of critical minerals is particularly sensitive for Indonesia and its relations with China. The country relies heavily on China for much of the capital, technology and processing capacity needed to modernize its nickel and bauxite industries.
Deputy Minister of Investment and Manufacturing Industry Todotua Pasaribu noted in August that Chinese investment in Indonesia had increased by 31 percent over the past six years, according to Indonesian magazine Tempo.
Between 2020 and this year, Chinese investments exceeded $35 billion, including more than $15 billion in metal processing, Todotua said.
About The Author
