US Forces Indonesia to Relinquish Rules Protecting Food Safety, Industries, Digital Trade

Chennai: Under the trade deal, the US has forced Indonesia to slash tariffs, commit to large purchases, and relinquish all regulations that protected its industries, food safety, and digital space. If India provides “similar access” to the US, it will have to allow remanufactured goods, open up agriculture and dairy, accept genetically modified (GM) feed, ease patent laws for pharma and adopt US rules on digital trade.

By agreeing to eliminate 99 per cent of its tariffs on US exports, Indonesia has received a 19 per cent tariff on US exports. Before this deal, Indonesia’s simple average applied tariff was 8 per cent while the US average applied tariff was 3.3 per cent, as per the statement of the US Trade Representative.

More importantly, Indonesia will exempt almost all the US products from Indonesia regulatory certifications. The US President had earlier mentioned that India too will provide the US a "similar access".

Indonesia will exempt US companies and originating goods from local content requirements and accept vehicles built to US federal motor vehicle safety and emissions standards. “US companies can now operate in Indonesia without sourcing from local suppliers. This will hurt Indonesian MSMEs that rely on demand from larger firms,” said GTRI.

Further, Indonesia will accept FDA certificates and prior marketing authorizations for medical devices and pharmaceuticals and remove certain labelling requirements for cosmetics, medical devices.

It will also take steps to resolve many long-standing intellectual property issues identified in USTR’s Special 301 Report. This report had earlier placed India in ‘Priority Watch List’ for vague patent laws, long approval delays, weak copyright enforcement, and insufficient trade secret protections. Easing the patent laws are detrimental to the Indian pharmaceutical industry.

Indonesia will exempt US food and agricultural products from all import licensing regimes, provide permanent Fresh Food of Plant Origin (FFPO) designation for all applicable US plant products; and recognize US regulatory oversight, including listing of all US meat, poultry, and dairy facilities and accepting certificates issued by US regulatory authorities. India too will have to allow free import of genetically modified feed, cereals and dairy products.

Indonesia also has committed to address barriers impacting digital trade, services, and investment by providing certainty regarding the ability to transfer personal data out of its territory to the United States. India has been insisting on keeping Indian data within its borders.

Indonesia also has committed to join the Global Forum on Steel Excess Capacity and take effective actions to address global excess capacity in the steel sector and its impacts. A similar commitment will weaken India’s steel sector. Indonesia will remove restrictions on exports to the United States of industrial commodities, including critical minerals.

“Concessions—especially in critical areas like food, health, digital, and IP—must be fair, reciprocal, and aligned with India’s development needs. Otherwise, India risks giving up long-term control for short-term gains,” said GTRI.

Moreover, Indonesia has agreed to procure $3.2 billion valued aircraft, $4.5 billion of agriculture products, including soybeans, soybeans meal, wheat, and cotton as well as $15 billion of energy products, including liquefied petroleum gas, crude oil, and gasoline from the US.