Ananya Bhattacharya and Adam Beeksma
INTS 498/ECON 601
Paul Bowles
April 7, 2015
In the process of globalization, some would argue that regional or global trade activities take precedence over local or national activities. In fact, a very visible result of globalization is the formation of an international trade regime, which requires rules of trade among nations. The global organization dealing with such trade rules, as we know, is the World Trade Organization (WTO). In 2001, at WTO’s Fourth Ministerial Conference in Doha, Qatar started the latest round of trade negotiations to further global trade among the WTO member nations. However, the meeting ended with no agreement, and progress has been stalled over a divide on major issues, such as agriculture, industrial tariffs, non-tariff barriers, services and trade remedies.1Also, the most significant differences are realized between the developed and developing nations. Given the background, it becomes interesting to examine negotiations from the point of view of a developing country, such as Indonesia.
This paper attempts to evaluate Indonesia’s trade profile and its policy position within the negotiations. The subject matter of this paper is divided into two parts. The first part outlines Indonesia’s position at the WTO and the Doha Round focusing on its areas of interests and contentions within the negotiations, while the second part reflects on the negotiation process at the level of the country and at the WTO as a whole.
Indonesia is currently one of Asia Pacific’s most vibrant democracies,with a stable economic performance over the years. It is the fourth largest economy in East Asia after China, Japan and South Korea and fifteenth largest economy in the world on a purchasing power parity basis.2The country’s gross national income per capita has risen from $2,200 in the year 2000 to $3,563 in 2013.3Also, Indonesia is the fourth most populous nation in the world with 242 million people, and the second most populous in East Asia after China.4Historically, agriculture was the main driving sector of Indonesia’s economy, as evident in the government policies of 1950s and 1960s which aimed at promoting agricultural self-sufficiency, but that has changed over the years. By the end of 1960s, the economy started industrializing by shifting its focus away from diversifying oil exports to manufactured exports,and increased this shift in the 1980s due largely tofalling oil prices.Thereafter, trade barriers were reduced and the economy became more globally integrated.For instance, Indonesia’s trade to GDP ratio5 rose from 30 percent in 1970 to 60 percent in 2000s.6 Moreover, the value of Indonesia’s exports rose rapidly during the same time, accompanied by shifts in the composition of exports from agriculture to manufacturing, mining, and services. As of 2011, fuels accounted for 33.9 % of exports, which is an 8.3% increase from 2007.7 In addition, Indonesia hassurpassed Australia in coal exports, Thailand in rubber exports and Malaysia in exports of palm oil.8 With regards to imports, manufactured products dominate the economy, accounting for more than half of the share. The main import sectors include chemicals, non-electrical machinery, and automotive parts.
Also, there has been a change in the trade destinations from within the region and to other developing countries, towards major advanced economies. However, China still remains as a major trading partner, accounting for over 11% of Indonesia’s exports and over 15% percent of its imports.9 The country’s trade regime over the years has become more outward-looking, and is aimed at increasing economic efficiency and investment, including non-oil exports. This effort has been supported by the government’s change in investment policy by making it more promotionary than controlled, leading Indonesia to an era of export promotion. However, the economic crisis of 1997 badly affected Indonesia, resulting in the need to receive help
