Just and Fair Trade
It may be the first time that Havas has publicly stripped away the EU’s unfair treatment of Indonesian commodities and disclosed 10 facts using objective data. Expecting the EU to change its policy through a diplomatic approach would be a long and winding road. It would be like waiting for Godot.
At the end of the 1994 APEC Summit in Bogor, President Soeharto pushed Indonesia to have courage in facing more open global conditions in the future. Ready or not, the President said, Indonesia must be ready to deal with economic globalization (a popular term at that time) and live with it.
Just like a mantra, the phrase “economic globalization” became popular amid the euphoria of the nations that had just finished the seven-year Uruguay Round of the General Agreement on Tariffs and Trade (GATT). The World Trade Organization (WTO), established at the end of negotiations, was designed not only to be the world trade agency, but also as an entity to manage the numerous agreements produced during previous negotiations under GATT. Its formation at that time was like sowing new optimism to manage the world economy through just and fair trade. Fair trade?
‘Fair trade’
It may be public knowledge that fair trade, as a new term, became the main consideration for some nations in their effort to develop a new world economy. It is no secret the new term was to counter the old free trade concept, which stemmed from classic economics.
Only the term was different. Of course, friction and even clashes do exist. The general norm was understood. But in practice, it is a different matter. Using “national interest” or any other reason, the word “fair” could be defined depending on the times and need. When clashes occur and continue without a quick settlement, the shadow of a trade dispute or even a trade war could spread. The recent trade dispute between the United States and China, the European Union or its allies like Canada and Mexico, is a clear illustration of the issue.
They argue that one of the trade partners took a unilateral action on the grounds of national interest, which they deemed unfair. Those who felt mistreated were prepared to retaliate. In short, in the context of fairness – although the disputing parties all champion free trade – they interpret it differently. In free trade, the word “fair” is interpreted according to a country’s interest.
Any dispute could escalate into a trade war if there was immediate retaliation. Imposing high import tariffs or additional tariffs on import commodities could be responded to with a similar measure. Limiting the market for one or more export commodities could also be responded to with a similar measure, or even restricting or cancelling a purchasing contract.
Essentially, such retaliatory action could be taken only if the disadvantaged parties have a mature calculation, strong policy and real power that could be applied effectively and immediately. The action should be the result of a concerted effort between the government and the business players. Under a similar condition, this also applies to Indonesia. Our stance, policy and real power could become a deterrent to prevent a possible trade war. Under such conditions, a win-win solution could be possible.
Palm oil case
A real case is a good example for seeing how the fair trade concept should be taken into account in Indonesia-EU trade relations. Arif Havas Oegroseno, former Indonesian ambassador to Belgium and the EU, has written in detail and clearly in this newspaper (4/6/2018) on how the EU has dumped fairness. World trade proponents such as the EU are key supporters of WTO principles such as nondiscrimination and transparency. But in the past two months, it protested unfair treatment by the US while at the same time, it acted unfairly and in a discriminatory manner against Indonesia regarding palm oil imports.
It may be the first time that Havas has publicly stripped away the EU’s unfair treatment of Indonesian commodities and disclosed 10 facts using objective data. The question is: What and how? Expecting the EU to change its policy through a diplomatic approach would be a long and winding road. It would be like waiting for Godot.
Without belittling the benefits of negotiations that has caused a delay, factually there has been no change in the EU’s stance. It has only helped to temporarily cool down the situation. Why?
The EU stance is substantively rooted in its subsidy policy, which is very closely connected to supporting farmers and industries that process agricultural products such as soybean oil and sunflower oil. The stance is rooted deeply in the national politics of EU and non-EU member states. In short, the absolute need among EU and non-EU states to defend and protect their national interest is a political stance that is hard to influence merely through a diplomatic approach.
Perhaps, many are misled by the status of industrial countries. In fact, the politics of European countries cannot be separated from agriculture and farmers.
Political support and crutches are the determinants. A subsidy is like a payment made upfront to farmers. Thus, if Jakarta views it only as a resolution of the EU Parliament and not yet a decision of the EU executive council, this would be self-consolation. Let us hope we don’t fool ourselves.
Facing an attitude that is deeply rooted in the national interest of EU countries, is it too much for us to prepare a similar action that substantially represents Indonesia’s national interest? Looking at alternative markets (while current export markets such as India also impose higher tariffs) is not an easy job that will bring quick results. Relying on other non-oil and gas commodities as another source of foreign exchange is also not as easy as switching hands. Moreover, this must all take place amid the efforts to increase our foreign exchange to strengthen state finances. Replacing imports by improving the downstream industry remains empty rhetoric. In short, there is no simple substitute. Then how do we proceed?
If we stay to be good it would be spun, if we are not confronting we are seen as weak and if we stay silent we are wrong. Then, why not taking a stance? Isn’t it unfair that our national interest is under threat? Even if the EU raises an environmental issue such as concerns over deforestation, peatland conservation or marginalized communities, all those arguments have been broached by Havas and can be opened to the public.
Perhaps it is time to reconsider whether Indonesia still needs to maintain the role and appearance of a good boy in many settings among the world’s nations. If the issue is an environmental one such as deforestation or peatland management, can we not take care of these ourselves, or through other efforts and resources?
Who knows if we can do everything on our own, with our own abilities and for our self-interest. The important thing is we do not need to expect empty promises of assistance that obstructs our moves and interests.
Attitude, policy and national synergy
Taking an opposing stance does not always mean looking for a fight. We need to remember that the EU’s and China’s stance toward the US unilateral action also serves as a deterrent against a possible trade war among them.
Nevertheless, it is important to realize a synergistic attitude, policy and action between the government and businesses so that Indonesia can create a deterrent effect. We should not scream about boycotting salmon, lest our businesses, hotels and restaurants protest such a policy. Neither should we threaten to cancel the purchases of Airbus aircraft and components, only to receive nationwide protests from the aviation industry. Let us not threaten to cancel the purchase of capital goods, which may draw the protests from industry or investors.
More than this, it would be better if the government and the Indonesian Chamber of Commerce (Kadin) embark on a step towards realizing national synergy, a synergy that is capable of taking a joined stance to defend the common interest with concrete needs, with the support of all stakeholders: real, executable attitudes, policies and powers; substantive attitudes, policies and strengths that are unanimously endorsed by all communities and the nation’s business world. It is not a formal synergy that simply leads to the President being present at the legislature or Kadin working meetings, or a hearing with the President at the palace.
If securing the largest export revenue – which also affects employment – eradicating poverty and increasing the people\'s income compose the national interest, perhaps it is time for all to speak simply and clearly about this matter. It is equally simple to talk about the importance of maintaining the environment, forests and peatlands in a sustainable manner while continuing to maintain social justice. Speak clearly so that the substance of national interest is an internal matter that must also be resolved and supported internally.
It is worth pondering how this EU-Indonesia case might be the right occasion to revive the spirit of “Indonesia, Inc.” of the 1980s. With real ammunition, our diplomacy – whoever may be in charge – would function well if it is “armed” to face the EU or non-EU member states. In the end, the palm oil case could also be a test of our ability to uphold fair trade as a principle, not just as a concept, or merely to enliven trade fairs.
Bambang Kesowo, Postgraduate lecturer at Gadjah Mada university Law School; chairman of Lemhannas Alumni