US imports from Indonesia have been growing as product sourcing diverts away from China due to recent tariffs. In recent months, GSP imports from Indonesia of product categories hit by Trump’s China tariffs grew by 22%, while imports of other products grew by 15%. So, Indonesia has been benefiting from tariffs slapped on Chinese goods.
But Trump’s trade war is expanding. The Generalized System of Preferences (GSP) is a US trade program which allows tariff reduced imports from preferred US trade partners. Several countries' GSP status is under review, as GSP benefits are not automatic and beneficiary countries must meet eligibility criteria including effective IP protection.
The 2018 National Trade Estimate Report on ‘Foreign Trade Barriers’ covering Indonesia stated that a wide array of trade barriers create serious negative effects on U.S. commerce. Indonesia remains on the USTR's Priority Watch List. Some key US IP concerns include:
a. Lack of effective IP protection and enforcement including insufficient enforcement coordination among agencies.
b. Widespread copyright piracy and trademark counterfeiting
c. Concerns over Indonesia’s Patent Law - the working requirements
d. Lack of effective Data Exclusivity in marketing approvals
They also cite market access barriers, like requirements for domestic manufacturing and technology transfer for pharmaceuticals and other sectors.
A review of Indonesia's GSP eligibility of Indonesia was started by the USTR in 2018. If Indonesia is found not to provide effective IP protection, it could lose its tariff reductions under the GSP. Indonesian exporters would then be penalized.
The next post will set out the responses from Indonesia's government.
