Jakarta. The United States has extended a trade facility for Indonesia after two and a half years of the evaluation process and lobbying, securing the way for annual exports worth more than $2 billion from Southeast Asia's largest economy to the world's largest consumer market.
The United States Trade Representative (USTR) has agreed to extend the special import tariff exemptions called Generalized System of Preferences (GSP) for Indonesia last week, Foreign Affairs Minister Retno Marsudi said on Sunday.
"This GSP facility is a concrete form of a strategic partnership between the two countries that not only brings benefits to Indonesia but also benefits US businesses," Retno said.
The announcement came just days after US Secretary of State Mike Pompeo met with President Joko Widodo in Jakarta on Oct 29.
GSP provides import duty exemptions granted unilaterally by the United States Government to developing countries since 1974. Today, the system comprises 3,572 items in the 8-digit Harmonized System (HS), ranging from manufacturing and semi manufacturing, agriculture, fisheries, and primary industries.
Indonesia first received GSP facilities in 1980. Retno said the value of Indonesia's exports using the GSP facility reached $1.87 billion from January to August, up 10.6 percent from the same period the previous year.
More than $2.61 billion, or 13 percent, of Indonesia's total exports to the US in 2019 of $20.1 billion used the exemptions, Retno said.
"With the extension of the GSP facility, it is hoped that the value of Indonesia's exports will increase," said Retno.
Foreign Affairs Deputy Minister Mahendra Siregar said Indonesia is the only country in Asia that has received GSP facilities in the US. Based on the evaluation results for three years, the US also did not make any cuts or reductions, he said. President Joko "Jokowi" Widodo specifically tasked Mahendra to conclude the GSP negotiation when he recalled the former Indonesian ambassador to the US to become Retno's deputy.
"It is increasingly important if we realize that most of the products exported with the GSP facility are produced [small and medium enterprises] in Indonesia," Mahendra said.
Among those products were mattresses or radial pneumatic tires for buses or trucks, sports equipment, several electronic products, and wigs, which become more competitive in the US market against products from other countries that are still subject to tariffs, he said.
GSP facilities also opened up greater investment opportunities in the US and Indonesia. For example, "the [US] companies are aware that Indonesia's digital economy of $45 billion will increase to $133 billion in the next five years," Mahendra said.