The Impact of US Policy on “Developing Country” List for Indonesia
Overview
On 10 February 2020, Trump administration stated that U.S will not granted special preferences treatment towards several countries which considered as no longer “developing country,” quoting the notice issued by U.S Trade Representative (USTR). The origins of this special preferences came from WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement). Under the SCM Agreement, WTO Members that have not yet reached the status of a developed country are entitled to special treatment to be rewarded subsidies and exempted from certain threshold of countervailing measures. The goal of this WTO’s special preferences is to help poorer countries reduce poverty, generate employment and integrate themselves into the global trading system.
US View on this Conflicts
On defense of U.S Policy, Trump argues that WTO were not acting fairly in regards with trade subsidies for several country such as China and India during his visit to Davos, Switzerland. Further, USTR Notice explain that the list dated back in 1998 were outdated with the current conditions of international trade. This reasoning were quite adequate and justified since there is no WTO regulations which govern the criteria of being developing country and only have been done through self-declaration mechanism. In implementing Trump’s policy direction, the USTR proposed a new system to replace the WTO’s self-declaration approach to the General Council. Under the proposed system, a country cannot claim developing country status in trade negotiations if it falls under one of these categories: (a) a member of the Organization for Economic Cooperation and Development (OECD), (b) a member of the Group of 20 (G20), (c) classified as high income by the World Bank’s per capita GNI standard, or (d) account for no less than 0.5 percent of global merchandise trade (imports and exports).
Impact on Indonesia
According to Airlangga Hartarto as Coordinating Economic Minister, the policy by US government won’t affect the Indonesian trade that much. However, he also admits that some facilities and benefits enjoyed as developing country will no longer avalaible. One of those benefits included is that Indonesia would no longer be eligible for the negligible import volumes criteria to enter the US market. Some industry that are expected to be damaged namely biodiesel, carbon, steel rods, frozen shrimp, Monosodium Glutamate (MSG), various types of polyethlene plastic, and more recently wind towers. In separate places, Ni Made Ayu Marthini as Director of Bilateral Negotiations Trade Ministry stated that this U.S policy reflects as an act to gain trade remedies. Quoting from Donald Trump statement, this act to gain trade remedies itself due to the obscurity of WTO rules which resulted some actual well-developed countries are shielded in developing countries list.
Disguised Retaliation
In some respect, US defense on their policy are justified since some studies and report has called WTO as organization that highly influenced by political will. In addition, there are several attempt to reform the WTO insititution and strengthen the dispute settlement mechanism in order to solidify the rule of law in international trade. Noting the statement of Ms. Made Ayu, we considers that this policy reflects as an act to gain trade remedies in form of retaliation since US government suspends trade concessions from SCM Agreement that deemed unfair to them. However, this act of retaliation violates the Article II of GATT 1994 regarding national treatment obligations. This obligations are prohibited the members of WTO to impose measures that meant to protect its domestic production and shall avoid any act of protectionism. Although this act of retaliation can be used to pressurize the offending Member and to appease the domestic constituency of the retaliating Member, it is not an ideal remedy. It amounts to shooting oneself in the foot because raising trade barriers against the offending Member might produce negative effects for the economy of the retaliating Member. As far we concerned, this policy fits Trump administration agenda namely “America First” which undoubtedly violates principle of non-discrimination. Therefore, as writers we calling out to all countries involved to sit down and come together to resolve this issues through negotiations which could help WTO reform from its flawed systems.
