Indonesia-China Trade Relations: The deepening of economic integration amid uncertainty?

By Alexander C. Chandra on September 7, 2011

The full implementation of the Association of Southeast Asian Nations (ASEAN)-China Free Trade Agreement (ACFTA) in early 2010 caused much anxiety in Indonesia.

The country's private sector and civil society organizations insisted that the government either pull Indonesia out of the agreement or renegotiate its terms with Beijing. Reluctant to breach an international trade agreement, which would harm the country's rising international stature in recent years, the government instead agreed to renegotiate up to 228 tariff lines with its Chinese counterpart. There is little doubt that China will feature strongly in Indonesia's trade relations with the outside world for quite some time to come. Given the limited space now available for Indonesia either to pull out fully from or renegotiate this trade agreement, it is now necessary for both sides to concentrate on the realization of the ACFTA's potential economic benefits as promised under the 2002 Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China. For example, Indonesia, other ASEAN member countries and China should address the potentially negative implications of the ACFTA and identify ways in which this trade agreement could assist the acceleration of domestic economic reforms in all participating countries.

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IISD, 2011