JAKARTA, Feb 20 (Reuters) – Indonesia and the United States finalised a trade deal on Thursday that cut U.S. levies to 19% from 32% on goods shipped from Southeast Asia’s biggest economy, following nearly a year of negotiations.
U.S. President Donald Trump last year imposed reciprocal tariffs on trade partners in a move he claimed would counteract non-tariff barriers that put exports from the United States at a disadvantage.
Here are some of the most striking points of the agreement:
TARIFF ELIMINATION AND EXEMPTIONS
More than 1,800 Indonesian commodities exported to the United States, including palm oil, coffee and cocoa, will be exempt from the tariff, chief economic minister Airlangga Hartarto said.
Indonesia will also eliminate tariff barriers on over 99% of U.S. products entering the Southeast Asian nation, the White House said. The deal also include agreements to remove non-tariff barriers.
CRITICAL MINERALS
Indonesia will remove restrictions on the export of industrial commodities to the United States, including critical minerals, and will also intensify cooperation with U.S. firms on the mining, processing and downstream production of minerals, including rare earths.
Indonesia will prevent excess production from foreign-owned processing facilities and ensure that foreign-owned industrial parks and processing facilities are subject to the same taxes, laws, quotas and legal requirements as other companies.
PURCHASES AND INVESTMENT
Indonesia will arrange to imports goods and services from the United States with an indicative total value of up to $38.4 billion, including around $15 billion of imports of U.S. energy commodities and $4.5 billion of U.S. agricultural goods like cotton, wheat and soybeans.
Indonesia must also import a minimum annual amount of certain agriculture products, including beef, certain types of fruits, rice and ethanol.
Indonesia will facilitate a minimum of $10 billion in direct investment to the United States in engineering, procurement, and construction projects as well as the development of blue ammonia and other energy initiatives.
INVESTOR FACILITATION
As part of the deal, Indonesia will not impose restrictions on the ownership of local businesses by U.S. investors using measures like mining sector divestment requirements.
It must also exempt U.S. investors from a regulation requiring natural resource exporters to retain their earnings in Indonesia for a set period.
A review of the regulation is to take place within 12 months of the agreement.
DIGITAL TRADE
Indonesia is obliged to communicate with the United States before entering into any new digital trade agreement with another country that could jeopardise U.S. interests.
Indonesia shall not impose digital services taxes, or any similar taxes, that discriminate against U.S. companies.
Indonesia must also refrain from requiring U.S. digital services providers to support domestic news organisations through paid licenses, user data sharing, and profit-sharing models.
Jakarta should also refrain from imposing requirements to process data onshore, particularly in the financial space, though the country’s authorities will also have the right to access information stored outside of its territory for regulatory and supervisory purposes.
BIOETHANOL USE
The deal also obliges Indonesia to ensure that transportation fuel is mixed with up to 5% of bioethanol by 2028, rising to 10% by 2030, and endeavour to achieve blends of up to 20% when the country is ready to do so, without adopting any measure that prevents the import of U.S. bioethanol.
NATIONAL SECURITY ALIGNMENT
The United States will notify Indonesia when it imposes trade restrictions on third countries for economic or national security reasons, and Jakarta will adopt measures with “equivalent restrictive effect” to align with Washington’s policies.
Indonesia has also agreed to take action against companies owned or controlled by third countries operating within its jurisdiction when their practices harm U.S. trade interests, including exports at below-market prices or the increased shipments of such goods to the United States.
Indonesia should also adopt and enforce rules to combat transhipments aimed at circumventing U.S. duties.
(Reporting by Bernadette Christina; editing by Gibran Peshimam and David Stanway)
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