Indonesia's Participation in GSP Draws Complaints, Defenders at USTR Hearing
Indonesia has given its customs officials the authority to stop counterfeit goods at the border, and just in 2020, has already seized $1 billion rupiah, or $73,000, worth of counterfeits that were set for export, according to Iwan Freddy Hari Susanto, charge d'affaires for the Indonesian Embassy. He was testifying Jan. 31 at a hearing on Indonesia's eligibility for the Generalized System of Preferences benefits program, and was describing numerous actions the country has taken to improve protections for intellectual property rights holders.
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He said the country has been putting into action a work plan on IPR agreed to with the Office of the U.S. Trade Representative in May 2018. The International Intellectual Property Alliance said in a written submission that it would like to see GSP eligibility removed at least in part because “while the Indonesian Government has made past progress towards meeting the GSP criteria, this progress stalled in 2019, and even regressed in some respects.”
Susanto said, “We believe IIPA does not adequately reflect Indonesia's reform efforts.”
Indonesia's continued participation in GSP was being challenged not only by IP advocates, but also by steel manufacturers, dairy exporters and insurers.
The American Iron and Steel Institute complained about export taxes and export bans on nickel ore. Shawna Morris, vice president of trade policy for the National Milk Producers Federation, said Indonesia is a top 10 export market, and said that the country had a “swift and positive response to our concerns in 2018.” But she said the trade group's delays in approving exports from new dairy processing facilities are cutting off growth, and she wants the Department of Agriculture and Indonesia to work out a solution.
Dan Anthony, vice president of The Trade Partnership who testified on behalf of the GSP Action Committee, said importers saved $137 million in tariffs on goods from Indonesia due to GSP in the first 11 months of 2019, which was up from $110 million for the full year in 2018. He said imports from Indonesia of GSP-covered goods have nearly doubled in two years.
He was not the only one arguing for allowing Indonesia to stay. An official from Public Citizen and one from Knowledge Ecology International argued that the IP complaints were unfair, and said that narrow issues should not outweigh the broader benefits of the trade program. Nate Herman, senior vice president of the American Apparel and Footwear Association, said Indonesia is a good source of outdoor backpacks, and if GSP is withdrawn, that will make importers' options to respond to the China trade war even more difficult.
Anthony, as he had argued in the previous day's Thailand hearing, said that the size of the GSP program compared with total Indonesian imports suggests that there's not much leverage on the U.S. side. He said that only 12 percent of Indonesian exports to the U.S. are covered by GSP. But, from an importer's perspective, Indonesia is an important workaround to the China tariffs. He said that the volume of goods subject to 25 percent Section 301 tariffs that are imported from Indonesia increased 46 percent, while those not in the 301 program only increased 5 percent.
Anthony noted that countervailing duty trade remedies or a World Trade Organization case could be used in the case of nickel ore. He said that importers that take advantage of GSP end up “sort of being the sacrificial lamb” if GSP is curtailed or withdrawn for every trade irritant, no matter how limited.