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Indonesia makes inroads in trade row

Publication Date : 24-07-2012


Confronted with a string of trade disputes, Indonesia has thus far triumphed in its attempts to clear its image as a transhipping nation after several countries halted their investigation into the case.

Brazil, the United States (US) and the European Union (EU) will no longer pursue Indonesia for allegedly functioning as an intermediary for Chinese-made footwear, shrimp and bicycles into their countries.

The three countries accused Indonesia of accepting the goods for re-export in order for China to circumvent quota restrictions and evade anti-dumping penalties they sought to impose.

The Indonesian Trade Ministry announced yesterday that the Brazilian government had stopped a "circumvention" investigation filed by Abicalcados, a Brazil-based footwear manufacturer that accused Indonesia of exporting Chinese footwear while claiming it was Indonesian-made.

Abicalcados alleged sports apparel giant Adidas and Nike used their Indonesian manufacturing bases merely as re-rerouting points to accommodate their China-made apparel, according to the ministry.

The Brazilian government have imposed anti-dumping penalties on Chinese footwear since 2010, with a levy of US$13.85 per pair of shoes. An anti-dumping measure is aimed at preventing foreign entities from destroying local industries by selling goods at prices unreasonably lower that those found in domestic markets.

According to the Trade Ministry, an investigation from Brazil's Department of Commercial Defence (Decom) concluded that it did not find any evidence that Indonesian footwear manufacturers conducted circumvention practices, or evaded anti-dumping policies.

"Had the investigation found us to be a transhipping nation, then our footwear would have been hit with an expensive tariff, which surely would come as a huge blow to our industry," said the ministry's director of trade security, Ernawati.

According to the Indonesian Footwear Association (Aprisindo), Indonesia's footwear exports topped $3.3 billion last year, up 32 per cent from $2.5 billion in 2010.

The EU and the US remain major destinations for Indonesia's footwear, with a market share of 48 per cent and 27 per cent, respectively.

However, due to a slowdown in the two markets, Indonesia is relying more on Latin American countries, causing exports to Brazil to soar by 30 per cent to $92.4 million in 2011 from $65.6 million in 2010.

"That's why we took this matter seriously. We’ve even sent representative from Aprisindo to Brazil to explain our industry," Aprisindo chairman Eddy Widjanarko said, adding Brazil's decision on the matter was "definitely good news" for the country's footwear industry.

Brazil's case is the latest iteration of similar allegations filed by the US in 2007, when it suspected China of re-routing its shrimp shipments to Indonesia, to avoid expensive tariffs. The US filed similar charges in 2010, alleging Indonesia was exporting Chinese honey under false "made-in-Indonesia" labelling.

The EU also suspected in 2010 that some of the Indonesian-made bicycles that it imported were actually made in China.

China has been exporting goods that are so competitive that they have forced many countries to implement various import tariffs or quotas to protect domestic industries.

But the allegations from the US and the EU have not been brought to a higher level of investigation, according to the Trade Ministry.

"We have not received any follow-up from their allegations since then. I assume they have dropped them," said Ernawati.

However, despite the good news, threats of other disputes loom over transhipment allegations after Sweden, Germany and Spain questioned the Batam Free Trade Zone Authority over the originality of goods produced on the island.

The agency's director for trade traffic, Fatullah, said the three countries were suspicious that the island was re-routing Chinese-made steel bolts and chemical products.

"We received their letter in April and July seeking clarification of the originality of the goods. We've told them to come to our factories to see for themselves," said Fatullah.

Aside from transhipment allegations, many Indonesian products, such as paper, food products, palm oil and tobacco, have also been subject to trade barriers imposed by foreign countries.

Fadli contributed to the story from Batam


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