{"id":1509,"date":"2017-04-05T21:09:29","date_gmt":"2017-04-05T21:09:29","guid":{"rendered":"http:\/\/aiccusa.org\/?p=1509"},"modified":"2018-02-22T20:41:33","modified_gmt":"2018-02-22T20:41:33","slug":"is-barbie-guilty","status":"publish","type":"post","link":"https:\/\/aiccusa.org\/?p=1509","title":{"rendered":"Is Barbie Guilty ?"},"content":{"rendered":"
I will be visiting Indonesia next week and will likely be asked about President Trump’s trade policy, articulated in his recent executive orders.\u00a0 Will Indonesia, one of 16 countries under review with a large trade deficit, be penalized.\u00a0 Is it really a trade “cheater” ?<\/div>\n

The US runs a congenital deficit with Indonesia mostly because we don’t grow key tropical commodities in the lower 48: rubber, coffee, vanilla, cinnamon, tea, teak, essential oils, palm oil and quinine.\u00a0 For as long as I can remember the ratio has been roughly 3 to 1; we import three times what we export. \u00a0 Until such time as American appetites change or there is a catastrophic warming of the northern hemisphere, the deficit will persist.<\/p>\n

The Commerce Department should be aware that the structure of our trade deficit is not a major cause for concern. After all we ship plenty of agricultural products to Indonesia: cotton, wheat, soybeans.\u00a0 \u00a0 The cotton helps balance our import of garments. \u00a0 We’ve had some problems exporting fruits and beef; these are being addressed at the WTO and directly.\u00a0 Indonesia should relax restrictions on refurbished equipment and reduce tariffs on high tech equipment still classified as luxury items such as CAT scanners. Stronger enforcement of intellectual property rights would promote the export of software, higher tech services, agrichemicals, and pharmaceuticals products.\u00a0 I’d also like to see more gumption from US vocational educational schools to establish a presence in Indonesia where there is a growing demand for trained workers in all kinds of fields not requiring a college degree. \u00a0 Education is potentially one of the best US exports.<\/p>\n

The Trump Administration will find that very few US manufacturers have moved jobs and operations to Indonesia.\u00a0 A large proportion of garment manufacturers went off shore decades ago. Indonesia was late to this industry.\u00a0 It was US textile quotas in the 1980’s that drove manufacturers from Hong Kong and South Korea to open factories in Indonesia. \u00a0 When that happened American cotton exports to the country jumped.<\/p>\n

Perhaps Barbie is guilty.\u00a0 The world’s largest Barbie doll factory is in Indonesia. Although Indonesian girls like her, Barbie travels to markets all over the world not just back to the US.<\/p>\n

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Some US manufacturers have expanded production there to serve local markets when it makes sense.\u00a0 P & G makes diapers in country now that the middle class has grown large enough. Young couples can’t afford nannies but they can afford Pampers.\u00a0 They can sell more than if they just exported from the US. Eventually the factory will provide products for the rest of Asia. \u00a0 I personally believe more US consumer products companies will do this if Indonesia does not go too far to protect local companies,\u00a0 infrastructure improves and the rule of law strengthens.<\/div>\n
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Indonesia’s attempt to legislate local production often backfires as it did with rattan.\u00a0 An export ban on raw rattan did not lead to a significant increase in foreign investment.\u00a0 Rattan furniture exports under the ban never reached the value of raw material plus furniture.\u00a0 The ban catalyzed greater use of synthetics and purchases from the Philippines which kept its export window open. \u00a0 Based on the same flawed logic, an export ban on raw mineral ores is having similar problems.<\/div>\n
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Without TPP Indonesia is justifiably nervous. \u00a0 Is it a coincidence that a way was found for Freeport to export copper concentrates –in the midst of a titanic dispute –right before the arrival of Vice President Pence ?\u00a0 Beyond this are a series of proposed localization regulations that limit exports of US pharmaceuticals, limit the footprint of on-line service providers, force local content on cell phone makers, and potentially curb the activities of US banking and insurance companies.\u00a0 Cleaning away these hurdles would certainly help but not eliminate the US- Indonesia trade deficit.<\/div>\n
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The best way to correct trade deficits is not to frame them as zero sum games.\u00a0 Policy makers should understand that a better balance between savings and consumption –perhaps through taxation and incentives– can mitigate them. \u00a0 Labor dislocations can be met with retraining to some degree.\u00a0 More important is improving elementary and secondary education –so that a high school graduate can assume the kinds of computer assisted manufacturing jobs that are the wave of the future.<\/div>\n
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AICC members are largely importers and value the relationships they have with their Indonesian suppliers.\u00a0 Our member banks, including Indonesian state banks often provide the documentation and credit to insure efficient payments.\u00a0 When I am in Indonesia next week my job will be to reassure all parties that there is no need for panic. \u00a0 Indonesia is not guilty of taking away US jobs.\u00a0 Trade only adds to them.<\/div>\n
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(The writer’s opinions do not necessarily reflect those of the American Indonesian Chamber of Commerce or its members)<\/em><\/div>\n","protected":false},"excerpt":{"rendered":"

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