United States Officially Extends GSP Facility for Indonesia

Pancasila Building - Foreign Ministry Office

Jakarta – The United States Government, through the United States Trade Representative (USTR), has officially issued a decision to extend the provision of Generalized System of Preferences (GSP) facilities to Indonesia.

The Government of Indonesia welcomed this extension of the GSP tariff preference.
According to the Coordinating Minister for Maritime Affairs and Investment, Luhut B. Pandjaitan, amid the decline in international trade due to the Covid-19 pandemic, the provision of this GSP facility will help improve the performance of Indonesia’s exports to the US.

The announcement of the extension of the GSP by the US Government was made just a day after President Joko Widodo’s meeting with US Secretary of State Mike Pompeo in Jakarta on October 29, 2020.

Minister of Foreign Affairs, Retno Marsudi, who at the time met with his partners, Foreign Minister Pompeo also specifically raised the issue of the GSP, stating that the completion of the GSP review was the result of a series of diplomacy that has been intensively carried out by the Government of Indonesia in recent times.

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“The provision of the GSP facility is a concrete form of a strategic partnership between the two countries which not only brings positive benefits to Indonesia, but also business in the US,” added Foreign Minister Retno.

Meanwhile, according to the Indonesian Ambassador to the US, Muhammad Lutfi, the extension of the GSP facility provided by the United States shows the high confidence of the US Government in various improvements in domestic regulations undertaken by the Indonesian Government in order to create a more conducive business and investment climate on the country.

“After the announcement of USTR, we will immediately compile a work plan or road plan to optimize import duty relief facilities for Indonesian export products in the US market,” said Ambassador Lutfi, who previously served as Minister of Trade and Head of BKPM.

In recent years, the granting of extension of GSP facilities by the US has been relatively rare. Even a number of countries that are US trading partners, such as India and Turkey, in 2019 their GSP facilities have been terminated.

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Coordinating Minister, Luhut Pandjaitan also added that in order to emphasize the commitment of the Government of Indonesia to continue to optimize the high potential for cooperation in the economic and trade sectors of the two countries, both at present and in the future, Indonesia will propose to hold a Limited Trade Deal (LTD) negotiation or trade agreement, limited between Indonesia and US.
“LTD, which will cover trade cooperation, investment to the information, communication and technology sectors, is expected to help boost two-way trade between Indonesia and US to reach US$ 60 billion by 2024,” he said.

The high intensity of cooperation in the trade sector between the two countries is also an effective catalyst for increasing investment flows between the two parties, including from US to Indonesia.
GSP ​​is a trade facility in the form of exemption from import duty tariffs, which have been given unilaterally by US Government to developing countries in the world since 1974. Indonesia first received GSP facilities from US in 1980.

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Based on statistical data from the United States International Trade Commission (USITC), in 2019, Indonesia’s exports using GSP reached US $ 2.61 billion. This figure is equivalent to 13.1 percent of Indonesia’s total exports to US, namely US$ 20.1 billion.

Indonesia’s GSP exports in 2019 came from 729 goods tariff posts from a total of 3,572 product tariff posts that received GSP tariff preferences.

Until August 2020, the export value of Indonesian GSP to the US was recorded at US $ 1.87 billion, an increase of 10.6 percent compared to the same period in the previous year. Indonesia is currently the 2nd largest GSP exporting country in the US after Thailand (US$ 2.6 billion).

Anang Fadhilah