US Seeks Increased Trade with Indonesia

27 July 2011 FDI Team

Background

During bilateral talks between the United States and Indonesia, US Secretary of State Hillary Clinton has called on Indonesia to cut tariffs in an effort to promote trade between the two countries, thereby deepening the relationship. 

Comment

Following the second Joint Commission Meeting (JCM) of the US-Indonesia Comprehensive Partnership on 24 July 2011, Secretary of State Clinton and her Indonesian counterpart, Foreign Minister Marty Natalegawa, both spoke of a desire to increase bilateral co-operation. Mrs Clinton noted that trade between the two nations was underdeveloped, citing bureaucratic barriers imposed by Indonesia as a major impediment to further expansion. Trade between the two countries exceeded US$20 billion in 2010, but, as Mrs Clinton noted, it still trails US trade with regional neighbour Malaysia at US$40 billion,despite the fact that Indonesia is the largest economy in the Association of South-East Asian Nations grouping.

The second JCM demonstrates the willingness of both countries to continue building a strong relationship. The US-Indonesia Comprehensive Partnership is described by the State Department as ‘a long-term commitment to elevate bilateral relations’, and symbolises an ever-increasing US interest in the world’s largest Muslim country. Indonesia’s transformation from dictatorship to democracy has been cited by Mrs Clinton as a potential model for democratising countries following the “Arab Spring”[1].

Indonesia is strategically important to the US due to its proximity to the Strait of Malacca, the stretch of water linking the Indian and Pacific Oceans. Geopolitically, Indonesia also offers a potential regional partner to assist in the mediation of territorial disputes in the South China Sea, and to provide a check to the growing influence of China in the Indo-Pacific region. This outcome seems beneficial for both parties. Increased trade would further cement the relationship. However, human rights issues, particularly in West Papua, continue to test the strength of US-Indonesian ties. There remains a degree of discomfort surrounding the issue, despite some reforms by Indonesia.  

Andrew Campbell

Future Directions International Research Intern              

Indian Ocean Research Programme



[1] Lee, M., ‘Clinton: Indonesia can be democratic role model’, Associated Press, 24July 2011.

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