Indonesia-US trade deal poses challenges for Philippines

Philippine exports to the US, especially garments and textiles, will face stiffer competition after Indonesia obtained a 19% tariff rate, according to an industry group.

Foreign Buyers Association of the Philippines President Robert M. Young called the Indonesia-US deal a “big blow.”

“This is again a big blow to the Philippines, particularly to the exports of garments, textiles, and apparel, because we are now at 20% and they are on 19%,” he told BusinessWorld by phone.

“To start with, they are much bigger in terms of exports to the US. Indonesia right now is shipping something like almost USD 5 billion worth of garments and textiles to the US, while the Philippines is still fighting for USD 1 billion,” he added.

US President Donald J. Trump said on his Truth Social platform that he finalized a deal with Indonesia on Tuesday that reduced the US tariff on Indonesian goods to 19%, much lower than the 32%. Mr. Trump assigned to Indonesia in a tariff letter last week.

Aside from opening the Indonesian market to the US, Mr. Trump said that Indonesia also committed to purchasing energy, agricultural products, and Boeing airliners from the US.

“For the first time ever, our ranchers, farmers, and fishermen will have complete and total access to the Indonesian market of over 280 million people,” Mr. Trump said.

“In addition, Indonesia will pay the US a 19% tariff on all goods they export to us, while US exports to Indonesia are to be tariff and non-tariff barrier free,” he added.

Mr. Young said the outlook for Philippine tariff negotiations is dimming as other countries’ negotiations with the US are weighted towards more geopolitical considerations.

“We really don’t know because actually in the past we have already offered everything in terms of military assistance and benefits. It was all exhausted by the Philippines, having been laid on a silver platter to the US,” he said.

“On trade, we are not at the level of the other countries to offer this kind of concession. As you know, we are a small player. It will be a difficult situation for the Philippines. I wish the team of negotiators good luck, but it seems like it will be a dim chance,” he added.

The government sent its negotiators to Washington this week to seek a lower tariff, with President Ferdinand R. Marcos, Jr. expected to arrive later this month.

Mr. Young said that he does not think the Philippines can offer a zero rate on US imports to match Indonesia.

“I don’t know if we can afford it. We are also relying on the taxes for our revenue. The other thing is, of course, this will be a Presidential action. But, in the Philippines, we have (to contend with) all kinds of legalities here and there,” he said.

“It has to go through the Congress. We really don’t know how we can manage. But we have so little to offer, so I don’t know if it will be attractive enough to the US. This is what we have been trying to say,” he added.

However, he said Secretary Frederick D. Go, the special assistant to the President for investment and economic affairs has hinted that the Philippines still “has some bullets.”

“I do not know what kind of bullets he is talking about, but that is what he said,” he added.

Aside from garment and textile exports, he said that Indonesia’s lower tariff can also impact other Philippine exports, including agricultural and mineral products.

“I’m not very familiar with the figures of agri and other minerals. But all of that can be affected because it’s a competition,” he said, noting that Indonesia already sells more because of its lower costs.

Meanwhile, he said that the garment and textile industries are still not giving up and seeking other markets to survive.

“We are not waving the white flag. We are fighting. We are looking for other markets; Russia is there,” he said.

“We are in survival mode,” he added. — Justine Irish D. Tabile, Reporter