JAKARTA, INDONESIA — The triumph of Democrat candidate Joe Biden in the US presidential election last Tuesday (3 November) gained a positive response from investors and the stock market, who are optimistic that the new POTUS will strengthen global cooperation, reduce trade tension as well as focus on recovering the domestic economy severely affected by the pandemic.
Stocks in the Asia-Pacific region rose on Monday (9 November) after Donald Trump’s defeat, NBC projected.
Japan’s Nikkei 225 jumped 2.12 per cent and closed at 24,839.84. The Shanghai Composite surged 1.86 per cent to 3,37.73. The Shenzhen component was up 2.188 per cent to 14,141.15, CNBC reported on Monday.
Biden’s victory triggers a question about the future of international trade and how his victory will affect the global economy, including in Indonesia.
The US trade dispute with several countries, including Indonesia
The US-China trade spat was one of the issues that attracted worldwide attention during the Trump presidency. However, the US has also several trade problems with other countries.
In 2017, the US included Indonesia in the list of countries that cause the US trade to suffer from a deficit, accusing the archipelagic nation of conducting illegal practices.
Senior Deputy Governor of Indonesia’s Central Bank (BI) Mirza Adityaswara, as cited in Viva News in 2017, described three indicators the US government uses to declare a country that causes a deficit.
First, from the trade perspective, countries with a US$20 billion surplus with the US are tapped as the countries that make the US suffer from the deficit.
Secondly, a current transaction in each country that books a surplus impacts a positive service balance.
Third, countries that continue to intervene in the currency.
The US-Indonesia trade vs. the Indonesia-China trade
Economist Bhima Yudhistira told TOC that Indonesia has recently posted a trade surplus, citing data from the Central Bureau of Statistics (BPS).
The statistics agency, as Anadolu cited, recorded that Indonesia posted a US$1.68 billion trade surplus with the US from the former’s non-oil and gas export in September.
“However, China is still the largest market for our non-oil and gas export,” the INDEF economist added.
From January to February this year, Indonesia’s non-oil and gas export to China was worth US$3.98 billion, accounting for 15.33 per cent of market share. While Indonesia’s market share for its non-oil and gas export reached 12.58 per cent during that period, the statistics revealed.
RCEP is a suitable option
In 2017, the US left the Trans-Pacific Partnership (TPP), a trade pact involving 12 countries at that time signed in 2016, aimed at creating a new market. Trump claimed that the trade pact harmed the American manufacturing sector.
In February 2016, the US, Japan, Vietnam, Singapore, Malaysia, Brunei, Australia, Chile, Mexico, Canada, Peru, and New Zealand–accounted for 40 per cent of the global economy–signed the pact.
The pact’s member countries felt disappointed with the US decision given that the US initiated the pact.
TPP was nothing without the US, Prof Hikmahanto Juwana, international relations expert at the University of Indonesia, told TOC last Friday (6 November).
Indonesia has not joined the TPP as the pact will benefit a country if it can serve as a production base, not only a market, Hikmahanto added.
Then-Indonesian president Susilo Bambang Yudhoyono claimed that Indonesia was focusing on preparing for the ASEAN Economic Community (AEC) and Regional Comprehensive Economic Partnership (RCEP). The latter consists of ASEAN, China, Japan, India, Australia, New Zealand, and South Korea. Also, Indonesia’s economy is not export-oriented, unlike Singapore or Vietnam.
RCEP seems to be more flexible regarding its implementation of tariffs. Then-Indonesian Trade Minister Enggartiasta Lukita stated that the 16 countries in the RCEP accounts for 45 per cent of the world’s population.
Australia and Japan benefited from the US’s departure from the TPP — now known as the CPTPP. Bhima said Australia is known for its agricultural products, while Japan focuses on exporting technology.
Will the US rejoin the CPTPP?
Bhima said that Biden would change Trump’s style by using forums such as the World Trade Organization (WTO) to settle disputes.
When asked about whether the US will return to the CPTPP, Bhima has yet to predict.
“Well, maybe yes, maybe no. Right now, Biden will focus on fixing the US economy, as the pandemic has crippled all business sectors. Therefore, the CPTPP whatsoever may not be his top priority,” Bhima said.
However, Biden’s plan for the Pacific Trade Pact may face opposing views from his party as Democratic politicians are more protective than Republican colleagues.
Democrats often bring issues such as human rights, green energy, and labour protection, affecting investment and export.