Economists Ask Indonesian Government To Beware Of 'Middle-Income Trap' Due To Trump's Trade Tariff

JAKARTA - Head of the Macroeconomics Department of the Institute for Development of Economics and Finance (Indef) M Rizal Taufikurahman said that the government needs to be aware of the risk of a greater middle-income trap due to the tariff agreement with the United States (US).

"The downstream sector and increased exports of manufactured products need to be intensified so that Indonesia is not trapped in the middle-income trap due to the dominance of raw-based exports," said M Rizal Taufikurahman, quoted by Antara, Thursday, July 17.

He said that the dominance of raw material-based exports, such as copper, could weaken the national economic structure in the long term.

This highlighted the statement of US President Donald Trump who is eyeing imports of copper commodities from Indonesia after lowering import rates on Indonesian products from 32 percent to 19 percent.

"The commodity is a strategic commodity that not only has high commercial value, but is also important for the national downstream roadmap and the development of the renewable energy sector," he said.

Rizal stated that if copper exports were released on a large scale without strict regulations, the potential for over-exploitation and environmental damage would be very difficult to avoid.

He also asked the government to immediately establish an export quota policy, domestic supply obligations (domestic market obligation), as well as a double price scheme to protect national needs and added value does not just disappear abroad.

"This is important to maintain national economic sovereignty and ensure that natural resource management remains in line with the principles of sustainability and the nation's long-term interests," he said.

Rizal emphasized that every trade agreement with major partners, such as the United States, is always accompanied by a safety mechanism and periodic evaluation.

He said the principles of national independence and competitiveness should be a top priority in every international trade policy pursued by the government.

"We certainly don't want to return to a modern colonial trade pattern, where export access is actually paid expensively with dependence on importation and uncontrolled exploitation of national resources," he added.

Previously, US President Donald Trump announced the application of an import rate of 19 percent of Indonesian products entering the US, based on a direct agreement with President Prabowo Subianto.

In addition to setting the tariff amount, Trump said the agreement also includes Indonesia's commitment to buying energy commodities from the US for 15 billion US dollars and agricultural products worth 4.5 billion US dollars.

The US President also mentioned Indonesia's commitment to buy 50 new Boeing aircraft, most of which are Boeing 777.