August 14, 2023
JAKARTA – The United States is seeking to maintain its presence in the Indo-Pacific region by increasing its trade relations, in addition to its military ties, in a seeming move to counter China’s influence in the region, a visiting senator has said.
The US has tended to lean more on its military relationship with countries in the region. But economic ties are just as important, including trade with Indonesia, which has been “underperforming” but can be improved, US Senator Tammy Duckworth said on Thursday.
“[The] economic relationship is just as important for American national security as the military relationship,” she said in a press briefing in Jakarta.
Duckworth was visiting Jakarta to attend the 44th General Assembly of the ASEAN Inter-Parliamentary Assembly (AIPA), which ran from Monday to Wednesday. She also met with representatives of participating AIPA countries and businesses.
One aspect of trade that can be improved is the electric vehicle (EV) battery industry. Indonesia is keen on developing the industry thanks to its abundant sources of nickel, while the US plans to invest more into it since Congress passed the Inflation Reduction Act (IRA) in August last year.
The act includes a US$7,500 consumer tax credit for EVs. To be eligible for the credit, the battery of the purchased EV needs to be built using minerals extracted or processed in a country that has a free trade agreement (FTA) with the US. A certain percentage of the components must also be manufactured or assembled in North America and must not come from a “foreign entity of concern”, which many interpret as referring to China.
Indonesia currently does not have an FTA with the US, but it is looking for a limited agreement for some critical minerals for the EV-battery supply chain.
If countries like Indonesia that do not have an FTA are interested in their products being eligible for the IRA benefits, Duckworth said, they should aim for a more focused agreement with the US while also making sure the products are not Chinese-made or made of Chinese-mined rare minerals.
“If you want to qualify, the first thing you have to do is make sure that the mining for nickel here is not done by a Chinese firm using coal-fired power plants,” the senator said. “It doesn’t matter whether you get a free trade [agreement with the US], that will never qualify.”
However, Duckworth said that countries like Indonesia are not being forced to choose between the US or China, while asserting that any Chinese involvement in the production of the component would block it from entering the US market.
“We’re not asking you to choose, we’re just saying this is what it takes,” Duckworth said.
According to Trade Ministry data, the bilateral trade between Indonesia and China in 2022 amounted to $133.56 billion, while it was only $39.79 billion with the US.
Duckworth argued that the US is keen on maintaining its presence in the region and standing up for international law, despite the country’s increasingly protectionist stance in the Indo-Pacific.
“All we’re saying is freedom of navigation, law of the seas, people deserve to be able to travel and transit. Commerce must continue. We must respect nations’ EEZ [and other] nation’s borders,” she said.
During her several bilateral meetings, she also brought up Myanmar and urged countries to follow the example set by Indonesia, especially the work that has been done by Indonesia’s Office of the Special Envoy on Myanmar.
“I hope that you will maintain that office even beyond your years as chair of ASEAN,” Duckworth said. “I think it does critical work.”