Mexico expects free-trade deal with Indonesia

Linda Yulisman, The Jakarta Post, Surabaya | Headlines | Tue, April 23 2013, 10:02 AM

In an effort to boost bilateral trade and investment, Mexico is intending to build an economic partnership agreement (EPA) with Indonesia.

Improving trade with Indonesia is in line with Mexico’s renewed focus on fast-growing Asia.

This move is relevant because Mexico, along with other members of La Alianza del Pacífico or the Pacific Alliance trade bloc such as Chile, Colombia and Peru, also plans to synergize with the Association of Southeast Asian Nations (ASEAN).

“Indonesia plays a very strategic role in ASEAN and, therefore, we have a big interest in building a very specific agenda [with it]. We need an agenda to work toward strengthening our relations,” Mexico’s Secretary of the Economy, Ildefonso Guajardo Villareal, told The Jakarta Post after the closing of the Asia-Pacific Economic Cooperation (APEC) trade ministers’ meeting in Surabaya on Sunday.

Despite the fact that the current level of bilateral trade was “significant”, it was still not “satisfying” as it did not reflect the real potential of either economy, he added.

Indonesia’s trade with Mexico reached US$1.22 billion last year, after growing by 24.8 percent on average from 2008 and by 6.92 percent since 2011. Indonesia sold $649.88 million worth of goods and commodities to Mexico in 2012, and purchased $568.44 million worth in return, resulting in a surplus of $81.44 million.

Exports mainly comprise rubber, textiles, palm oil and gold, while imports consist of cotton, aluminum scrap metal, silver, copper, tractors, computer parts and petroleum products.

The strategic partnership framed under the EPA would help to considerably reduce tariff and non-tariff barriers, thus further facilitating bilateral trade and enhancing it, Guajardo said.

In the context of global production, Mexico and Indonesia could build a strong collaboration to integrate their expertise so as to contribute to closer links in the process.

“Mexico and Indonesia can complement each other in the process of adding value to production. We need to look at where we are strategically, and determine how we can build on our strengths to be part of the global value chain,” said Guajardo.

In its push to diversify its markets, which includes South American countries, Indonesia signed on Sunday terms of reference (ToR) to prepare for negotiations for a comprehensive economic partnership agreement (CEPA) with Chile, which it considers could serve as a trade hub in South America.

Although a feasibility study on the CEPA was concluded in 2009, pre-negotiation talks stopped, partly because Indonesia prioritized other trade talks.

In response to Mexico’s proposal, Trade Minister Gita Wirjawan said that he welcomed the country’s interest in improving economic relation with Indonesia.

“We take note of this proposal as it is a very positive aspiration,” Gita told a press briefing on Sunday.

However, he acknowledged that any follow-up to the proposal would depend on Indonesia’s readiness to seal a new commitment under a similar kind of trading pact.

At present, Indonesia is focusing on planned as well as ongoing negotiations that it has with trade partners, including the regional comprehensive economic partnership under ASEAN and its six major trade counterparts, and a CEPA with South Korea.