Japan, Indonesia Reach Basic Agreement for EPA

Japan and Indonesia reached basic agreement for Economic Partnership Agreement (EPA) at top meeting between prime minister Shinzo Abe and president Susilo Bambang Yudhoyono on Tuesday. They introduce special tax exemption for steel trade in 5 applications including automobile and parts, electronics and appliances, energy, construction machinery and reexport while they terminate the tariff for semi-finished steel products, electrical steel, rail, some stainless and some special steel products immediately after the effect of the agreement. The free tax trade represents 83% of 830,000 tonnes of volume including reexport in 2004 basis. The free tax trade will be expanded to some welding pipe, some stainless and special steel in 7 years, to tin-free steel and some special steel in 10 years and some hot rolled flat steel in 15 years. By utilizing the tax exemption depending on the applications, the immediate free tax trade rate is higher than 50% for Thailand and 60% for Philippine. They also seek strategic support for steel industry. They keep talking for the paper work to effect the agreement. Japanese export to Indonesia was around 1.017 trillion yen in 2005. Indonesia exports 2.298 trillion yen in 2005. With the EPA, the 92% of the total trade become free tax trade. They will exempt the tariff for 71% of steel trade by utilizing tax exemption depending on the applications. For steel industry, the EPA is better than EPA with South Korea and ASEAN, which maintain tariff for some steel items, though EPA with South Korea and ASEAN result in free tax trade for 90% of total trade. They keep talking for pending issues on steel industry including steel strategy through Japan External Trade Organization steel cleaner products study through Japan International Cooperation Agency.