US threatens Indonesia's trade privileges

Issue 

By Cipto R.

JAKARTA — The United States has threatened to withdraw from Indonesia the Generalised System of Preferences (GSP), a system of tariff concessions, if the Suharto government does not improve workers' conditions. Among the GSP conditions is the right for workers to organise outside of the official government trade union, the All Indonesian Workers Union (SPSI).

In 1987, Washington also threatened to withdraw GSP privileges if Jakarta did not allow open access to the Indonesian market for US films. Jakarta abolished all controls on US film imports in return for tariff reduction on US imports of Indonesian textiles. If Indonesia loses the GSP privileges it will lose US$624 million in exports of 14.8% of its exports to the United States. US business interests have also benefited as they moved their own manufacturing to Indonesia to make use of the cheap labour, as with the big Reebok and Adidas factories.

President Suharto has reacted to the threat by deciding to form a ministerial team comprising the trade, industry, labour, foreign affairs and information ministers to negotiate with Washington. The daily Media Indonesia reported on August 9 that the Minister for Trade, S.P. Joedono, stated that "there are still companies which do not treat their workers properly but labour conditions in Indonesia are not as bad as people in the US imagine". This will be the key message that the ministerial team will be bringing to Washington.

Non-government organisations however have taken a different stand. Teten Masduki from the Workers Solidarity Forum, Fauzi Abdullah from the Legal Aid Institute and others issued a joint statement arguing that rather than forming a diplomatic team to lobby Washington the government should simply move to improve the terrible conditions for workers in the country. One member of parliament, Tadjuddin, went as far as to say that it was time to re-evaluate the SPSI "because we are now entering an era different from that when SPSI was formed."

The regime remains solidly in support of SPSI. It has been reported that President Suharto recently told Australian foreign minister Gareth Evans that Indonesian labour laws are based upon "unity and union". This statement was seen as a reaffirmation of the policy of "evolution unionism" that gives the SPSI the role of preventing conflicts between bosses and workers. The official policy states that bosses and workers are "partners in development". Thus, for example, if companies' incomes fall because of a drop in exports, then they have the right to cut workers' wages.

According to the former businessman and now head of SPSI, Imam Soedarwo: "SPSI is not yet as we had hoped for, but in order that SPSI become a free and democratic organisation, it is important that there be no attempt to split it or form new, separate organisations. That would be a step backwards."

Another issue in the current situation is the weakness of the ket, which has made Indonesian industry export-dependent. This, in turn, has provided a key justification for keeping wages low.

During the 20 years or more of the New Order regime, Indonesia's economy has remained dependent on foreign loans and investment.

Now that so many industries have relocated here in the 1980s, we are finding that workers cannot buy even the goods they themselves produce. A pair of Reebok shoes sells here for Rp, 200,000 (A$15) which is the equivalent of over three months wages for most workers. Many garment products are also too expensive for workers in Indonesia. Nearly of all these products end up as exports to overseas markets. This situation has been worrying some US companies which have to compete with those companies that have re-located in Indonesia. US labour organisations have expressed similar concerns, and have lobbied for Washington to make the threats on GSP.

Jakarta is now supporting the Australian-initiated Asia Pacific Economic Cooperation (APEC) process and expects to become APEC chair in 1994. While Jakarta's participation in APEC is seen as part of its strategy to advance its trade, worker support organisation activists say that it will just lock Indonesia into a system where companies from the large industrial countries of the North continue to dominate the Indonesian economy, deciding what products should be produced, how and for whom.

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