Protectionism Virus behind Global Trade Turmoil

Penulis: Sorta Tobing

Editor: Sorta Tobing

22/8/2019, 19.29 WIB

The current trade war is not merely between the US and China. Many countries do the same, including Japan-South Korea and the European Union-Indonesia.

Telaah - Perang Dagang Meluas
Besides the US-China trade war, there is also a trade war between Japan and South Korea.

A Free Market that's No Longer Free

The US-China and Japan-South Korea disputes are indeed two different things. However, the common thread is that the leaders of developed countries are currently placing domestic priorities above global stability. Protectionism is the term.

The US President Donald Trump is arguably the most aggressive in calling for this movement. Since taking office in 2017, he promised to ‘make America great again.’

The trade war that he fought with China since last year has impacted the global economic growth. According to research by Fitch Ratings and Oxford Economics, Mexico is the most affected country.

Indonesia is also included in the top ten countries whose GDP was affected by the trade war. Fitch predicts Indonesia’s GDP is likely to decrease by 0.12 percent in 2020. The following Databoks chart shows the ranking of countries affected by the US-China trade war.

United Kingdom (UK) had already carried out protectionism. It would withdraw from the European Union based on the results of the referendum on June 23, 2016. But until now it is not clear how this withdrawal will take place.

There are two options: hard and soft Brexit. The first option describes a failure or no agreement. Trade-wise, the UK will later be treated as a non-EU member. The second option means the opposite. The UK has the chance to be treated like a member of the single market.

With the election of Boris Johson as the new prime minister of the UK, it seems that the choice will lean toward the first option. He told BBC that the Brexit no-deal preparation is already on the right track.

Many observers warned him that it would trigger a reduction in the supply of food and medicine and trade issues on the border with Ireland.

Protectionism of developed countries also affected Indonesia. The impact of the US-China trade war has weakened this country’s economy. However, there is another confrontation going on. European Union (EU) is the opponent.

On August 14, the EU implemented an anti-subsidized biodiesel import duty of 8-18 percent. “Import duties are imposed temporarily as the investigation continues until definitive steps are set in mid-December 2019,” an EU executive said on Wednesday.

Indonesia gets the impact. Biodiesel exports will decline. Based on data from, the country's biodiesel (code HS 3826) export to Europe in 2018 skyrocketed with a value of US$ 631.1 million or around Rp 8.52 trillion. It grew 22.5 times compared to the 2017 export value of US$ 26.8 million.

Trade Minister Enggartiasto Lukita proposed a countermeasure, which is the imposition of 20 percent to 25 percent tariffs for the EU dairy products. “We will certainly implement it, and we have asked importers to divert resources,” he said. Importers can find other suppliers, such as Australia, India, New Zealand, or the US.

In addition to the imposition of the anti-subsidized import duties, the EU also applied the Renewable Energy Directive II (RED II) in May. The consumption of high-risk biofuels in its member countries will be limited in 2020-2023. Crude palm oil (CPO), which is one of Indonesia's leading export commodities, is included in that category.

In the end, there is no truly free market. Developed countries that often promote free trade do the opposite. Now they do trade protection for the benefit of their own country.

Joseph Stiglitz, a recipient of the Nobel Memorial Prize in Economic Sciences, wrote to CNBC in April that globalization has benefited the US and other developed countries but not developing countries.

There is no genuinely fair trade agreement. The US has benefited the most so far. They succeeded in forcing many countries to open their markets. “We need better and fairer international rules,” Joseph wrote.

Your Email Has Been Registered
sorry there was a problem signing you in
Please Fill Email Address
Fill Email Correctly
Please type the Captcha correctly