The Limits of Indonesia and India Trade Cooperation: The Case of Import Tariffs on Refined Palm Oil 2019–2020

Abstract

This article examines limitations present in India–Indonesia bilateral trade relations. Since January 2019, India has imposed higher import tariffs on Indonesian refined, bleached, deodorised palm oil (RBDPO) than those imposed on Indonesia's main competitor Malaysia. This tariff policy weakened Indonesia's exports, given that India is Indonesia's third-largest export destination for palm oil. To overcome these tariff disparities, the Indonesian government responded with a trade-off strategy, offering to lower its import tariffs on India's raw sugar in exchange for a reduction in India's import tariffs on Indonesia's RBDPO. However, this strategy has thus far failed to generate a satisfying outcome for Indonesia. This article examines the obstacles in enacting such a strategy from the Indonesian perspective. By mobilising the concept of reluctance in international politics, this article argues that India's reluctance hinders Indonesia's trade-off strategy. This reluctance is evidenced by India's hesitation and recalcitrance, resulting in delays, and reversal of policy as well as ignoring Indonesian requests regarding the trade-off strategy. This could indicate that India does not prioritise Indonesia in its Indo-Pacific vision, particularly in enhancing cooperation with Southeast Asian nations, particularly Indonesia.