The International Trade Council takes note of Indonesia's recent proposal to initiate discussions on a potential trade agreement for critical minerals with the United States. This significant development emerged during a meeting between Indonesian President Joko Widodo and U.S. Vice President Kamala Harris on the sidelines of the Association of Southeast Asian Nations (ASEAN) meetings in Jakarta.
The Indonesian government expressed its interest in engaging in negotiations for a trade deal that would enable its exports of critical minerals to fall under the purview of the U.S. Inflation Reduction Act. This law, implemented in March, stipulates that a certain portion of critical minerals used in electric vehicle (EV) batteries must be produced or assembled in North America or through a free trade partner. This requirement is a prerequisite for EVs sold in the United States to qualify for tax credits.
Notably, Indonesia currently lacks a free trade agreement with the United States. However, as a resource-rich nation, Indonesia aspires to play a pivotal role in the manufacturing of EVs and their batteries, leveraging its substantial nickel reserves.
President Joko Widodo emphasized Indonesia's potential as a key supplier of batteries and EV components to the U.S., given its vast nickel reserves, which amount to 21 million metric tons.
"Indonesia invites the U.S. to discuss the formation of the Critical Mineral Agreement," President Widodo stated during the meeting.
President Widodo also expressed hope that Indonesia's participation in the U.S.-led Indo-Pacific Economic Framework (IPEF) could lead to the recognition of its mineral exports for "green subsidies" under the U.S. Inflation Reduction Act.
The concept of proposing a limited free trade agreement with the United States was initially introduced in April by senior Indonesian minister Luhut Pandjaitan. Jakarta aims to present an agreement to Washington that mirrors the March accord between Japan and the United States concerning EV battery minerals.
In her remarks at the opening of the bilateral meeting, Vice President Harris conveyed her commitment to collaborating with Indonesia to establish supply chains that incorporate "critical minerals required to expand our clean energy economies." She also expressed the intent to enhance trade between the two countries through the Indo-Pacific Economic Framework (IPEF).
The International Trade Council recognizes the importance of facilitating international trade agreements that promote economic cooperation and development while fostering sustainable practices in the global supply chain.