In the Rush to Free Trade, Don’t Put Consumers at Risk

this article was published by Jakarta Globe :

ACFTA will encompass a total of 10 economic regions with 1.7 billion consumers, with a total annual trade volume of approximately $1.23 trillion and a combined gross domestic product of close to 6 trillion U.S. dollars. One can say that the ACFTA is the world’s largest trading bloc in terms of the population covered and the third largest in terms of trading volume.

There are numerous reactions about ACFTA. Some people agree that the implementation of ACFTA would adversely impact Indonesia’s manufacturing and trade performance. Those who are against ACFTA claimed that the free trade agreement may potentially hinder the small & medium businesses, causing millions of labor at risk to be laid off. In short, they are saying that ACFTA will hamper the national economy.  Those who are for it argues that, we cannot avoid free trade, especially, because we have signed the ACFTA agreement in 2002. The signing obliges us to follow the terms of that agreement.

However, given how Indonesia’s economy now is different from how it used to be in 2002, a possible recalculation of the impacts of the ACFTA and not to mention the amount of national pressure against it, Indonesia is seeking to re-negotiate the rates of at least 455 tariff lines, which have the potential to weaken its domestic industries.

The impact of the establishment of ACFTA is very broad. The visible ones are the impacts it is going to have on the flow non-oil imports from China to Indonesia and the loss that small industries in Indonesia are going to suffer. Arguments on that issue or pertaining to it are ubiquitous. What is often near sighted is the fate of the consumers. One might argue that opening a market up can stimulate competition and thus benefit the consumers. But is that always the case?

I believe that consumers are the real “object” of the free trade agreement. They are the ones that will face a market that is overflowed with Chinese products. This was already the case even before the ACFTA came into force. There are two perspectives in which we can view this condition. First, the agreement could benefit the consumers because they will have more options in choosing which product to buy, but, on the other hand, it could be viewed as a threat because there is the likely possibility for products that have not been tested appropriately  are sold freely in the market.

Even though ACFTA has the ASEAN Coordinating Committee on Standard and Quality (ACCSQ) that regulates the standardization of goods for consumption, it is no secret that China are having difficulties in integrating into their legal system the policy that consumers merit special protection. Case in point; recently, the efforts of Wang Hai, a prominent well-known consumer protection advocate have been curtailed by a variety of legal actions around China that sought to limit Wang’s status because of his efforts that sought out for products and then sued the offending manufacturers and retailers.

Further, back in September 2008, The Indonesian Food and Drugs Monitoring Agency (BPOM) found the poisonous ingredient, melamine, in 28 dairy-based products from China. In that same year, BPOM also banned cosmetic products made by China brands. The cosmetic products were banned after being found to containhazardous substances such as mercury, retinoic acid, hydroquinone and diethyl glycol.

There are also other cases, such as the China milk scandal and the China food safety incidents.

In the free trade, the overflow of the products is inevitable.  It will significantly impact our people as customers. Now, let me ask another question: is our consumer protection law ready to protect the consumer’s rights amidst the free trade era?

The lack of standardization system demonstrates the concerns that our consumer – end customers, the person at the end of the supply chain as stated by law – is vulnerable for the direct impact of free trade if our government does not pay attention to these issues. Consumers are often powerless when dealing with big corporations. Therefore our government needs to ensure there exist a comprehensive set of laws and its implementation that protects the consumers.

In the sense of consumer protections, the law is required to cover the disparity that exist in bargaining power between consumers and merchants if there are any disputes on the products. The disputes would occur if the standardization system failed to filter the products.

My point is simple: the consumer laws have to be a vehicle for expressing consumer’s right. We need to protect our people, so they will not become a “victim” of free trade.

Take Prita’s case as a clear example to show the disparity that exists: Prita was sued and held in custody for libel by Omni International Hospital in Tangerang for complaining in an e-mail.

Indonesia’s Consumer Protection Law has been around since 1999. The Law was enthusiastically crafted, but not well prepared, during the reformasi hysteria. As a result, the Law is full of contradictions within itself and with other laws.

An excellent example about the laxity of our consumer protection law: the costs for individual consumers to litigate fraud and warranty disputes were often prohibitive.

Flaws on the law, the lack of socialization and implementation about the law itself poses significant risks for consumers as a free trade object. The Consumers Dispute Resolution Agency (BPSK) that was established as mandated in the Law is arguably toothless. They lack the adequate authority to decide over consumer disputes. It is lacking due to the flaws of our consumer’s protection law.

The merchants could easily dismiss the agency’s authority to decide over the disputes. As a result, the consumers will need to access and express their rights through ordinary court (district court), which is far more complicated.

When the cost of legal enforcement exceeds the expected recovery, it will become a universal hurdle to enforcement methods The complexities, uncertainty, and lengthiness of formal legal proceedings in Indonesia add setbacks for consumer protection.

Weaknesses in the existing court system, when coupled with the weaknesses in the state-controlled enforcement apparatus will undermine the potential for effectively enforcing consumer rights. As I have established, consumer rights at a time of free trade becomes even more important.

As a comparison, in other countries such as United States, Hong Kong, Canada, the United Kingdom, and South Africa, their judicial system enables consumers to express and access their rights through the Small Claims Court. In this court, consumers can easily file a petition and express their rights without the complicated process of an ordinary court.  Small claims court recognizes the disparity in bargaining power between consumers and the merchant.

Furthermore, the lack of private consumer organizations is detrimental to our consumers. We need more independent consumer protection groups in order to protect the consumers and in the same time demand responsibility from the government and the merchants. We need them to serve as watchdogs for the interest of consumers.

We need to improve our Customer Protection Law. We need a set of laws that protect consumers and should they need to settle their disputes, we need to provide them a legal recourse through a court that is much simpler, like the Small Claims Court system. The government also needs to educate the consumers about their rights and how to properly access it. I concede the point that we must be ready for ACFTA. It is not just about the government but also consumers need to “preparing” themselves to face the free trade. They need to educate themselves about their right and responsibility as a consumer.

The world will only continue to open up and intertwined. But in doing so, let us not forget our consumers.

1 Comment

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One response to “In the Rush to Free Trade, Don’t Put Consumers at Risk

  1. katy

    Made in China products and Made in Indonesia products
    present the similar quality and they do have competitive price in the market. Yes it is true that China’s goods are just about everything in our life right now, but why can’t Indonesia produce the same thing? Instead of worrying about the signed ACFTA, maybe we should focus more on how to boost the nation’s productions to compete in the international market. The fact that China’s goods are extremely cheap but posses these poisonous chemicals that made the headlines can be used for our advantage. And at the end of the day, we as consumers are the ones who choose what we consume. Their supply won’t be much if the demand is not here anymore. We should start from within ourselves to love the domestic products. Invest in our own country for products developments and technology advancement. If we worry that China’s goods will hinder our SME, we need to look at it from another perspectives. It may also be a good motivation for our SME to produce original products with trusted quality. We should start looking into ways to integrate our domestic products in the international market, and pursue the initial intentions of signing the ACFTA.

    As for the Consumer Protection Law, we may need to look into foreign laws that deals with the similar situation, and proceed with it. In my reference is the case of De Cruz v TV Media Pte Ltd in Singapore. The dispute was, a slimming pill manufactured in China that made its way to Singapore and probably to Indonesia too, which caused De Cruz to be hospitalized and the pill was not distributed appropriately although it claimed to have passed the HSA. She was awarded totaling near 900,000 sgd and 3 out of the 5 sued were held liable, one of it failed because the Chinese manufacturer was not identifiable and cannot be brought to court. By using this reference, it is an example that we can hold importer and distributors liable for the danger goods. If they are importing goods into the country simply to maximize benefits without concerns for the consumer, we should start chasing them before the product gets further into consumer’s hands.

    As for the case of Prita, she was held liable for libel when her blog entries were most likely to be true. Can we sue Omni back under the same clause?

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