How US, Indonesia can both win from strengthening ties

US Vice President Mike Pence (L) listens to Indonesian President Joko Widodo at Merdeka Palace in Jakarta on April 20.

Story highlights

  • US Vice President Pence just completed his first visit to Indonesia since taking office
  • Pence signed $10 billion in deals with Indonesian leader Joko Widodo

Mari Pangestu is a former Indonesian trade minister and currently professor of international economics at the University of Indonesia. She's also on the board of directors of Center of Strategic and International Studies think tank in Jakarta.

(CNN)The penultimate stop on US Vice President Mike Pence's tour to Asia was to Indonesia, a strategic move that should send positive signs about the Trump administration's engagement to trade in the region.

The largest country in Southeast Asia, Indonesia is important to the US as it is a vibrant democracy with a young and productive population and strong growth potential. It also has the world's largest Muslim population and is known to practice religious tolerance.
    The US is obviously important to Indonesia because it is still a major power and the largest destination for its exports, as well as an important source of investment and technology.
    At the end of the visit, Pence and Indonesian President Joko Widodo announced that both sides intend to increase trade and investment, though more work is need to ensure "win-win" solutions.
    Indonesia's ex-trade minister Mari Elka Pangestu in 2013 at the WTO.
    This is consistent of course with the US administration's priority on win-win bilateral deals.
    We got a hint of what the US means by win-win from Pence's speech at a business forum in Indonesia.
    Amid the signing of business deals amounting to $10 billion, Pence reiterated that the US remains committed to Asia and that President Donald Trump's "America First" policy will benefit the world just like the "rising tide will lift all boats".
    He also said the US would do more to increase fair and open trade in a win-win way by removing barriers to trade. However, he also emphasized that US companies face many barriers and difficulties in the Indonesian market, including intellectual property, the lack of transparency and requirements in manufacturing to include local content to be able to sell products in the Indonesian market.
    Furthermore, he said while he appreciated the reforms Indonesia has done to date, more needs to be done.
    None of these points are surprising.
    At the end of March, on a list of 16 countries with trade deficits with the US, India ranked 13, with $13.2 billion or 1.8% of the total deficit (compared with China which contributes 47%).
    The National Trade Estimate Report on foreign trade barriers released around the same time specifically mentioned restrictions on agriculture imports and licensing and local content in mobile technology.
    Indonesia also remains on the priority watch list of the United States Trade Representative Special 301 report, which monitors the global state of intellectual property rights (IPR) protection and enforcement.
    What is important to Indonesia is that a win-win strategic partnership is one which not only focuses on the issues and problems, but can build on the high complementarity between the US and Indonesia to realize opportunities to grow trade, investment, business to business and people-to-people links.
    Pence later visited the largest mosque in Indonesia, a symbolic gesture as part of his first visit to the country.
    The elements of such a strategy would include the following:
    First, the analysis of the trade deficit should go beyond the short-term ups and downs due to effect of business cycles and look at the opportunities to grow trade between the two countries, as both countries are on track for robust recovery.
    Indonesia's recovery as commodity prices improve and the prioritization of infrastructure will mean increased investments and import demand for capital goods, as well as Boeing jets, to meet transpo