06/09/04 JAKARTA (Dow Jones)--China has agreed to reduce its importtariff on Indonesian stearic acid as part of wider plans to free up tradein the Asian region, the head of an association of Indonesian producerssaid Monday.

Indonesian officials decided at meetings over the weekend to includestearic acid - a product made from refining crude palm oil - on a list oflow tariff goods traded between China and member countries of theAssociation of Southeast Asian nations, or Asean, said Kris Hadisubroto,chairman of the Indonesian Association of Oleo-Chemical Producers.

"The Chinese Finance Ministry agreed that it will reduce the importtariff for Indonesian stearic acid to 10% from 16%," said Hadisubroto,adding that the reduction will take effect within a few weeks.

Asia's other major exporter of CPO products, Malaysia, has alreadyreached a low tariff agreement with China for stearic acid.

Asean countries and China are in the process of drawing up a list oflow-tariff goods which are meant to pave the way for a full free-tradeagreement between the two the parties by the end of the decade.

Commerce ministers from Asean met their Chinese counterparts inJakarta over the weekend to further discuss the plan.

Indonesia was initially reluctant to open up its stearic acid marketbut changed its mind at the meeting because stearic acid exports to Chinahave fallen 20% since June, Hadisubroto said. The country's producers wereunable to compete on price with Malaysian firms that benefitted from lowertariffs, he said.

China needs up to 500,000 metric tons a year of stearic acid to meetits production needs. Typically, Indonesia supplies about 60% of China'sdemand, or about $200 million in stearic acid sales every year. But thisratio has been falling due to competition from Malaysia, Hadisubrotoadded.

Stearic acid is used in the production of many goods, includingdetergents and cosmetics.