Citrus, potatoes, carrots and honey should all benefit from the newly signed Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA), signed last week.
Prime Minister Scott Morrison inked the landmark trade deal with one of Australia’s most important trading partners in the Presidential Palace in Bogor last Friday.
The IA-CEPA has been a goal of successive Australian governments.
Indonesia ranks as our fifth largest ag export market and is our 13th largest trading partner overall.
According to the Department of Agriculture and Water Resources, the key parts to the deal for horticulture include:
- Immediate tariff cut mandarins from 25pc to 10pc for 7500 tonnes per year; down to 0pc after 20 years for an unlimited volume.
- Duty free access for 10,000 tonnes of oranges per year, increasing 5pc each year.
- Duty free access for 5,000 tonnes of lemons and limes per year, increasing 2.5pc each year.
- Immediate tariff cuts for potatoes from 25pc to 10pc for 10,000 tonnes per year; after five years tariff further reduced to 5pc for 12,500 tonnes per year, increasing by 2.5pc per year.
- Immediate tariff cuts for carrots from 25pc to 10pc (from 25pc) for 5000 tonnes per year; down to 0pc after 15 years for an unlimited volume.
- Progressive elimination of 5pc tariff on Australian honey after 15 years.
Other notable agricultural trade points include:
- Duty free access for 575,000 head of live male cattle per year, growing at 4 per cent per year to 700,000 at year five of the agreement.
- Remaining tariffs on all Australian exports of frozen beef and sheepmeat into Indonesia reduced to 2.5pc immediately, and eliminated after 5 years.
- Guaranteed duty free access for 500,000 tonnes of feed grains per year (wheat, barley, sorghum), increasing at 5pc per year to 775,664 tonnes.
- Reducing the tariff on Australian sugar cane from 8-12pc to 5pc.
- Immediate elimination of 5pc tariff for milk and cream, concentrated or containing added sugar or other sweetening matter.
- Immediate elimination of 5pc tariff for grated or powdered cheese, of all kinds.
Ausveg welcomed the deal, saying Australian vegetable growers were looking to export into this potentially lucrative market.
In the 2017/18 financial year, Australian vegetable exports to Indonesia were valued at $3.7 million, with the top commodity being potatoes, which accounts for nearly half of this total.
Given Indonesia’s developing population and its proximity to Australia, this market has strong potential for local growers to boost their fresh vegetable exports, according to Ausveg.
“The efforts of the Department of Foreign Affairs and Trade and former Trade Minister Steven Ciobo who worked together with their Indonesian counterparts to finalise negotiations are greatly appreciated by the Australian vegetable industry,” Ausveg chief executive officer, James Whiteside said.
“In particular, the agreement to increase import quotas and decrease tariffs for carrot and potato exports – two of the Australian vegetable industry’s key export crops – should lead to an immediate increase in the trade of these commodities to Indonesia, a potentially lucrative market for our growers.
RELATED READING
“The finalisation of this important deal is timely, given the industry’s increased activities in market development, which included Indonesia’s participation in the recent annual Ausveg Reverse Trade Mission that allowed buyers from key export markets to visit Australian vegetable growers and see first-hand the high quality produce for which our growers are renowned around the world.”
The vegetable industry is seeking to increase its export value to $315 million per year by 2020, an increase of 40 per cent from 2016.
Indonesia is a country of boundless opportunity for the Australian grains industry
- David McKeon, GrainGrowers
Grain industry lobby group, GrainGrowers, has been quick to lead the farm industry in congratulating the federal government for concluding the
“Indonesia is a country of boundless opportunity for the Australian grains industry,” said GrainGrowers chief executive officer, David McKeon.
“A country with 263 million people, it is forecast to grow to 295m by 2030.”
It is already Australia’s largest wheat market, valued at roughly $1.3 billion with trade volumes around 4.2m tonnes a year.
“Wheat is already Australia’s single largest export to Indonesia, which will become the world’s third largest economy by 2050.”
Mr McKeon said while Australia’s grain trade to Indonesia was almost exclusively wheat for milling purposes, the IA-CEPA would directly allow more diversity and growth in the future.
Feed wheat opportunities
Australia would now have priority access to the rapidly growing Indonesian feed grain market thanks to a new 500,000t duty-free tariff rate quota for Australian feed grains, including feed barley, sorghum and feed wheat.
“This will provide distinct advantages to Australian grain farmers over rival grain exporting countries,” he said.
“These new opportunities for Australian feed grains will also help boost development of Indonesia’s livestock, poultry and aquaculture industries, while complementing the existing strong trade in milling wheat between the two countries."
“GrainGrowers is equally pleased that Indonesia and Australia will start to work on a grains-specific economic cooperation initiative, dubbed the Indonesia-Australia Strategic Grains Partnership.
The partnership will provide the required technical, economic, and social programs to allow the grains and related industries in both countries to flourish.”
Total trade between the two countries is worth $16b a year with Indonesia buying more than $2.4b in agricultural commodities such as wheat, livestock, meat, sugar and cotton.
Deal sweetener last year
Indonesia paved the way to a comprehensive agreement last year when it cut sugar tariffs for Australian imports by three per cent in exchange for eliminating import duties on Indonesian herbicides and pesticides.
The near neighbour’s rising middle class is also a prime target for high-value Australian produce.
The trade deal was set to be signed early this week but was delayed by last week’s Canberra leadership spill.
Mr McKeon said GrainGrowers, on behalf of Australian grain farmers and the broader industry, had been working hard with the Australian Government to ensure grain was central to the trade agreement.
“We are thrilled with the outcome and the benefits this new trade agreement will provide to Australian grain growers and the broader industry," Mr McKeon said.
“IA-CEPA will provide a platform for further growth in milling wheat trade, and will allow for improved diversity in grains trade between the two countries.
“IA-CEPA will not only boost opportunities for the Australian grain industry, but will also support growth, development and trade opportunities for Indonesia’s food manufacturing, stockfeed and livestock sectors.”
Still to be ratified
GrainGrowers' trade and economics manager, Luke Mathews, acknowledged the efforts by the government in pursuing a high quality agreement with Indonesia.
However, he noted the official signing of the agreement and subsequent ratification by both countries was still to come and hoped it would happen soon.
The IA-CEPA would cement the existing relationship between Australian and Indonesian milling wheat industries while allowing new trade, investment and relationships to flourish between Australia’s grain industry and Indonesia’s food manufacturing, stockfeed and livestock sectors.
Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
