Farmers cheer Indonesian free trade deal

Farmers cheer Indonesian free trade deal


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Australia has signed a new trade deal with Indonesia, with benefits to horticulture.

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THE leaders of Australia's horticulture, beef, dairy, grain and live cattle export industries have been quick to welcome the signing of a major free trade deal with Indonesia in Jakarta this week.

The Indonesia-Australia Comprehensive Economic Partnership Agreement (I-A CEPA) is expected to deliver big gains for Australia's farm sector, particularly for sheep and beef producers. 

Minister for agriculture and water resources, David Littleproud, said once in force the deal would help farmers sell more product.

“All tariffs on beef and sheep meat will be eliminated over five years with most eliminated immediately. At the moment they sit at 5 per cent," he said. 

“Sugar tariffs will be slashed from a maximum 12 per cent to 5 per cent.

“The first 500,000 tonnes of grain per year will also be duty free and that will grow by 5 per cent a year."

Vegetables

AUSVEG welcomed the deal, saying it will help Australian vegetable growers looking to export into this growing 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.

Of particular interest to horticulture exporters will be: 

  • Carrots: Increased import quota of 5000t per year, growing to 10,000t per year after 10 years, with a decreasing tariff schedule during this time.
  • Potatoes: Increased import quota of 10,000t per year, growing to 12,500t per year after five years, with a decreasing tariff schedule during this time.

Ausveg chief executive officer, James Whiteside, said these two particular products were key export crops and that the deal should lead to an immediate increase in the trade of these commodities to Indonesia.

“The finalisation of this important trade agreement aligns closely with our industry’s increased activities in market development, which included Indonesia’s participation in the 2018 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," Mr Whiteside said. 

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“Given Indonesia is predicted to have the world’s fifth largest economy by 2030, the IA-CEPA will help ensure that Australia, and its horticulture producers, will be able to benefit from the country’s expected economic growth.”

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.

“We are currently in a fantastic position to take advantage of opportunities in lucrative export markets, and the industry is working hard to ensure growers have the necessary tools to be successful in the exporting process,” Mr Whiteside said.

“Trade agreements with neighbouring countries such as the IA-CEPA help provide our industry with confidence that it can continue to prosper through developing export markets, which helps secure the profitability and competitiveness of the Australian vegetable industry.”

Fruit

INDONESIA will eliminate tariffs on citrus under tariff rate quotas:

  • 25pc tariff on Australian mandarins cut immediately to 10pc for 7500t per year, with progressive tariff reductions down to 0pc for all Australian mandarins after 20 years
  • Guaranteed tariff free access for 10,000t of oranges, increasing by 5pc each year
  • Guaranteed tariff free access for 5000t of lemons and limes, increasing by 2.5pc each year

Indonesia will also reduce or eliminate tariffs for other fruit and nuts:

  • Elimination of tariffs on pineapples, avocados and strawberries in 2026
  • 20pc tariff on mangoes reduced to 12.5pc in 2025
  • 5pc tariff on dragon fruit reduced to 2pc in 2026

Elimination of all other tariffs at entry into force including on bananas, persimmons, and a range of tropical fruit which were not eliminated under AANZFTA.

Beef 

AUSTRALIAN Livestock Exporters’ Council independent chairman Simon Crean said I-A CEPA confirmed the importance of live cattle exports to Indonesia.

“Live cattle exports from northern Australia to Indonesia represent more than half of our $1.2 billion industry,” Mr Crean said.

“The Indonesian market is the backbone of the live trade, which provides employment for 10,000 Australians, and tens of thousands of Indonesians, and injects more than $600 million a year directly back to producers.”

I-A CEPA includes a quota for 575,000 live male cattle (with a 0 per cent in-quota tariff), growing by 4pc per annum over five years to 700,000 head. Annual cattle import permits will be issued without seasonal restrictions, with a review after five years to consider further increases. Restrictions for female cattle exports will be also eliminated.

“The agreement streamlines Indonesia’s access to dietary protein by strengthening existing links back to northern Australia’s beef cattle industry and our proven ability to meet that growing demand,” Mr Crean said.

Mr Crean, who was in Jakarta for the signing of I-A CEPA, said the finalisation of the agreement was testament to several years of hard work by Australian and Indonesian negotiating teams.

Cattle Council of Australia CEO, Margot Andrae, said boxed beef tariffs would also be liberalised, either immediately or gradually, under the deal.

Exports where 0pc tariffs are not already applicable will benefit from either a 0pc or 2.5pc tariff on EIF (down from 5pc), with the tariffs being eliminated altogether over five years. Similar advantages will be extended to frozen offal.

In the past 12 months (ending January 2019), Australian cattle exports to Indonesia rose 15pc to 589,234, with chilled and frozen beef to Indonesia at 128,948 tonnes, a rise of 14pc.

Cattle Council president Tony Hegarty said improved trade access was a high priority for the industry, and especially so when droughts and floods have tested the confidence of producers.

Red Meat Advisory Council Independent Chair Don Mackay said the trade deal would provide greater certainty for Australia’s 82,500 red meat businesses and the 438,000 jobs it supports.

“Security of markets drives competition and allows Aussie red meat businesses to continue to invest back into their supply chains, employ more Australians and continue to add to their $15 billion-dollar trade export contribution.” 

“This will provide greater future certainty for Australia’s producers, processors and livestock exporters including a duty-free quota of 575,000 head of male cattle, liberalised access for female cattle and reduction to 2.5 percent or zero percent tariff on boxed red meat and offals.”

Grains

AUSTRALIAN Export Grains Innovation Centre CEO Richard Simonaitis said Australia would have access to the Indonesian feed grain market, with 500,000 tonnes tariff-free, under the new deal. 

Mr Simonaitis said AEGIC had already been laying the groundwork to boost the value of Australian feed grains into Indonesia.

“Over the past three years we have been engaging feed grain nutrition experts to go into Indonesia and demonstrate to buyers the benefits of using Australian feed grains,” he said.

“This work, and the provisions of the new partnership, will give Australia a distinct advantage in capturing the rapidly growing Indonesian feed market.

“Indonesia’s total feed imports are currently valued at more than $1 billion, and the market is growing fast as people increasingly eat more meat.”

Mr Simonaitis said Indonesia had been a focus for AEGIC and the new partnership would strengthen this relationship.

“AEGIC is supporting Indonesian flour millers and processors through in-market education and technical support to help them get the most value out of Australian grains,” he said.

Dairy

ALL remaining tariffs on dairy exports into Indonesia will eventually be scrapped under the IA-CEPA.

Tariffs will be removed on entry into force for skim milk powder (SMP), whole milk powder (WMP) and grated and powdered cheese, while remaining tariffs will be eliminated by 2026 for non-liquid milk and by 2033 for liquid milk

Peak dairy industry body the Australian Dairy Industry Council (ADIC) welcomed the deal, saying it would create a closer relationship with one of Australia’s largest trading partners.

“As Australia’s close neighbour with strong existing ties with our dairy industry, the conclusion of IA-CEPA will enhance the naturally emerging opportunities that are presenting themselves in Indonesia,” ADIC Chair Terry Richardson said.

The agreement also includes a cooperative mechanism to enable regular discussion of non-tariff measures (NTMs).

“These NTMs, including measures such as licencing arrangements and product testing regulations, can be significant hurdles for Australian dairy exports into markets like Indonesia and add significant costs to doing business,” Mr Richardson said.

Indonesia is a major destination for Australian dairy exports and ranks only behind Greater China and Japan as Australia’s third largest dairy export market on value terms. 

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