The United States and New Zealand last week requested the World Trade Organization (WTO) establish a dispute settlement panel to examine Indonesia’s restrictions on several categories of agricultural imports. This action follows the failure of bilateral consultations over the last three years to find a solution. U.S. horticultural and animal products are primarily affected by Indonesia’s challenged practices.
“Indonesia’s unrealistic policy of self-sufficiency is known the world over,� said Kevin Roepke, U.S. Grains Council regional director of South and Southeast Asia. “It’s the fourth largest country in the world by population, yet its arable land is only the size of Kansas. As Indonesia continues to make impressive economic progress and dietary standards rise, trading isn’t a luxury, it’s a necessity.�
Indonesia is already the world’s largest importer of corn gluten meal and a top 10 market for distiller’s dried grains with solubles (DDGS).
Importing feed grains into the country remains a challenge due to unreliable statistics. At a recent U.S. Soybean Export Council and USGC co-sponsored event held in Singapore, Dr. Bustanul Arifin, the founder and senior economist at the Institute for Development of Economics and Finance (INDEF), told the audience the Indonesian government expects 2015 corn production to be 20 million metric tons (787 million bushels). This is in comparison to the U.S. Department of Agriculture (USDA) and Indonesian trade estimates, which peg Indonesian domestic production at slightly more than 9 million tons (354 million bushels).
“This is an unfortunate impediment from a trade standpoint. The government is reluctant to issue import permits on the basis of high claimed production figures, yet the economics and the availability paint an entirely different picture,� Roepke said. “There are data issues in some other countries as well, but overestimating production by 120 percent is extreme.�
Poor statistics aside, Arifin also pointed to poor infrastructure and high domestic costs of transportation as an inhibitor of domestic utilization.
“With ocean freight as cheap as it is now, in many cases, it’s less costly to ship corn from the Americas than it is from one island to another in Indonesia,� Roepke said.
In a public statement announcing the WTO action, the Office of the U.S. Trade Representative (USTR) noted that U.S. exports of horticultural products to Indonesia in 2014 were slightly smaller than exports to Malaysia — $122 million versus $128 million –- despite Indonesia being eight times larger in population. USTR attributes that result largely to WTO non-compliant, trade-restricting import licensing restrictions.
“From a Council perspective, the immediate benefit of a successful challenge to Indonesia’s trade-inhibiting practices would probably be an increase in animal products,� Roepke said. “We, of course, support the export of corn in all forms.
“Longer term, the rapid growth in Southeast Asia, India and China puts Indonesia at the center of the world’s economic engine for the next generation. Indonesia is poised for opportunity, if it can learn to embrace free trade.�