http://www.asiasentinel.com/index.php?option=com_content&task=view&id=5339&Itemid=226
Indonesia Runs Into Trouble with the WTO
Written by Our Correspondent
Monday, 15 April 2013
Not a pleasant reception
Major trading partners express alarm with protectionist practices
Indonesia is earning itself a wide range of powerful critics who have
gone to the World Trade Organization over its increasingly restrictive trade
policies, with the United States, Japan, Australia, Korea, Canada, the European
Union and New Zealand all expressing concerns about the country's restrictions
on food products.
With those complaints simmering, last Friday Jakarta backed away from
from imposing limits on horticultural products in the face of a US challenge
filed with the WTO in January, Trade Minister Gita Wirjawan said.
The US said it was requesting consultations over alleged trade
restrictions by the Indonesian government, with US Trade Representative Ron
Kirk saying in a prepared statement that "Indonesia's opaque and complex import
licensing system affects a wide range of American agricultural exports. It has
become a serious impediment to US agricultural exports entering Indonesia,
reducing Indonesian consumers' access to high-quality US products."
A request for consultations is considered the first step toward seeking
retaliatory measures with the WTO. The US said it had asked the WTO to strike
down import restrictions imposed by Indonesia on horticultural products
including fruits, vegetables, flowers, juices and other horticultural products
as well animal products.
Indonesia is a major US trading partner, with more than US$28 billion
worth of goods exchanged in 2011. The trade balance is sharply in Indonesia's
favor, with US$8.01 billion in imports from the US and US$17.9 billion in
exports, giving Jakarta a positive trade balance of US$9.98 billion.
The threatened WTO action is the first crack over Indonesian knuckles
over a long list of irritations that other countries have been enduring.
Indonesia last November instituted a food security measure that has driven up
the price of food across the board by about 15 percent, playing a major role in
pushing up overall inflation in Indonesia by 5.6 percent.
The country has been the focus of investor concerns for months as
officials have constricted the ability to operate on the part of
multinationals, particularly in the extractive industries such as oil and gas
and minerals, where billions of US dollars in investment have been stalled for
months. (See Indonesia Trade Law Worries Multinationals)
A government official who monitors trade issues said protectionist
measures in resources and agriculture are "a disaster," adding that "This could
send us in reverse."
According to the WTO website, the US in 2012 expressed concern about what
it said was an "expanding web of trade restrictions in Indonesia," citing
import licensing requirements on many products including livestock, textiles
and apparel, electronics, household appliances and food and beverages.
The US also complained that disguised pre-shipment inspection
requirements and local content requirements including in the energy sector were
resulting in trade restrictions.
The European Union also complained to the WTO, over the same issues,
saying trade restrictions have effectively stopped some imports, and expressed
particular concern over the regulations affecting horticulture and animal
products. It urged Indonesia to clarify the new measures to the WTO. The other
nations followed suit.
Indonesia, however, told the WTO that its trade policies need to address
the needs of millions of poor people in the country. It said it was reviewing
some of the regulations, noting its recent decision to postpone the
implementation of some measures, according to the WTO website. It said it would
continue its dialogue with other members on this issue in various WTO
committees "There will be revisions on trade ministry regulations and
agriculture ministry regulations on horticulture importation," Gita Wirjawan
told Reuters. "We will not impose quantity restrictions on imports anymore."
A spokeswoman for the U.S. Trade Representative's office said they were
"reviewing the announcement and seeking details" and had no additional comment,
Reuters said.
Indonesia's bid for food security in beef has resulted in prices higher
than Tokyo, one of the most expensive cities in the world for beef. The price
of garlic is up by eight times the normal price, with a delay in issuing
recommendation letters for importers to obtain revised import licenses under
the new food law resulting in garlic being stockpiled in ports and unable to
make it to market. Chilies, a crucial ingredient in Indonesian cooking, have
more than tripled in price.
While tariffs have been brought down from 20 percent to 5 percent over
the intervening years and import monopolies and licensing have been largely
abolished, corruption in the food process is endemic and debilitating despite
abolition of the licensure procedures. As the WTO complaint notes, inspection
and licensing procedures have resulted in de facto trade violations.
At the root of the problem today is the new Food Law, passed on Oct. 18,
2012, and signed by President Susilo Bambang Yudhoyono in November, that was
intended to institutionalize self-sufficiency in food production and "food
sovereignty" as overarching food security policies, according to the US
Department of Agriculture's Foreign Agricultural Service.
Among its provisions, Article 14 states that "Sources of food supply are
from domestic production and national food reserves. In the case of shortage of
food supply from those two sources, food can be fulfilled by importation, as
needed." Another provision, Article 24, limits the export of food, saying
exports "can be carried out by taking into account the needs of domestic food
consumption and national interest. The export of staple food can only be
carried out after the fulfillment of domestic consumption and national food
reserves."
In recent months, officials have drafted new trade and industry laws that
have concerned American and European multinationals operating in the country
because of fears they will constrict investment and cut further into market
access in a country increasingly in the grip of economic nationalists.
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