Cattle quotas on table for fresh Indonesian trade talks

By Colin Bettles

Published on 1 August 2016, on

THE Australian and Indonesian governments are continuing negotiations this week on potentially adopting an annual quota system for live cattle exports, after recent ministerial changes in both countries.

Agriculture and Water Resources Minister Barnaby Joyce and former Trade Minister Andrew Robb held high-level discussions last year with Indonesian officials about changing from a quarterly to an annual import permit system, with industry backing, to increase market stability.

Mr Joyce’s core argument was that an annual quota arrangement would aid Indonesia’s desire to reduce market fluctuations caused by the system being “gamed” which created high beef prices and caused ongoing uncertainty for Australian producers.

Those talks resulted in a tri-annual permit system being implemented at the start of this year that was viewed as a positive step forward to try and smooth out unpredictable supply and demand variations.

But with the Australian industry seeking further reforms to the system, Mr Robb retired ahead of the federal election and was replaced by Liberal MP Steven Ciobo.

Last week, Indonesia also appointed a new Trade Minister Enggartiasto Lukita with Thomas Lembong – who was pivotal to the cattle permit talks last year – named the new Chairman of the Indonesian Investment Coordinating Board (BKPM).

Mr Ciobo was praised by Australian farming groups for prioritising post-election talks with Indonesia in visiting Jakarta this week, to push forward on the Indonesia-Australia Comprehensive Economic Partnership Agreement.

He will meet with the new Indonesian trade minister, Mr Lembong and Minister of Industry Saleh Husin with the cattle quota arrangement also on the table as well as plans to cut tariffs on other leading farm exports like grains, sugar, dairy and boxed and frozen beef.

Mr Ciobo said the aim of his trip was to build further momentum towards concluding a free trade agreement with Indonesia which could be struck in 12-18 months.

With the senior minister in transit, Assistant Minister for Trade, Tourism and Investment and Queensland Nationals MP Keith Pitt spoke to Fairfax Agricultural Media saying Indonesia was a large and fast growing economy with significant market opportunities for Australian agriculture.

Mr Pitt said it was one of the nation’s most important markets for live cattle and while recent changes had been to trade arrangements, the annual permit system would be on Minister Ciobo’s agenda during his first engagement with Indonesia since the federal election was held in Australia and a new trade minister was appointed.

“Indonesia is an important market for Australia and it’s important we put a deal together, if we can,” he said.

“I’m sure it will be a cordial meeting but as in all negotiations you never telegraph your punches.

“It’s important that we get over there and have an initial meeting with the new minister for trade.

“The issue around live cattle is something we’re well aware of and the indicative quota for the year 2016 is some 600,000 head which makes it a very large market.

“Obviously those permits are only issued every four months – and there are positive steps to improve market certainty for Australian exporter -s but we’ll need to continue with negotiations on that.”

Mr Pitt said moving towards annual quotas for live cattle exports was “certainly something Australia would recommend” in the talks, which was common knowledge.

“These are important negotiations,” he said.

“This is the first meeting with the new Indonesian trade minister and I’m sure that Minister Ciobo will be advocating in Australia’s interests to the best of his ability.

“As with any political system there is always change and we’ve just had an election ourselves (but) I’m sure that the negotiations will be conducted in good faith.”

Mr Pitt said for the rural sector, sugar, wheat, live exports and beef were all important exports to the Indonesian market.

National Farmers’ Federation President Brent Finlay said his group welcomed Mr Ciobo heading straight up to Indonesia within weeks of the Turnbull government being reformed.

Mr Finlay said the NFF regarded a free trade agreement with Indonesia as a “really high priority” given it was Australia’s nearest and neighbour and a large export market.

“We have a special relationship with Indonesia,” he said.

“Indonesia is really important destination for our beef whether it’s live cattle or boxed beef and it’s also an important market for the grains industry.

“It’s also one of our largest sugar markets and I know the dairy industry is looking towards developing the Indonesian market also, to export their products.”

Mr Finlay said the two governments should aim to sign a trade deal by the end of 2017 but it was unknown whether the change of Indonesian trade minister would impact cattle permit numbers or implementing a yearly quota system.

“That’s unknown and something that’s obviously yup for discussion,” he said.

“Trade is two way – what suits Indonesia and what suits Australia – and hopefully we can have a coming together of what can suit both countries.

“Trade agreements basically set down the rules of engagement – also around tariffs – between trading partners and they also open up the conversation around non-tariff barriers and getting those protocols in place.

“Trade agreements are really important for building the relationship and the market access but it’s always a two way relationship and that’s why it’s called trade.”

Mr Ciobo said he was focussed on the successful negotiation of a comprehensive economic partnership, in the next 12 to 18 months.

“I’m very optimistic that Indonesia recognises the multitude of benefits that flow from free and liberalised trade,” he said.

“At the end of the day, both Indonesia and Australia have, in many respects, complementary economies.

“And through closer economic integration, it’ll be a win for Australia and a win for Indonesia and I’m very confident that that will appeal to Minister Lukita as well.”

Mr Ciobo said Indonesia had a population of more than 255 million – including a middle class of more than 45 million that’s forecast to grow to 135 million by 2020.

According to the GrainGrowers 2016 state of the industry report, Indonesia is Australia’s largest individual wheat export market accounting for 20 per cent of exports from 2010-2015, followed by Vietnam with 9pc as the next biggest South-East Asian destination.

On average per year from 2010-2015, Australia has exported about 4 million tonnes of wheat to Indonesia valued at about $1.3 billion per annum.

The report said Indonesian wheat demand has been growing at about 10pc per annum and was anticipated to import 10mt by 2020, overtaking Egypt as the world’s largest wheat importer.

“This estimate is based on both population growth and increasing westernisation of South East Asian diets,” it said.

“The growing milling sector in Indonesia also indicates potential for growth into this market.

“This growth is not only to service domestic Indonesian flour and flour products consumption, but also drive a growing export noodle and baked good sectors.”

According to figures from LiveCorp, in 2014-15 Indonesia was Australia’s largest live cattle export market taking about 746,000 head or 54 pc of the 1.38 million exported for that financial year, valued at $601 million.

According to the ABARES 2016 commodities report, Australian agricultural exports to Indonesia were valued at $3.385b in total for 2014-15, up from $3.046b the year before.

That total comprised; $1.423b for grains, oilseeds and pulses; $519m for sugar; $214m for dairy; $136m for cotton; $233m for beef and veal; $75m for horticulture; and $1.201b in overall livestock exports.

In the same period, Australian agricultural exports to China were valued at $8.604b, including $2.531b in grains and $4.669 in total livestock products.

The next biggest agricultural export markets in 2014015 were the US with $5.101b – including $4.17b in livestock products and $463m in wine – and Japan with $3.95b.

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