Brazil ramps up Indo access push via WTO challenge

James Nason, 25/08/2014

The Brazilian Government is again ramping up efforts to gain access to the Indonesian beef market following the South East Asian country’s recent change of Government.

Brazil’s Council of Ministers of the Foreign Trade (CAMEX) last week announced it will initiate a dispute process through the World Trade Organisation (WTO) to challenge restrictions imposed by Indonesia on imports of beef from Brazil.

The development comes amid news that the Indonesian Government has also just revoked a four year ban on beef and cattle imports from Japan.

While Japanese export volumes to Indonesia will be very small, the move underlines a desire within Indonesia to diversify its import supply options. An Indonesian agriculture ministry official told Indonesian media last Friday that the decision to allow beef imports from Japan was intended to reduce dependence on Australian shipments (more on Japan’s new access below).

Brazil last week announced it will use a WTO dispute process to challenge the validty of a 2010 ruling by Indonesia’s Supreme Court, which it says effectively and unfairly banned Brazil’s access to the Indonesian beef and cattle market.

The 2010 Supreme Court ruling annulled a new law that had been passed by the Indonesian Parliament the previous year.

The 2009 Animal Husbandry law had allowed the importation of beef and cattle into Indonesia from “disease-free zones” within countries, even if other areas or zones within the same country were affected by diseases of concern to Indonesia.

However Indonesian farmers and veterinarians argued that the policy posed potential health risks to consumers and to Indonesia’s large and important cattle production sector by increasing the risk of importing a destructive disease such as Foot and Mouth (FMD) to Indonesia, which is currently FMD free. The law was subsequently overturned in a challenge to the Supreme Court the following year.

In the meantime Brazil has been actively courting Indonesian politicans to reinstate the zone-based import law. Its campaign gained momentum last year when some senior members of the Indonesian Parliament, including then agriculture minister Suswono, publicly advocated for Indonesia to open its borders to Brazilian imports.

Suswono maintained the move would expand Indonesian’s beef import options, improve its food security and reduce the ‘monopoly’ Australia maintains over the beef import market.

Debate on the issue had become relatively quiet earlier this year as the Indonesia’s general and presidential elections played out, but is now likely to return to political attention following Brazil’s move to challenge Indonesia’s restrictions through the WTO.

In a statement issued last week CAMEX said it will argue through the WTO that the 2010 Indonesian Supreme Court decision violated Indonesia’s responsibilities under the General Agreement on Tariffs and Trade (GATT), the Customs Valuation Agreement and the Agreement on Technical Barriers (TBT).

“Although Brazil is the second largest producer and the largest exporter of beef, the Indonesian market remains closed to the national product and Australia has consolidated as the largest exporter of beef to Indonesia,” the CAMEX statement announcing the WTO dispute process said.

Indonesian market sources say it remains hard to predict which way the support of the newly elected Indonesian Government will fall on the issue of importing beef from FMD-free zones within FMD affected countries such as Brazil.

Some say there is strong support for the view that Indonesia needs to diversify its beef supply options to improve its food security. The shock of being told without warning in June 2011 that Australia would no longer supply cattle, just a month out from Indonesia’s peak beef demand period of Ramdan, remains a fresh memory in Indonesian Government ranks.

At the same time there many Indonesians also believe its own agricultural sector, a major source of employment in Indonesia, needs to be protected and championed, and see greater imports as a source of negative competitive pressure on local farmers while also posing a risk to Indonesia’s valuable FMD-free status.


Indonesia revokes beef import ban on Japan to diversify supply

Indonesia’s agriculture ministry on Friday stated that its decision the same day to revoke a four year ban on beef and cattle imports from Japan was motivated by a desire to reduce dependence on Australian shipments and diversify its supply sources.

Indonesia banned Japanese beef imports in early 2010 following concerns over foot and mouth disease.

Even before the ban, Japan hardly exported any beef to Indonesia, but the Southeast Asian nation is potentially a new market for its wagyu beef, famed for juiciness and taste, and may help meet the Japanese government’s goal of increasing agriculture-related exports.

Beef and cattle consumption in Indonesia is forecast to rise to 560,000 tonnes in 2014 from 549,000 tonnes in 2013, with around 20 per cent likely to be met by imports.

Syukur Iwantoro, director general of livestock and animal health at Indonesia’s agriculture ministry said that following inspections and an audit, all importers are now free to buy from Japanese suppliers.

“The government of Indonesia has opened its market to Japanese beef,” Iwantoro told Reuters. “All Indonesian importers are allowed to import beef and cattle from Japan.

“This will reduce Indonesia’s dependency on Australia because Japanese beef and wagyu cattle is better in quality and cheaper in price,” he said, adding that the latest deal was unrelated to the ongoing poultry talks with Japan.

Japanese officials said that the beef talks with Indonesia were ongoing, with only technical issues remaining to be sorted. Japan’s government wants to boost exports of agricultural, marine and forestry products to about $10 billion by 2020, from about $4.5 billion in 2012.

Indonesia has been desperate to boost its domestic cattle industries in recent years, and Iwantoro said Japanese cattle breeders may now invest in the country.

Earlier this month, Australia and Indonesia agreed an investment partnership that will focus on improving cattle breeding and logistics for the livestock industry in the archipelago.

Aside from the trade of livestock and poultry, Indonesia’s controversial minerals export ban still appears to be an unresolved and contentious issue for both countries.

In February, senior government officials in Japan said the world’s third largest economy was considering taking Indonesia to the World Trade Organisation.


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