Australian sugar cane farmers have say moves to reduce the tariff on exports to Indonesia by 3 per cent will “level the playing field”.
Indonesia has agreed to reduce tariffs on Australian raw sugar imports to 5pc in exchange for eliminating import duties on Indonesian herbicides and pesticides as part of moves towards securing a new free trade deal.
Indonesian Trade Minister Enggartiasto Lukita met with his Australian counterpart Steven Ciobo on Wednesday in Jakarta as part of the ongoing negotiations.
Mr Ciobo said the tariff cuts reflected “our shared ambition” for completing the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA).
Indonesian pesticides and herbicides are expected to be more competitive in the Australian market and offer greater choice to consumers, while Indonesia’s processed food and beverage industries are set to benefit from lower raw sugar prices in meeting the demands of national and regional markets, the ministers said in a statement.
Mr Lukita said Indonesian President Joko Widodo and Australian Prime Minister Malcolm Turnbull – who revealed the farm trade exchange during talks in February – were “determined” to conclude IA-CEPA this year and “we are doing all we can to make that happen”.
Australian Sugar Industry Alliance Chair and Chair of its Trade Committee Paul Schembri said his group was looking forward to Indonesia being restored as a major export destination for Australian raw sugar.
“A 3pc tariff cut is a good outcome for Australian farmers and millers and for Indonesian refiners who want access to our high-quality product at a competitive price,” he said.
“Australia was put at a disadvantage in 2015 when Indonesia granted Thailand a 5pc tariff on sugar while Australia’s stayed at an effective 8pc.
“We went from supplying around a third of Indonesia’s sugar imports to almost nothing.
“The final steps are now being taken to level the playing field and reduce the tariff on Australian sugar to 5pc.”
In thanking the Prime Minister, Trade Minister and their officials and representatives for their hard work on our industry’s behalf, Mr Schembri said the changes provided the opportunity to increase sugar exports to Indonesia to more than 1.25 million tonnes from their present level of 350,000 tonnes.
He said that was worth $500 million.
“Removing a barrier to trade with our nearest neighbour is a great outcome for the Australian sugar industry and our Indonesian customers,” he said.
Indonesia is also a prime export market for Australian beef cattle and major grains like wheat.
Australian Chamber of Commerce and Industry CEO James Pearson, CEO of the Australian Chamber of Commerce and Industry said Australian farmers were set to benefit from the changes and Indonesian consumers as the price reductions were passed on.
“The tariffs on Australian raw sugar going into Indonesia are set to reduce from 8pc to 5pc bringing tariffs into line with those paid on Thai sugar, making Australian sugar more competitive,” he said.
“This announcement is an important step towards the broader goal of an Indonesia-Australia Comprehensive Economic Partnership Agreement.
“The Australian Chamber wants to see a truly comprehensive trade agreement with our nearest neighbour, one that will benefit Australian and Indonesian businesses across all sectors and consumers in both countries.
“We’re looking forward to seeing this agreement completed by the end of the year.”
According to Meat and Livestock Australia figures, shipments of feeder and slaughter cattle to Indonesia in August totalled 76,500 head – the largest monthly shipment of cattle to the country in 21-months.
That number was supported by the seasonal increase as part of the religious festival Eid al-Adha and the requirement to re-stock feedlots post Ramadhan.
However, the year-to-August feeder and slaughter cattle exports to Indonesia declined 24pc to 330,000 head with Indian buffalo meat in wet markets across the market continuing to impact the sale of Australian cattle.
Live cattle exports to Indonesia dropped to 278,767 head in 2012 – the year after the former Labor government’s snap trade ban – but has steadily increased in the years since at 452,239 in 2013, 728,404 in 2014, 610,047 in 2015 and 615,604 in 2016.
Agriculture and Water Resources Minister Barnaby Joyce said the tariff reduction would increase the competiveness of Australian sugar exports into the important Indonesian market, while strengthening opportunities for Australia’s $2.2 billion sugar export industry.
“This is great news for our sugar industry, but it also demonstrates the strong trade relationship we share with Indonesia,” he said.
“It will ensure better returns for our exporters through improved market access, while also ensuring Indonesia can continue to have access to the world-class produce we are known for.”
Australia’s total agricultural, food, fishery and forestry exports to Indonesia were worth $3.2b in 2016 and imports from Indonesia were worth $843m.