U.S. and New Zealand to Challenge Indonesian Agricultural Restrictions at WTO

May 13, 2014 Posted by ASEAN Briefing Reading Time: 2 minutes

JAKARTA – The United States has announced it will request a new World Trade Organization (WTO) dispute settlement consultation with Indonesia over licensing requirements for the import of agricultural products.

Joined by New Zealand, the U.S. will contest what it characterizes as Indonesia’s “opaque and complex” rules on agricultural imports. After a similar WTO-mediated consultation in 2013 that resulted in Indonesia streamlining its import licensing process and removing a number of restrictions on garlic, chili powder and cabbage, U.S. Trade Representative (USTR) Michael Froman feels the changes do not go far enough.

“Indonesia revised its import licensing requirements in response to action by the United States at the WTO. Unfortunately, the revised system still appears to break WTO rules and restrict U.S. agricultural products,” Froman said, “Accordingly, we will continue to press Indonesia to bring its import licensing system into compliance with WTO rules to that U.S. farmers, ranchers and businesses are able to have access to Indonesia’s market that we negotiated in the WTO.”

Namely, Indonesia’s restrictions on fruits, vegetables, flowers, beef, poultry and other products concern the United States and New Zealand. In the past two years, Indonesian licensing restrictions have resulted in what Froman characterized as “drastic reductions” in quotas for U.S. beef and agricultural products. According to the U.S. Department of Agriculture, Indonesia imported almost no U.S. beef in 2012 and 2013.

By filing a joint request for consultation with New Zealand, the USTR hopes the dispute’s resolution will be expedited.

“Filing the new consultation request, in coordination with New Zealand, will facilitate the resolution of the dispute by addressing the current version of Indonesia’s export licensing regime. If the United States and New Zealand subsequently request the establishment of a WTO dispute settlement panel, the panel would examine the most recent version of Indonesia’s measures, as described in the new consultations request,” the USTR’s announcement of the consultation request stated.

The U.S. request for a WTO consultation with Indonesia comes ahead of the country’s presidential elections, which are currently scheduled to be held in July. This follows a similar WTO action launched by the U.S. against India in the midst of that country’s election season.

Last month, Indonesians voted in the fourth round of national legislative elections since the fall of Suharto’s New Order in 1998. With all 692 seats in Indonesia’s National Assembly at stake, the Indonesian Democratic Party-Perjuangan (PDI-P) took control of the country’s legislature from President Yudhoyono’s Democrat Party (Partai Demokrat).

As the third largest democracy in the world, and single largest economy in Asia Pacific, Indonesia’s legislature is set to play a critical role in the formation of the ASEAN Economic Community (AEC) next year.

The official announcement of the WTO consultation request from the Office of the U.S. Trade Representative can be found here, and a copy of the revised U.S. consultation request here.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email indonesia@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

China Set To Lose Foxconn to Indonesia

Indonesia Prepares For Demographic Changes