TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
How Indonesia can take advantage of IA-CEPA
Indonesian government is committed to issue, automatically and without seasonality, import permits used for import authorization for live cattle, frozen beef and sheep meat.
Change Size
T
he Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA), which took effect on July 5, 2020 is expected to be a milestone in unlocking and realizing the vast potential of bilateral economic partnership and commercially meaningful outcomes between the two countries as currently their bilateral trade is considerably low, despite their close geographical proximity.
For instance, Indonesia’s Trade Ministry recorded total trade between Indonesia and Australia of around US$7.8 billion in 2019. This value is miniscule compared with China’s $73 billion total trade with Indonesia in the same year.
Under the IA-CEPA agreement both parties will enjoy certain preferential market access. For instance, Indonesian exports such as automotive products, timber, textiles, electronics and communication tools are expected to increase as Australia will eliminate the remaining import duties for such goods. In parallel, Australia’s cattle and red meat producers will obtain greater market access in Indonesia, as the Indonesian government is committed to issue, automatically and without seasonality, import permits used for import authorization for live cattle, frozen beef and sheep meat.
Article 3.4.1 of the agreement titled “Import Licensing” provides that import licensing measures imposed by both parties to the agreement are implemented in a transparent and predictable manner, and applied in accordance with the World Trade Organization’s (WTO) Agreement on Import Licensing Procedures (ILP).
It is important to note that a footnote is added to Article 3.4.1 which specifies specifically Indonesia’s commitment to guarantee the automatic issuance (and without seasonality) of import permits for live cattle and red meat products. Import licenses generally are issued either automatically or non-automatically.
As regards non-automatic licensing, the WTO’s ILP Agreement says they must not have trade-restrictive or -distortive effects on imports and their administrative work must not be more burdensome than absolutely necessary to administer the measure.
“Automatic, non-seasonal” import licensing is one of the results expected by the United States and New Zealand in a WTO dispute regarding Indonesia’s import licensing regimes on horticultural products, animals and animal products. Australia was also a third party in that dispute.
Some of Indonesia’s import licensing measures challenged by the United States and New Zealand included, among other measures, limited application windows and validity periods for import licenses, fixed license import terms imposing quotas on import, and import restrictions based on Indonesia’s harvest periods. The WTO panel and Appellate Body eventually found that all the challenged measures were WTO-inconsistent, and therefore they must be withdrawn or modified accordingly.
The implementation of such rulings appears to be problematic and challenging, which led to the US requesting that the WTO impose $350 million worth of retaliation measures against Indonesia’s failure to implement the rulings. Domestically, the Indonesian government’s attempts to revise the laws and regulations to comply with WTO rulings have met some local resistance.
For instance, in the omnibus bill on job creation, the government proposed clauses that “condition imports upon a determination of the sufficiency of domestic product to fulfil domestic demand” such as embodied in Article 36B of the Animal Husbandry Amendment Law, Article 88 of the Horticulture Law, Articles 14 and 36 of the Food Law, and Article 30 of the Farmers Law, to be amended to exclude such condition. This proposal faced a backlash from various local stakeholders claiming that such a move was in favor of imported foods over local supply and would potentially have negative impacts on the local production chain.
Reflecting on the implementation saga of the WTO’s Indonesia – Import Licensing Regimes dispute, it is interesting to watch the future implementation of Footnote 1 to Article 3.4.1 of the IA-CEPA.
If the provision in Footnote 1 is successfully implemented, Australia will indeed enjoy certain benefits with respect to import licensing regimes granted under the IA-CEPA, a similar end that the United States and New Zealand should have also benefitted by winning the dispute.
Further, these favorable treatments on Australia’s certain products that are not available to other WTO Members (e.g. New Zealand or the United States) are justified under a series of exceptions for custom unions and free trade areas meeting specific conditions provided under Article XXIV of the WTO’s General Agreement on Tariff and Trade (GATT).
This leads to the final thought, if a web of complicated and burdensome import licensing procedures regimes can be untangled for one country, why then cannot these measures be offered or extended to others?
***
The writer is law lecturer at Universitas Pelita Harapan (UPH), director of the UPH Center for International Trade and Investment, and of counsel at FratiniVergano in Jakarta, Indonesia. The views expressed are her own.
