Timely Indonesia trade boost after China blow

The Indonesia-Australia trade agreement — which comes into force next month — could not have come at a better time for WA after China shut the door on Australian barley and beef. But there are challenges with maximising opportunities amid the pandemic, according to Perth US Asia Centre senior analyst Kyle Springer, and exporters must still look beyond Indonesia, which could only absorb about 10 per cent of the lost China trade. The new Indonesia-Australia Comprehensive Economic Partnership Agreement takes effect from July 5, after 11 years of negotiations between the two countries. Mr Springer said recent events — in particular China putting 80 per cent tariffs on Australian barley — had put unprecedented pressure on WA exporters. The trade war between Australia and China — fuelled by Prime Minister Scott Morrison calling for an inquiry into the origins of COVID-19 — also led to four Eastern States abattoirs being banned from exporting to the economic powerhouse. Mr Springer said this made the Indonesian trade deal more important than ever. Both barley and beef have expanded access to the Indonesian market under the agreement. Under the feed grain tariff rate quota, 500,000 tonnes of barley will be allowed into Indonesia duty free. Tariff reductions that are not tethered to a quota include a zero per cent tariff on chilled beef. Frozen beef with bone-in has a tariff of 2.5 per cent. “This is good news for the industry as Indonesia’s beef consumption is expected to grow 1300 per cent by 2050,” Mr Springer said. The live cattle TRQ allows imports of 575,000 cattle at a zero per cent tariff in the first year. The quota increases 4 per cent every year for the next six years. Mr Springer said WA was well positioned to capture opportunities, because of its close proximity to Indonesia. But a major challenge was building new customer relationships during the pandemic, given the usual tools of international business cannot be used. Under normal conditions, flights between Perth and Jakarta take just three to four hours, there is only one hour’s time difference between the two, and vessel voyages are shorter than those from the Eastern States. And importantly, the IA-CEPA enables Indonesia to issue import permits automatically for TRQ commodities. “While this might seem inconsequential, Indonesia’s labyrinthine import licensing process is a major non-tariff barrier to trade,” Mr Springer said. “A simplified process for automatic permits makes it vastly easier for WA exporters to get these products behind the border. “You can’t have international travel for face-to-face meetings, or large trade shows. “Value chains are collapsing. Shipping networks are disrupted by quarantines and the difficulty finding crews for vessels.” Although the agreement with Indonesia is exciting, it doesn’t end there and there are many other countries Australia should be looking to partner with for trade, Mr Springer said. “Indonesia could probably only absorb about 10 per cent of the trade that was being done with China, if maxing out the quotas.,” he said. “We are not just expecting Indonesia to absorb it. We need to keep looking at other countries such as Vietnam, which already takes a lot of WA barley,” he said. “There are a lot of other promising markets and the idea is if you can combine countries like Indonesia, Vietnam, the Philippines, India, these could collectively help absorb what is lost with China.”