Australia’s farmers are the big winners under the new the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA).
Tariffs will be slashed on nearly all Australian agricultural exports to Indonesia – including livestock, beef and sheep meat, grains, sugar, dairy, citrus and horticulture.
The landmark trade agreement was announced in Jakarta on Friday following a meeting between Prime Minister Scott Morrison and Indonesian president Joko Widodo.
Mr Morrison, who was on his first official foreign visit as Prime Minister, said both leaders were confident the deal would be signed by November this year.
Indonesia is Australia’s fourth most important agriculture market, making up almost half of its total exports to Indonesia. It is worth $3.5 billion to the Australian economy.
Australia’s top agriculture exports to Indonesia in 2016-17 included wheat ($1.3 billion), sugar ($541 million) and live feeder/slaughter cattle ($620 million).
“This agreement improves access for industries which trade most to Indonesia, including our livestock, beef and sheepmeat, grains, sugar, dairy, citrus and horticulture,” said Agriculture Minister David Littleproud.
Welcome news for wheat farmers
Mr Littleproud said the agreement would deliver duty free access for half a million tonnes of feed grains per year.
“Our wheat industry exported $1.3 billion worth of produce to Indonesia in 2016-17 and this will grow that further,” he said.
“The agreement will increase duty free access for live male cattle by 4 per cent a year to 700,000 head annually.”
Tariffs on most lines of beef and sheepmeat will be reduced from 5 to 0 per cent on signing, with remaining tariffs to be removed after five years.
“This will help us build on the $261 million that these exports were worth to Australia in 2016-17,” Mr Littleproud said.
Tariffs slashed on sugar cane
“Our grain farmers will get guaranteed duty free access for 500,000 tonnes of wheat, barely and sorghum grains per year increasing at 5% per year to 775,664 tonnes.
“Tariffs on our sugar cane will drop from as high as 12 per cent to 5 per cent.
“Oranges and limes will get increased duty-free access while dairy, mandarins, potatoes and carrots will get reduced tariffs.”
Mr Littleproud thanked former trade Minister Steve Ciobo and his department trade division for their hard work in helping to seal the agreement.
New opportunities for vegetable growers
AUSVEG, the body representing Australia’s vegetable and potato growers, welcomed the new agreement.
AUSVEG CEO James Whiteside said the IA-CEPA would create the framework for a new era of closer economic engagement between Australia and Indonesia.
Australian vegetable exports to Indonesia were valued at $3.7 million this financial year, with potatoes accounting for nearly half of the total.
“Given Indonesia’s developing population and its proximity to Australia, this market has strong potential for local growers to boost their fresh vegetable exports,” Mr Whiteside said.
The agreement would help the vegetable industry in its quest to increase its export value to $315 million per year by 2020 – an increase of 40 percent from 2016.
“Trade agreements with neighbouring countries such as the IA-CEPA helps provide our industry with confidence that it can continue to prosper through developing export markets, which helps secure the profitability and competitiveness of the Australian vegetable industry,” he said.
Under the new agreement, Indonesia will receive 100 percent tariff reductions on imports into Australia, including petroleum, wood, furniture, textiles and footware.
“That means more exports for Indonesia and cheaper inputs for Australian business,” Mr Morrison said.
“Because we know from first-hand experience that free trade works. It has underpinned Australia’s economic success for more than half a century and fuelled Asia’s rapid growth.”
Under the IA-CEPA more than 99 percent of Australian goods exports to Indonesia will enter duty free or under significantly improved and preferential arrangements.
Key agricultural outcomes include:
- Duty free access for 575,000 head of live male cattle per year, growing at 4% per year to 700,000 at year five of the agreement.
- Remaining tariffs on all Australian exports of frozen beef and sheepmeat into Indonesia reduced to 2.5% immediately and eliminated after 5 years.
- Guaranteed duty free access for 500,000 tonnes of feed grains per year (wheat, barley, sorghum), increasing at 5% per year to 775,664 tonnes.
- Reducing the tariff on Australian sugar cane from 8-12% to 5%.
- Immediate elimination of 5% tariff for milk and cream, concentrated or containing added sugar or other sweetening matter.
- Immediate elimination of 5% tariff for grated or powdered cheese, of all kinds.
- Immediate tariff cut mandarins from 25% to 10% for 7,500 tonnes per year; down to 0% after 20 years for an unlimited volume.
- Duty free access for 10,000 tonnes of oranges per year, increasing 5% each year.
- Duty free access for 5,000 tonnes of lemons and limes per year, increasing 2.5% each year.
- Immediate tariff cuts for potatoes from 25% to 10% for 10,000 tonnes per year; after five years tariff further reduced to 5% for 12,500 tonnes per year, increasing by 2.5% per year.
- Immediate tariff cuts for carrots from 25% to 10% (from 25%) for 5,000 tonnes per year; down to 0% after 15 years for an unlimited volume.
- Progressive elimination of 5% tariff on Australian honey after 15 years.