• Transcript, E&OE
Topics: IA-CEPA
27 November 2019

Belinda Varischetti: First though, Western Australia’s agricultural industry will be one of the big winners of a new trade deal between Australia and Indonesia. It’s called the Indonesia-Australia Comprehensive Economic Partnership Agreement, and the legislation making it official passed through Parliament yesterday.

Simon Birmingham is the Federal Trade Minister. And Minister, there are a few specific agricultural sectors set to benefit from this agreement, so maybe we can break it down into those categories to kick off. Firstly, with grain, there is this annual duty-free access for 500,000 tonnes of feed grain, and that increasing 5 per cent each year. The grain industry here is saying that’s a start, but nowhere near enough to have any tangible benefits. The feeds sector is a real growth sector, and this figure needs to grow, and the annual increase needs to be much higher too. Do you acknowledge that this is really just a starting point?

Simon Birmingham: Well, Belinda, thank you, and thanks for the time. This is a big opportunity for West Australian farmers and businesses. And 500,000 tonnes of wheat exports able to be landed with no tariff applied into Indonesia quoted it then, grows over a period of time. That’s a very important big step in terms of the access that it provides. It gives choice in terms of markets in being able to diversify some product away from other markets, to be able to strike new contracts. And of course, Indonesia is a close and proximate nation to Australia. So it comes with lower freight and shipping costs and times in terms of access.

So, of course, we’ll always work and strive for more. But this is 500,000 tonnes of grain access tariff free that didn’t exist before this trade agreement, that does exist now.

Belinda Varischetti: On the livestock front, cattle is going to be duty-free for 575,000 head, and increasing by 4 per cent to 700,000. Industry sources in Indonesia say while that’s helpful and better than nothing, on the ground the live cattle price in Australia is the much bigger determination of the Indonesian demand. So, how far do you think this duty-free factor is really going to contribute to the demand?

Simon Birmingham: Well, that eliminates a price and a cost, as part of the equation. So what you often have when tariffs are eliminated, is that you’ll have one of two factors that will occur in any particular good or commodity. And one factor is that goods will land at a lower price, and volumes and sales will increase. Or another factor, sometimes, is that goods will still land at the same price, but the margin for the seller is better.

And so again, in this case, the elimination of tariff for some 575,000 head of cattle is a very significant gain that may see growth in terms of live cattle exports into Indonesia, and particularly there’s a hunger for breeding stock in relation to parts of the Indonesian industry, and their desire to build some of their own food security, but knowing that Australia’s industry will be crucial to doing that. So I expect that we’ll see new opportunities and markets emerge out of the cattle quota that’s been established, but it may also be that in terms of market prices, in some cases, people are able to enjoy a slightly higher margin on their prices too.

Belinda Varischetti: What opportunities do you see then for the immediate halving of the tariff on frozen beef and sheep meat, from 5 per cent to 2.5 per cent, with elimination over five years?

Simon Birmingham: Well, that’s right. So, again there in terms of frozen meats, big opportunity for Australia’s meat processors to be able to expand their exports into Indonesia. Indonesia is a huge market in terms of population. It’s big, the growth in middle class is significant in Indonesia. And what we’ve seen across other Southeast Asian markets, in markets like China, is that as that transformation occurs in terms of the growth of a much bigger middle class in a highly populous country, we’ve seen phenomenal growth in their demand for protein sources and particularly for safe reliable high quality protein source of meat coming from Australia. And I would hope that we can see similar trajectory in terms of demand established in Indonesia by now being more competitive with the halving of the tariff originally, and soon to be elimination.

Belinda Varischetti: Twenty-six past twelve. In a moment Minister, southwest potato exporter, Patrick Fox is going to comment on the trade deal and what it means for him. He’s pretty excited about it so on the horticultural front, what exactly is in this trade deal between Australia and Indonesia when it comes to horticulture with the carrots, potatoes and citrus in particular?

Simon Birmingham: Yeah. So we see strong grains there in terms of opportunities for citrus for example, tariff free access for 10,000 tonnes of oranges into Indonesia, growing some 5 per cent per annum. A 15 per cent tariff cut for 7500 tonnes of mandarins and moving them to zero tariffs over time. We see zero tariff on 5000 tonnes of lemons and limes into Indonesia in the first year and that tonnage growing over time. In terms of potatoes I’m just trying to find potatoes on my list here Belinda, truth be known. But certainly in the other horticultural products vegetables of potatoes and carrots, there is again a significant increased access that’s available across those individual product lines.

Belinda Varischetti: We might get the exporter to explain what he sees is in the deal for him shortly for you. What’s in this for Indonesia?

Simon Birmingham: So for Indonesia, one of the things that – sorry two of the things – that they are most eager for are better services provision in Indonesia. So they’re opening up opportunities for Australian education providers in the vocational education sector as well as in the in other services sectors to be able to operate in Indonesia and that can help to improve training opportunities for Indonesians and give them a more highly skilled workforce. They’re also very eager to see enhanced investment in Indonesia. There is a vision that President Widodo has to create 10 new Bali’s. Now plenty of West Australians take their holidays on the very short flight from W.A. up to Bali. Whether 10 is ever achievable, who knows, but again Australia’s tourism industry investors, skills and service suppliers are well-placed to help Indonesia realise their vision. And they’re some of the examples I guess, of win-wins that flow through on this and even in goods trade space, yes we will send increased grain into Indonesia. Some of that grain is expected to end up in the famous Indo noodles that are made in Indonesia, which they again export out to other parts of the region. So what we look for from these trade agreements are win-win outcomes too.

Belinda Varischetti: Now this agreement, this Indonesia Australia Comprehensive Economic Partnership Agreement, it sort of follows the free trade agreement Australia signed with Indonesia earlier this year. Now Indonesia did consider pulling out of that FTA after the Prime Minister’s comments about moving the Australian Embassy in Israel to Jerusalem, Indonesia being a strong supporter of the Palestine territories, so how would you describe relations between Indonesia and Australia today?

Simon Birmingham: Relations are quite warm and strong now. And Prime Minister Morrison recently attended the swearing in of President Widodo for his second term. Prime Minister Morrison was one of only a handful of leaders of other governments who travelled for that event and it was a sign both of the strength of the overall relationship as well as the personal relationship that has been established between Joko Widodo and Scott Morrison. So it’s a relationship that is now growing, I think, quite strongly and we hope that this trade agreement and the increased access for businesses to exchange and grow through it will also drive better understanding of both Indonesia and Australia in each direction. Stronger people to people links and ties, and all of that helps to cement of course a better relationship with a country that is strategically so incredibly important to Australia, to our maritime security and to our partnerships within the broader Indo-Pacific region.

Belinda Varischetti: Minister, thanks for being part of the WA Country Hour today, appreciate it.

Simon Birmingham: My pleasure. Thanks Belinda.

Belinda Varischetti: That is the Minister for Trade, Simon Birmingham going through the details of that new agreement with Indonesia.