`EU farm reform has little impact on RI farm exports'

M. Taufiqurrahman The Jakarta Post Jakarta

The latest reform measures of the European Union (EU) for the agriculture sector, which include subsidy cuts for farmers, will have little impact in boosting Indonesia's farm exports to the European market, an analyst has said.

Agriculture expert Bustanul Arifin, of the Institute for Development of Economics and Finance (INDEF), said that instead of subsidies, what constituted the greatest obstacle for Indonesia and the developing countries in general was barriers to entry.

"There is hardly any reason for Indonesia to cheer the decision, because what stands as the biggest challenge is both tariff and nontariff barriers for products from Indonesia," he told The Jakarta Post over the weekend.

He described the policy merely as part of efforts by the EU toward meeting World Trade Organization (WTO) rulings, not in order to open its market for agriculture products from developing countries. He added that the reform drive was triggered by internal economic problems suffered by European countries, which could no longer bear the huge cost of the subsidy program.

Last week, after going through a series of heated negotiations, the EU agreed to cut a link between subsidies given to farmers and their ability to produce. The subsidy program was known as the Common Agricultural Policy (CAP).

The very expensive, 45-year CAP has been blamed for abundant surpluses, which were later dumped on the world market.

The policy costs around 43 billion euros (US$ 50 billion) per year -- about half the total budget of the EU. CAP is largely unpopular around the world as it subsidizes European farmers to an extent that they can undercut farmers from poor countries, who also face trade barriers that exclude them from potentially lucrative European markets.

The reform's chief architect, European Farm Commissioner Franz Fischler, said that the move marked the beginning of a new era when EU said goodbye to a policy that used to distort trade.

EU ambassador/head of delegation for Indonesia, Brunei Darussalam and East Timor Sabato Della Monica acknowledged that the reform would bring no significant impact to Indonesia because EU's largest trading partner from the camp of the developing countries happened to be countries from Latin America.

Earlier, an economist with the EU Embassy in Indonesia said that the new agriculture reform would produce little incentive for farmers in Europe to produce more crops.

"This means that supply in the world market will drop, and the price will therefore rise," he told the Post.

Bustanul said the reform represented part of EU's strategy to bring its major trading partner to the table at the next WTO round of talks in Cancun, Mexico, this September.