Govt to cut tariff rates on agricultural products
Govt to cut tariff rates on agricultural products
JAKARTA (JP): Indonesia, in complying with its free trade commitments, plans to simultaneously abolish non-tariff protections and cut tariff rates on over 1,000 agricultural products within eight years, a minister said.
"Indonesia, in order to comply with international trade agreements, will annul non-tariff protections and slash tariff rates on 1,341 agricultural products," Minister of Agriculture Sjarifudin Baharsjah said in a hearing with Commission IV of the House of Representatives yesterday.
The minister explained that in total, tariff rates on the agricultural commodities will be reduced by approximately 33 percent to reach about 10 percent on each agricultural product.
Indonesia signed last year the Marrakesh treaty which marked the completion of the Uruguay Round of the General Agreement of Tariff and Trade (GATT) talks.
Indonesia, as a member of the Association of Southeast Asian Nations (ASEAN), also signed in 1992 the ASEAN Free Trade Agreement (AFTA), which requires trade liberalization among its member countries by 2003.
According to the National Development Planning Board, the country's agricultural sector grew by 2.4 percent per annum in the last five years and is expected to grow by 3.4 percent a year in the coming five years, as compared to the 6.6 percent growth expected in the gross domestic product.
Concern
International observers, including the World Bank and the Institute of Southeast Asian Studies, have expressed concern about Indonesia's free trade commitments because the country's effective tariff rates on certain products are set at 600 percent higher than the official rates, including those on agricultural products such as sugar.
Sjarifudin said that in order to cut effective tariff rates to the level stipulated under AFTA's Common Effective Preferential Tariff, his office will implement the tariff-slashing move under two categories.
Under the first grouping, all tariffs higher than 20 percent will be lowered to 20 percent by 1998 and to a range between zero percent and five percent by 2003.
In addition, still in the first grouping, all tariffs equal to or lower than 20 percent will be reduced to no more than five percent by 2000, the minister said.
Under the second grouping, all tariffs higher than 20 percent will be reduced to a range between zero and five percent by 2000, while tariffs lower than 20 percent will be lowered to between zero and five percent by 1998.
The minister did not specify the commodities included in each of the categories.
Sjarifudin also said that, beginning this year, Indonesia will gradually liberalize trade of unprocessed agricultural commodities.
"By next year, we aim to liberalize at least 20 percent of unprocessed commodities currently still excluded from AFTA," he said, without elaborating further details.
This move will be conducted every year for a five-year period, he added.
Non-tariff
Sjarifudin also said that all non-tariff protections will be abolished except in the case of soybean cakes and milk.
"We can maintain protections for the milk industry for the next 10 years and soybean cake for three more years," he said.
Indonesia protects the domestic milk industry by requiring compulsory domestic procurement of fresh milk by milk processing companies.
Government warrants the National Logistic Agency the exclusive right to import and market soybeans as part of the food-security strategy. In 1993, the agency-set price of soybeans was about 55 percent higher than the import parity price.
On the role of the agency, Sjarifudin said that it will be defined as a "state trading enterprise" so that it can operate in controlling the trade of several commodities, including rice, garlic and cloves, without violating principles of GATT.
However, a senior official of the Ministry of Agriculture, told The Jakarta Post that some foreign parties might still object to the way the agency operates, even after it is called a "state trading enterprise."
"I'm concerned that some foreigners will still be able to recognize that the agency will continue practicing non-tariff protections," he said, requesting anonymity. (hdj)