Problems in RI’s dairy industry nothing to do with tariff cut: NZ

New Zealand Trade Minister Tim Groser was in Jakarta to attend the inauguration ceremony of President Susilo Bambang Yudhoyono on Oct. 20. He talked to The Jakarta Post’s Lilian Budianto about
the inauguration and trade relations between both countries, including
the bilateral trade arrangement under the framework of the ASEAN
Australia New Zealand Free Trade Agreement (AANZFTA), signed in
February this year. Here are excerpts from the interview:

Question: What is your comment on President Yudhoyono’s inauguration?

Answer: It’s a great day for Indonesia. And I
had the opportunity to have a few remarks with the President. It’s not
just a great day for Indonesia to have a solidified democracy, but it’s
a great day for the world given that Indonesia is the fourth-largest
country in the world and the largest Muslim *majority* country in the
world … The Indonesian leaders decided in the 1940s to become a
democratic country and the path toward that has not been straight, but
slowly and surely, it’s come together. *Yudhoyono* is, sincerely for
many years, the first democratically elected President of such a large
and important country in the world.

What is the latest situation on the bilateral agreement between Indonesia and New Zealand under the AANZFTA?

We have some issues to be resolved in terms of the halal
certification and moving forward in a productive way. We’ve still got
some technical details, issues that we need to work through, but
politically the deal is done. So obviously we are waiting for the final
formal announcement … We are very optimistic we will bring it into
effect early next year. For trade, Indonesia is an increasingly
important market for New Zealand, the fact that the whole Southeast
Asia put together is now New Zealand’s third-largest trading partner.
Present bilateral trade between Indonesia and New Zealand stood at NZ$2
billion, balance of trade is slightly in favor of Indonesia.

Is halal certification an issue in New Zealand?

It has been a very difficult issue in the last few months. It’s
not because New Zealand is not familiar with halal certification. On
the contrary, NZ is the world’s largest exporter of halal products. We
export halal products to 43 different Islamic communities around the
world. Some 70 percent of the world’s *mutton* comes from New Zealand;
40 percent of the world trade in dairy products come from New Zealand;
New Zealand is the most experienced non-Islamic country in the world in
dealing with the halal issue. But there has been some misunderstanding
around it over the qualification of the halal certification agencies in
New Zealand. A couple of them were delisted by the Indonesian
authorities and we are trying to work through that to get them back on
track, and I am confident that we will be able to work through that.

Is it because of the different standards?

That’s the issue. Because there are no single halal standards.
Our problem is precisely that. We have to have meat plants that can
export halal meat to Malaysia, Indonesia, Bahrain, Iran, and all of
these have slightly different interpretations of what is considered
halal. That is the essence of the problem. It’s very strongly in
everybody’s interest because we provide a very significant portion of
Indonesia’s imports. Forty percent of all Indonesian dairy imports come
from New Zealand, and also quite a large proportion of food comes from
New Zealand, is added or mixed here to be re-exported, so any
interruption would have a significant impact on exports. We are
responsible globally for 40 percent of all trade in dairy products,
this is what New Zealand does. There is a strong interdependence on
economic interest here. I believe we can work our way through this.
Indonesia is the last major country that we are waiting for *to
finalize its bilateral arrangement under the AANZFTA*, but we are not
far off.

The Indonesian media has been reporting complaints from
local farmers that the elimination of the tariffs will lead to a flood
of dairy products from New Zealand, which will hurt their income. What
do you have to say about this?

I think that is an overly dramatic picture. The current tariffs
are around 5 percent and the fact that they are going to phased out in
the coming few years will make no difference. The problems of
Indonesian dairy products have nothing to with being protected by
import tariffs of 5 percent. It is to do with the technological issue;
dairy is a technically difficult industry to run and very technically
demanding. I can tell you this, that the future of Indonesia’s dairy
will not be affected by a 5 percent tariff.

Do you think Indonesia is being protectionist?

If you look at Indonesia’s applied tariffs, the answer is no,
but if you look at Australia and Indonesia bound tariffs, they are very
high. Binding means the legal commitment internationally that Indonesia
and any other countries have undertaken, but there is a huge gap
between the bound tariffs of Indonesia, especially in agricultural, and
the applied rates. The average bound tariffs in agriculture in
Indonesia are 50 percent the average applied tariffs area at 4 percent.
So Indonesia in practice has a very low tariff in agriculture.