Home » Problems In RI’s Dairy Industry Nothing To Do With Tariff Cut: NZ

Problems In RI’s Dairy Industry Nothing To Do With Tariff Cut: NZ

News From : DagangHalal.com (22 Oct 2009)

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.

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