A World Trade Organization settlement panel on Dec. 22 ruled that Indonesia’s restrictions on horticultural products, animals and animal products are inconsistent with WTO rules.
The dispute, which was filed by the United States and New Zealand, sought to address trade barriers that restrict the importation of fruits and vegetables; such as apples, grapes and potatoes; animal products; such as beef and poultry; and other agricultural products.
“Today’s announcement is a win for Washington’s apple industry and agriculture community,” said Rep. Dave Reichert, R-Washington in a news release. “The Indonesian government’s trade restrictions have limited access for our exporters to this important market and harmed growers in my state. We must always fight against these types of actions that hurt consumers and limit opportunity for our communities. I thank (U.S. Trade Representative Michael) Froman and his team for their commitment to eliminating barriers and supporting U.S. agriculture.”
Reichert’s district includes agricultural areas around Wenatchee and Ellensburg, Washington.
The settlement panel decided each of the 18 complaints in favor of the U.S. and New Zealand.
Background on the dispute from the U.S. Trade Representative’s news release follows:
Since 2012, Indonesia has maintained unjustified and trade-restrictive licensing regimes for the importation of horticultural products and animals and animal products. Indonesia has amended its regimes several times, adding additional trade-restrictive requirements. The United States launched a dispute with Indonesia in January 2013 and, working together with New Zealand, filed additional complaints in August 2013 and in May 2014 to address the modifications to Indonesia’s import licensing restrictions. The WTO Dispute Settlement Body established the panel for this dispute in May 2015.
The Panel found that all of Indonesia’s import restricting measures for horticultural products and animal products are inconsistent with Article XI:1 of the GATT 1994. The United States challenged Indonesia’s agricultural import regime as a whole as well as the following measures:
- Requirement to import at least 80 percent of the quantity for each product specified on each importer’s license, or face steep penalties.
- Restriction on the importation of horticultural products during Indonesian harvest periods to avoid competition with domestic products. For example, Indonesia would restrict the importation of oranges during the harvest season of its domestic oranges.
- Restrictions on the use, sale, and distribution of imported products. For example, imported beef could only be sold in restaurants and hotel, but not in traditional markets and supermarkets.
- Restriction on the importation of certain products when their market prices fall below the government-determined “reference prices.”
- Restriction on the importation of horticultural products based on an importer’s ownership of storage facilities. For example, an importer could only import 100 bushels of apples if it owns the storage space for 100 bushels of apples. The importer cannot lease or rent storage spaces to satisfy this requirement.
- Requirement to purchase certain amounts of domestic beef before importation of beef from other countries is permitted.
- Limited time period in which to apply for an import license and short validity periods of these licenses.
- Restriction on imports that can be entered under a license based on fixed type, quantity, country of origin and port of entry requirements.
- Prohibition on the importation of horticultural products that were harvested more than six months previously.
- Prohibition on the importation of animals and animal products if they are not specifically listed in Indonesia’s regulations.
- Prohibition on the importation of horticultural products, animals and animal products when Indonesia determines that its domestic supplies are sufficient to satisfy domestic demand.
The Panel found that all of these break WTO rules because they either restrict or prohibit importation of these products. The Panel also found that Indonesia has failed to demonstrate that the challenged measures are justified under any general exception available under the GATT 1994, including Articles XX(a) (public morals), XX(b) (human health), or XX(d) (compliance measures) of the GATT 1994.
The Panel sided with the United States and New Zealand on 18 out of 18 claims that it reached. The Panel report not only provides a win in this complaint, but it also would resolve the two U.S. complaints filed on previous versions of Indonesia’s import regime for agricultural products.
Indonesia is the fourth most populous country in the world and an increasingly important export market for many U.S. agricultural products, with exports of agricultural products affected by Indonesia’s import licensing regimes totaling nearly $115 million in 2015.
U.S. agricultural products affected by Indonesia’s import licensing regimes and related prohibitions and restrictions include fruits, such as apples, grapes and oranges; vegetables, such as potatoes, onions and shallots; dried fruits and vegetables; flowers; juices; cattle; beef, including a ban on secondary cuts; poultry, including a ban on chicken parts; and other animal products.
In 2015, U.S. exports of affected horticultural products to Indonesia exceeded $87 million – including $28 million of apples and over $29 million of grapes. In the absence of Indonesia’s trade-restrictive import licensing regime, however, we would expect U.S. farmers to be able to compete more effectively for sales to Indonesian consumers. In 2015, exports of affected horticultural products to Malaysia, a similar market, totaled $106 million, $19 million more than exports to Indonesia, despite the fact that Indonesia’s population is over eight times larger than Malaysia’s.
U.S. exports of affected animals and animal products totaled $26million in 2015. As with exports of horticultural products, however, we would expect U.S. producers to compete more effectively in the Indonesian market in the absence of Indonesia’s trade restrictions. For example, U.S. exports of affected animals and animal products to the Philippines, another similar market, totaled $205 million in 2015, notwithstanding the fact that the population of the Indonesia is 2.5 times larger than that of the Philippines.
Under WTO rules, either party may request adoption of the panel report by the WTO within 60 days of the release of the report, and the report would be adopted unless an appeal is filed. If the report is appealed, WTO rules provide that the WTO Appellate Body must issue its report within 90 days of the filing of the appeal.