THE FANTASY THAT KEEPS GOING

Dumping a free trade deal           

                                                     

For the past two years Australian exporters’ prospects have been jollied along by forecasts of a looming free trade agreement with their giant northern neighbor.

Once in place grain carriers and beef boats would sail past unconcerned customs officials and into the increasingly hungry ports of the world’s fourth largest nation; Indonesian vegetable and mineral oils will head Down Under to a similar welcome. 

Prefacing this nirvana have been big show-and-sell missions to the Archipelago, ministerial handshake photo-ops and glowing statements implying negotiations are running briskly and on the same page.

So all being well the Indonesia-Australia Comprehensive Economic Partnership Agreement (CEPA) should be signed before 2018 dawns. 

However all is not well and that sunrise now seems remote.

The possibilities have been eclipsed - not by nationalist Indonesians fearing floods of foreign goods, but by parochial politics in Australia.

Late last month [april] the Federal Government abruptly announced dumping duties on Indonesian copy paper imports.

“The impact of the decision is potentially lethal,” Australia-Indonesia Business Council President Debneth Guharoy told members. 

“It flies in the face of the visiting President’s pointed request in Sydney for a fair go on paper and palm oil. (In February Indonesian President Joko ‘Jokowi’ Widodo promoted the CEPA in Australia.)

“We unilaterally decide to turn the (asylum seeker) boats around, stop the exports of live cattle, raise hell over the death penalty and now rollback their paper. Each and every time, we expect the Indonesians to bow to our self-promoted higher standards, our much-touted lofty principles.

“Those of us who have lived in, worked in or frequently travel to Asia cringe at the disdain with which these proclamations are treated by our neighbors.”

Indonesia Institute President Ross Taylor, a former national vice-president of the AIBC, warned that the problem should be “handled with subtlety”.

“Otherwise we run the risk of this tariff issue becoming a catalyst - for those who are anti-free trade - to have the CEPA stall or collapse,” he told Strategic Review.  “That would be a great disappointment.

“Getting an agreement was always going to be a tough task - Indonesia is really focused on the need for big infrastructure projects that can be funded by North Asian countries.

“However it can be done with goodwill and considered perseverance by both sides. The decision by Australian officials to impose the tariff at this time was less than helpful; Mr Guharoy is right in that regard and we share his concern, as would Indonesia.”

The head of Indonesia's negotiation team was reported by Fairfax Media claiming the duties would affect discussions.

“We explained to Australia that it (the dumping accusation) is not true, but they insisted just to protect their industry,” Deddy Saleh was quoted as saying.

“So it means there is unfairness. How can we conduct negotiations when we know that our counterpart is not fair? Negotiation takes mutual trust from both sides.”

The duties will please supporters of trade barriers; they argue free trade agreements are an easy way to avoid developing complex policies to stimulate local yields and build food self-sufficiency.  Instead FTAs favor efficient producers like Australian wheatgrowers who can swamp local markets and put poor farmers out of business

 ‘Dumping’ means an exporter is selling goods overseas below the homeland price. 

Apart from deliberate attempts to weaken rivals through trade wars, there are two main reasons for dumping: A manufacturer has a surplus it can’t shift at home, or its products are being subsidised by government for local political reasons, such as keeping an unprofitable factory running to save jobs.

The upset started when a private company in Victoria complained to the independent Australian Anti-Dumping Commission that paper manufacturers in Indonesia (and some other countries) were undercutting local prices and threatening profits and jobs.  The Commission agreed and told the government.

Despite Australian Paper’s nationalistic name the company is owned by Nippon Paper Industries of Japan.

Its two mills are in Gippsland, a rural area 160 kilometers east of Melbourne.  AP is the biggest employer with around 1,300 on the payroll.  It makes about 600,000 tonnes of paper products a year and much is exported.

The unemployment rate in Gippsland is 9.42 per cent against the national average of 5.7 per cent, according to Australian Bureau of Statistics figures.

To stop interest in trade with Indonesia flagging after the latest setback the AIBC has asked National Development Planning Minister Dr Bambang Brodjonegoro to help buoy the disheartened.

“For the first time ever, a ranking Indonesian Minister will visit five of our capital cities (in June) on a whistle-stop tour,” said Guharoy who claims Indonesia could be the fifth largest economy by 2050 with Australia then ranking 32.

“The mission is to talk about Indonesia's economic outlook, the opportunities they present and against that backdrop, encourage Australian enterprises to engage.”

The AIBC has been pushing local businesses to recognise openings in the Indonesian market with 250 million consumers and a growth rate of more than five per cent compared with Australia’s 2.4 per cent.

Indonesia is Australia’s 12th largest trade partner, mainly importing wheat, beef and sugar, and selling oil and some manufactured goods.  Total two-way business is worth about US $11.4 billion.

An AIBC delegation will appear before a Parliamentary Inquiry on the Trading Relationship with Indonesia in Canberra this month.  [may]  “We have an unintelligent relationship with our large neighbour and it does warrant examination,” said Gutharoy. “But I'm not so sure that the politicians will welcome the candor.”

Australia’s dumping duties are likely to be appealed to the Geneva-based World Trade Organisation, a body not known for swift decision-making. Unless the Indonesians ignore Australian protectionism and abandon their own, a free trade deal is unlikely anytime soon.

First published in Strategic Review, 26 May 2017 - http://www.sr-indonesia.com/web-exclusives/view/dumping-a-free-trade-deal

HIDING BEHIND THE FLAG

 Words for the blood, not the brain                                     

‘Nationalism is an infantile thing – it’s the measles of mankind’.

If Nobel prizewinner Albert Einstein’s quip is right, then it’s time to extend vaccination programs in Indonesia and Australia before the epidemic hits.

For there are troubling signs that rational thought is being infected by the virus of base political rhetoric.

Consider the comments of new Agriculture Minister Barnaby Joyce.  The Queensland politician feels uncomfortable with Indonesians buying 10,000 square kilometers of Northern Australia (an area twice the size of Lombok), to raise cattle for consumption in the Republic.

Like all populists the minister knows that his views play well with the xenophobic.  These suspicious folk were revealed last month (Aug) through an Australian government-commissioned survey. This showed almost half the respondents believe Indonesia is a threat.

Mr Joyce doesn’t disparage directly, preferring the fuzzy phrase ‘national interest.’  But the message is clear: Who’d want sinister foreigners with their funny habits, strange language and curious religion sitting on our land? Goodness, they might even make it more productive.

Nonetheless Mr Joyce’s mutterings have copped some stick, as Australians say.  A maturing electorate?  Maybe - or because his boss, Prime Minister Tony Abbott is trying to be nice to the people next door and show his Asian credentials.

Despite Mr Joyce’s concerns a sale will probably go through after scrutiny by the Foreign Investment Review Board. The Chinese, British, Americans and many other nationals, including presidential hopeful Aburizal Bakrie, have owned leases over big pastoral stations (ranches). Discrimination against Indonesia is unlikely, even though the reverse operates.

On this side of the Arafura Sea there’s no way Australians can buy even a grain of the Archipelago.  Apart from leasing a condo the best we can do is enjoy property held in the name of an Indonesian spouse or business partner.  The risks are obvious.

Mr Joyce is a member of the conservative National Party (in coalition with the Liberal Party majority), but even some supporters, particularly those with properties for sale, reckon he’s singing yesteryear’s song.

Not so in Indonesia. What Perth academic Professor Krishna Sen calls ‘nationalistic fervour’ remains top of the pops.

Writing on The Conversation website she made the embarrassing (for Australians) observation that the present Indonesian Cabinet is smart, well-educated and understands more about Australia than its counterpart does of Indonesia.

Three key members of the Indonesian Government, including vice president Boediono, studied at Australian universities. Six have PhDs.

So all the more surprise that such a sophisticated ministry seems determined to bang the nationalistic drum with its policies, knowing that the risks of rousing the masses are real and damaging.

According to the London-based economic think-tank Global Trade Alert, Indonesia has implemented 198 protectionist measures that ‘are harmful, or almost certainly harmful to Indonesia.’ Another 88 are in the queue.

Further proof that foreigners aren’t wanted came with the release this month (Sept) of figures showing a six per cent drop in work permits. For Australians the figure is even greater - about a third, down to just over 2,300 in the past year.

Employers here and elsewhere usually want the best person for the job.  Are qualifications and experience of less value than birthplace? Does citizenship trump merit?  In the current climate the answers are ‘yes’.

Writing in The Wall Street Journal Jakarta-based management consultants John Kurtz and James Van Zorge commented on ‘the curse of nationalism’, adding: ‘Policy changes in the mining, retail, horticultural and oil and gas sectors have led foreign investors to reassess the risk of doing business here.’

Foreign companies take profits out of the country so are easy to demonize: ‘You are poor because they are greedy’. Investors also take risks and create jobs. That’s usually overlooked

Elections are great opportunities for politicians to offer slogans rather than plans. Mr Abbott’s one-liner ‘stop the boats’ resonated with an electorate deeply worried about Middle Eastern and Sri Lankan asylum seekers being ferried to Australian shores by Indonesian fishermen.

How that’s going to be achieved is another matter. The plans revealed so far, including Indonesian ‘transit ports’ for refugees, seem set to inflame emotions.

National flags are useful symbols but can also mask purpose. All the indicators are that next year’s presidential election will be a policy-free affair driven by personalities draping themselves in red and white.

The dog whistling has already started. Terms like ‘territorial integrity’ and ‘sovereign rights’ stir the blood but dull the brain.

In 2010 President Susilo Bambang Yudhoyono addressed the Australian Parliament.  He said the first challenge facing the two nations was to ‘bring a change in each other’s mindset’.

He continued: ‘The most persistent problem is the presence of age-old stereotypes – misleading, simplistic mental caricatures that depict the other side in a bad light.’

It will be sad and damaging if next year’s candidates follow Mr Joyce’s misleading and simplistic view that the nation will be better off without outsiders, their money, expertise - and friendship. 

(First published in The Jakarta Post 28 September 2013)