At the start of this year, Indonesia implemented a policy that took many by surprise, not least its largest cattle trading partner.
After importing more than 730,000 Australian cattle in 2014 (up more than 60 percent from the previous year), Indonesia began systematically slashing the country’s quotas.
First came news in January that Indonesia was only going to issue 100,000 import permits for the first quarter, which took exporters aback as they had been hoping to ship 150,000 to 160,000 units.
Then, in July, came the real shock.
Indonesia slashed the number of live cattle imports from Australia, where the entire industry is worth more than $1 billion to the Australian economy each year, to just 50,000 head in the third quarter, compared to 250,000 in the previous quarter.
The policy is designed to help Indonesia work toward its goal of self-sufficiency – and it is not the first time Indonesia has rolled out protectionism.
Last October, Brazil – the world’s largest exporter of halal chicken – requested consultations with the World Trade Organization, claiming Indonesia imposed measures that effectively prohibited Brazilian chicken from entering the country.
The trade barriers have been in place since 2009 due to foot and mouth disease, despite the fact Brazil has since been found to be free of the infection.
“They want to become self-sufficient but at the same time they are going to push the prices up,” says Mohammed Hajjar, regional director for the Middle East office of Farrelly & Mitchell, a food and agribusiness consulting company. “And what is that going to do for poor people? Nothing. When prices go up, poor people will eat less meat.”
Beef prices spiked by about 40 percent in the weeks after the decision, forcing Indonesia to import another 50,000 head.
IMPACT ON BRAZIL AND AUSTRALIA
The impact on Australia remains to be seen.
“If the ban is effective, then obviously the impact will be great on Australia and they will move to other industries,” says Hajjar.
Brazil is even less likely to suffer as a result of the ongoing import restrictions.
“Brazil is exporting a lot to the Middle East,” says Hajjar. “I don’t think Brazil will be impacted by the ban from Indonesia. It’s not significant. The major impact will be on Australia.”
AUSTRALIA GAINS IN CHINA TRADE
However, in the same month that Indonesia slashed imports from the country, an agreement inched forward that could see Australia export up to 1 million live cattle a year to China, substantially more than the number it exported to Indonesia last year.
The question is, then, whether the import restrictions will help Indonesia succeed in its quest to be self-sufficient.
“It’s good to stand on your own two feet but it is a little bit like saying: OK, baby, stand on your own two feet. But the baby hasn’t learned how to walk yet,” says Jeremy Mulholland, a researcher in international marketing at Australia’s La Trobe University.
“There is a difference,” says Mulholland, “between the rhetoric and the reality on the ground.”
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