United States Trade Representative Michael Froman announced Dec. 22, 2016, that a World Trade Organization (WTO) dispute settlement panel has found in favor of the United States’ challenge to Indonesia’s wide-ranging restrictions and prohibitions on horticultural products, animals, and animal products.

The United States, working closely with New Zealand as co-complainant, filed this dispute to address trade barriers in Indonesia that restrict the importation of American fruits and vegetables (such as apples, grapes, and potatoes), animal products (such as beef and poultry), and other agricultural products.

The WTO panel agreed with the United States on 18 out of 18 claims that Indonesia is applying import restrictions and prohibitions that are inconsistent with WTO rules.

“The Obama Administration has again prevailed on behalf of U.S. farmers, ranchers, and businesses,” said Ambassador Froman. “Today’s panel report will help eliminate unjustified trade restrictions on American agricultural products, allowing U.S. farmers and ranchers to sell their high-quality products to customers in Indonesia – the fourth-most populous country in the world. This major victory is the fourth WTO win announced by USTR this year. It again affirms the Administration’s commitment to enforcing U.S. rights to ensure Americans benefit from all the opportunities the United States has negotiated under our trade agreements.” 

“The American Farm Bureau Federation applauds U.S. Trade Representative Michael Froman and the Obama administration on their victory at the World Trade Organization in defending farmers and ranchers from unfair trade restrictions in Indonesia," said the American Farm Bureau Federation in a statement. “America’s farmers and ranchers depend on our nation’s leaders to hold our trading partners accountable, and Farm Bureau is grateful for the administration’s work to defend U.S. agriculture’s interests abroad. Enforcement of trade agreements is crucial to maintaining market access. Thanks to this victory, American farmers and ranchers will have the freedom to reach customers in one of the world’s most populous countries.”

“Since 2012, Indonesia has maintained an untenable import licensing program, harming the ability of U.S. producers to sell a wide range of American-grown products in the Indonesian market – from potatoes to beef to grapes to oranges to poultry," said Agriculture Secretary Tom Vilsack. "Importantly, the WTO panel findings will discourage Indonesia from simply substituting new trade-distorting approaches for the measures repealed, restoring American farmers' and ranchers' ability to compete.”

Dispute background

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.

Challenges

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% 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.

-Restrictions on the use, sale, and distribution of imported products.

-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.

-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.

Exports

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. 

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. 

U.S. exports of affected animals and animal products totaled $26 million in 2015.

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.

Source: USDA Foreign Agricultural Service