Public Hearing held by Indonesian Government on Safeguard Measure for Imported Wheat Flour

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Representatives of Central Anatolian Cereals, Pulses, Oil Seeds and Products Exporters Union from Turkey attended a Public Hearing on Jan 17, 2013, in Jakarta, expressing their concerns on diminishing bilateral trade between two countries as a result of a temporary Safeguard Measure being implemented on imported wheat flour. If it stays in effect permanently, Indonesia will be the first and only country to apply a safeguard measure on a stable food items such as wheat flour.

Turkish wheat flour exporters hope that Indonesian Government, will consider the future of the two countries bilateral trade relations; and will listen to the concerns of the millions of Indonesian people.

Parties involved in the Safeguard case for imported wheat flour were invited by KPPI (Indonesian Trade Safeguards Committee) for a Public hearing on Jan 17, 2013, in Jakarta. Representatives of Central Anatolian Cereals, Pulses, Oil Seeds and Products Exporters Union from Turkey, as well as representatives of Sri Lankan and Australian wheat flour exporters and government representatives attended the hearing. Ukrainian and European Union wheat flour representatives, who couldn’t attend in person due to the flooding, will present their comments in writing.

Indonesian wheat flour producers association, APTINDO applied for a safeguard to KPPI in August 2012, and Ministry of Finance approved a temporary safeguard measure of additional 20% BMTPS in December 2012, that will stay in effect for maximum 200 days. In a press briefing after the hearing Mr. Avsin Kasikci, representing the Central Anatolian Cereals, Pulses, Oil Seeds and Products Exporters Union said "With the Public Hearing Indonesian Government tries to gather further information from local manufacturers who claim to have been injured due to imported wheat flour, and exporters like us who have data showing otherwise."

Mr. Kasicki continued to explain how so many Indonesian experts and consumer groups are aware that eliminating imported wheat flour will create an oligopolistic market, hence allowing local manufacturers to determine the price for their maximum profitability. While APTINDO executive director Ms. Ratna Sara Lopies have been sending emails to media and experts stating that there would not be price increases, only after couple of weeks of implementation of the temporary safeguard measure, a major Indonesian newspaper reported (Kontan, Jan 7, 2013, “Indofood Berencana Menaikkan Harga Tepung Hingga 3%) that PT Indofood is already in the preparation of increasing the price of flour and flour products approximately 3%. Mr. Franciscus Welirang, Director of INDF, stated in the same article that price increase is controlled by the “market mechanism” – without mentioning that in a market where there’s no competition it’s easy to manipulate price.

During an open discussion by the Food Security Council last month, Mr. Boediyanto, Chairman of ASPIPIN (Indonesian Food Industry Employers’ Association) raised concerns that the implementation of BMTPS will increase local flour prices and will negatively effect small manufacturers who use wheat flour as a main ingredient.

Also, in the same meeting, economist Mr. Ahmet Erani Yustika draw attention to the fact that small and medium businesses who consume the majority of the imported wheat flour will be seriously affected from the safeguard related price increase.

Moreover, Mr. Yustika, like many other legal experts, agrees that this safeguard measure does not meet some of the requirements of WTO Agreement.

As per the WTO regulations a member country may impose a safeguard measure only if the following four conditions are met: (1) The increased (surge) of import volume proven to exist;(2) there is evidence of serious injury on the overall of the domestic industry or threat of serious injury (3) there is a causal relationship between the increase import and serious injury or threat of serious injury; and (4) there is an unforeseen development. Unfortunately, none of these conditions have been satisfied in this investigation.

Mr. Kasikci showed data and explained "Considering the significant decline in wheat flour imports to Indonesia in 2011, which continued in 2012, it would be inaccurate to claim that there had been a surge in wheat flour imports that is “recent enough, sudden enough, sharp enough, and significant enough”, both in terms of volume and value, to cause or threaten to cause "serious injury” to the local industry."

Mr. Bulent Hacioglu, legal representative of the Turkish exporters, provided data from similar cases that have been declined by WTO in the past saying "There have been similar cases in the past that were brought to WTO where the complainant claimed increase in imports to implement a safeguard. However, just like in the data provided by Aptindo, due to lack of evidence showing a sharp increase in imports, WTO decided that a safeguard measure could not be implemented."

Mr. Hacioglu explained in detail the requirements for a safeguard measure and the lack of evidence proving for a measure in this case: "Safeguard measures can be justified only when, as a result of unforeseen developments such as significantly changing consumer trends or changing technologies which would make the local industry uncompetitive and obsolete all unexpectedly. Suprisingly, there is not even one single word about this unforeseen development in Aptindo’s application."

Mr. Kasikci expressed that KPPI investigation is very contrary to interest of indonesian people by saying, “As much as this investigation is against the WTO rules and regulations, it is also against the interest of the Indonesian people. We want to remind all the parties that the world has experienced three food crises in the last six years with the most recent one happening this year. We are clearly in a new era in terms of food security. Production in the world, in almost every food commodities and especially in wheat, can barely keep up with the increasing world demand. Therefore, almost every government in the world is easing import restrictions in order to increase their access to potential suppliers instead of putting barriers to food imports.”

As Aptindo mentioned in a press release dated 2nd of November 2012, wheat flour became the second staple food of the Indonesian people after rice. However, unlike rice, Indonesia is not producing her own wheat since it is geographically not suitable to grow wheat. For a country like Indonesia who cannot grow any wheat yet has such a high and surging consumption, it is unimaginable to put barriers to wheat flour imports from the food security point of view.

“There is no single country in the world putting barriers to import of an item that she doesn’t produce. Especially for a country like Indonesia, who is becoming the rising star with her democratic and economic success, imposing an unfair trade barrier to a strategic food item would be inconsistent with her current economically liberal image in the world,” said Mr. Kasikci He also thinks such an act would only benefit a number of businessmen trying to create trade cartels but seriously harm the Indonesian people. If additional safeguard taxes will be imposed at the end of this investigation, there will be no mechanism to control the prices of the local producers. The local producers, which already have an oligopolistic structure, will definitely increase their prices compared to the world wheat flour prices.

The Turkish wheat flour exporters have mentioned in past press releases that with access to competitive Turkish flour, the Indonesian wheat flour based food item exports experienced quite remarkable increases in recent years. Mr. Turgay Unlu, chairman of Central Anatolian Cereals, Pulses, Oil Seeds and Products Exporters Union had stated in a press brief conducted in Jakarta, late November 2012, that "Turkish flour has always been and will always be the reliable source of governments, downstream industries, and consumers when it comes to ensuring their food and supply securities. Turkey would always consider the benefits of a brother nation like Indonesia and give utmost importance to Indonesians’ access to quality products for good value."

With the implementation of the temporary 20% BMTPS, additional safeguard tax, the Turkish wheat flour exporters halt their trade since December 2012. Wheat flour being the top item that Turkey exports to Indonesia, the trade deficit between two countries is yet to grow further as a result of this safeguard measure.

Turkish wheat flour exporters hope that Indonesian Government, will consider the future of the two countries bilateral trade relations; will listen to the concerns of the millions of Indonesian people who consume noodle and bread as a substitute staple food to rice, and who make ends meet from baking, cooking and selling food with small profit margins on the streets, rather then protecting the greedy profit demands of big corporations.

For further information, please contact:

Simin Atayman, Atayman PR, Turkey
Mobile: +1 415 724 2874

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