Opening the Floodgates

Opening the Floodgates:

How Globalization and Climate Change

Threaten Asias Food Sovereignty

Asia Pacific Network for Food Sovereignty (APNFS)

2014

Opening the Floodgates: How Globalization and Climate Change Threaten Asias Food Sovereignty

Published by Asia Pacific Network for Food Sovereignty (APNFS)with funding support from Catholique Comite Contre La Faim Et Pour Developpment (CCFD) Terre Solidaire

Copyright @ Asia Pacific Network for Food Sovereignty,2014All Rights Reserved.

APNFS gives permission for excerpts from this book to be cited/ photocopied/reproduced provided the source is properly acknowledged.

Editorial Board: Arze Glipo, regional coordinator. Ananeza Aban & Arturo Francisco, regional secretariat

Copy Editors: Vanessa Almeda & Misael Paranial

Book Designer and Lay-out Editor : Tyrone Velez

CONTENTS

The Path to Food Sovereignty in Indonesia Between G33 Proposal and the National Food Policyby RACHMI HERTANTI & RIKA FEBRIANIIndonesia for Global Justice (IGJ) / 1

Confronting a Changing Climate in Indonesia A Case Study of Rice, Onion and Salacca Farmers in Central Javaby MIDA SARAGIH Indonesia Civil Society Forum for Climate Justice / 41

Not Seeing the Forestsfor the TreesThe Perils of Green Economy in Ancestral Communities of Bukidnonby ANANEZA ABANIntegrated Rural Development Foundation / 71

Shackling the Nine DragonsA Rapid Impact Assessment of the Mekong Mainstream Dams on Farming Villagesin the Mekong Deltaby LAM DINH UY & LAM THI THU SUUVietnam Rivers Network DINH NHAT LAM & LE DUYSouthern Institue Of Ecology / 93

Opening the Floodgates

FOREWORD

Facing Up to Asias Twin Sustainability Challenges

ASIA is facing two intertwining sustainability problems -- 1) sustaining the regions eco-system amidst extremes in global climate behaviour and general environmental degradation in the different Asian countries, and 2) sustaining jobs and livelihoods in an integrating regional economy that is increasingly subjected to global competition and economic liberalization.

Nowhere are these sustainability challenges more deeply felt than in the agricultural sector of the Association of Southeast Asian Nations (ASEAN). The sector is unable to provide the food and nutritional requirements of the regions 600 million people, as liberalizing ASEAN has increasingly become dependent on agricultural imports coming from the big agribusiness-producing countries of the world United States, Europe and Australia-New Zealand. The widening agricultural deficit is also due to the increasing fragility of the regions eco-system and consequently, the declining productivity of the sector. With increasing regularity, the region has been witnessing each year the occurrence of production-crippling deadly storms, droughts and weather disturbances, which are aggravated by man-made disasters such as forest fires and large-scale despoliation of the environment by irresponsible mining, logging and agri-chemical companies.

The biggest victims of the asymmetry in an unequal global agricultural trading system and natural and man-made environmental and climate-change-related disasters are the poor, especially the small farmers, many of whom are driven further to deeper debt and poverty and even displaced from their own land. Hence, a big challenge to development workers and farmers organizations is how to push governments and policy makers to craft or frame food and agricultural policies that help empower the small farmers while strengthening at the same time the economic and environmental sustainability of each ASEAN/Asian country. This is not easy given precisely the agricultural and environmental policy regime that is in place in most countries under globalization.

This is where books and studies such as Opening the Floodgates: How Globalization and Climate Change Threaten Asias Food Sovereignty play a central role in deepening our understanding of the kind of policy reforms that the farming world in the ASEAN region and other parts of the world urgently need. The book gives us a good overview, in the context of the Indonesian experience, of the anti-farmer and anti-development clauses found in the Agreement on Agriculture (AoA) of the World Trade Organization (WTO) and how such clauses are used by rich agricultural-producing countries of the

world to flood the world with subsidized products that erode the agricultural capacity and sovereignty of liberalized developing countries.

Opening the Floodgates also gives an empirical analysis of seemingly complex policy issues on the environmental front. The Green Economy concept advanced by rich polluting corporations in the name of carbon mitigation through the carbon trading mechanism under the formula of the Reducing Emissions from Deforestation and Forest Degradation (REDD) has turned out to be a dangerous proposition because it has become not only a rationale for the continued pollution of the atmosphere by the participating polluting companies but, as implemented in some areas of the indigenous peoples (IPs), has become an instrument for the alienation of the IPs from their own socio-cultural-ecological systems. The carbon traders have transformed the IPs into paid forest keepers while opening the forests for further commercial and mining explorations!

Of course, one should not confuse the challenge of greening the economy with the Green Economy concept of the big REDD-participating corporations. Transforming vulnerable agricultural communities into resilient and climate-change ready communities through a switch to organic farming and the institution of appropriate anticipation-adaptation-adjustment measures is a must and doable as discussed in the book itself. A genuine Green Economy should be built based on peoples needs and peoples participation in the greening and transformation processes. This is what the book is asking when it discusses the serious environmental and agricultural implications of more dams being built to sequester waters of the mighty Mekong River that connects the agriculture of the six Asian countries because they can disrupt lives and cause environmental damage across the region. To conclude, going sustainable economically and environmentally -- is a must for all countries in the region. But going in such direction will not be easy for this requires an overhaul of the unadulterated free market orientation in development planning as well as a rethinking of environmental reforms by simply relying on corporate leadership without peoples participation. Opening the Floodgates tells us that it is time to change the development framework to ensure a sustainable life for all.

DR. RENE OFRENEOFormer Dean, School of Labor and Industrial RelationsUniversity of the PhilippinesChairperson of the Board of Trustees, Integrated Rural Development Foundation

INDONESIA

THE PATH TO FOOD SOVEREIGNTY IN INDONESIA Between G33 Proposal and the National Food Policy

RACHMI HERTANTIRIKA FEBRIANIIndonesia for Global Justice (IGJ)

2 Opening the Floodgates

Acronyms

AMS aggregate measurement of supportsAoA Agreement on AgricultureAPEC Asia-Pacific Economic CooperationAPI Indonesian Peasant AllianceASEAN Association of South East Asia NationsBPS Central Statistic AgencyBULOG Indonesian Bureau of LogisticsCIF cost, insurance, and freightEU European UnionFOB free on boardFTA Free Trade AgreementGATT General Agreement on Tariff and TradeGATS General Agreement on Trade in ServicesGKP Dry grain harvestG33 The Group of Developing Countries in WTOs Agriculture CommitteeHPP government purchase priceRASKIN rice for the poorTRIMS Trade Related Investment MeasuresTRIPS Trade Related Intellectual Property RightsUSA United State of AmericaWTO World Trade Organization

3Executive Summary

In the midst of an increasingly severe world food crisis, the member countries of the Group 33 (G33) issued a public stockholding proposal to protect the poor and low-income farmers and achieve food security. Submitted by the G33 in November 2012, the proposal on public stockholding was negotiated in the 9th WTO Ministerial Conference in Bali, Indonesia last December 2013.

The proposal allows developing countries to buy food for their reserves and food aid needs at prices determined by each government. That the state can determine the prices is contrary to economic logic. High pricing at the domestic level requires the intervention of other factors, such as import protection, production quotas, phyto-sanitary regulations, export bans or subsidies, etc. These factors may lead to distortions in the trade.

This paper intends to figure out the food profile in ASEAN member countries; the complexity of food issues in rice-producing countries, particularly Indonesia; and the main agenda of the developing countries in the G33 proposal. It will then evaluate the effectiveness of the G33 proposal in achieving food sovereignty for Indonesia. The evaluation is based on a study of the countrys national food reserve system, including the role of the State Logistics Agency (Bulog) in providing national food necessities.

The G33 proposal has been presented at the WTO Ministerial Conference last December 2013. However, a decision on this proposal has not been reached nor any single permanent solution has been made. Hence, in the aftermath of the Bali Conference, the G33 will be renegotiated in order to reach a deal.

To that end, the analysis obtained from this paper will be the basis for Indonesian civil society organizations for further advocacy actions related to the negotiation of G33 proposal, post-Bali.

Indonesia | G33 & Food Sovereignty


AGRICULTURAL LIBERALIZATION

WTO Agriculture Liberalization in ASEAN Region To date, the implementation of the Agreement on Agriculture (AoA) has significantly affected ASEAN countries agriculture. The AoA regulations have forced developing countries to open their market and reduce government subsidies, not to achieve national food security, but to make agricultural products become trade commodities in the global market. Such practice eliminates the states obligation to fulfill peoples rights to food.

As a consequence of low agricultural subsidies, some ASEAN countries who used to be big food producers, are now food importers. Moreover, the food price instability brought about by liberalization has eliminated peoples access, especially the poor, to affordable food.

Market access facilitation has increased agricultural product imports from developed countries to ASEAN countries. Imported products are priced cheaper than local products because of the large government subsidies in developed countries. ASEAN statistical data shows that developed countries such as United States of America and European Union are placed as the top agricultural product exporters to ASEAN.USA captured the largest ASEAN market share in the years 2010 and 2011 with 12% and 11% respectively; and was followed by EU which controlled 11.5% in 2010 and 9.7% in 2011.1 The following are the top ten agricultural import commodities in 2011.

Diagram 1. ASEAN Top 10 Agricultural Import Commodities

Source:IGJ Data Center, taken from ASEAN Statistic 2012

The high quantity of agricultural product imports vis a vis the lower number of local products that penetrate the market has resulted in the decline of local agricultural commodities growth, weakening the competitiveness of local farmers.

5From 2007-2011, there was a growth decline in ASEAN agricultural commodities, such as rice and soybeans. While there has also been an increase in the growth of other top commodities during the same period, it is not considered as significant. The following is a chart showing the growth rate of ASEANs major food commodities.

Diagram 2. Growth Rate of ASEAN Five Major Food Commodities 2007-2011

Source: IGJ Data Center, taken from ASEAN Statistical Yearbook 2012.

The slow growth of several top products because of the agricultural performance drop will affect the availability of staple crops in ASEAN countries, especially rice. This causes dependency on imports. For example, the import value of rice in 2012 was still high.

Diagram 3. Import Value on Rice in Several ASEAN Countries (2012)

Source: IGJ Data Center, taken from AFSIS Report 2012

The loss of potential income due to their inability to compete with imported products has threatened farmers livelihood. The following diagram shows a decrease in the number of workforce in the agricultural sector from the year 2010-2011.

Diagram 4. Agricultural Sector Workforce Percentage 2010-2011 (%)

Source: IGJ Data Center, taken from ASEAN Statistical Yearbook 2012



Data released by Grain in 2013 shows that almost all farmers in ASEAN countries are small farmers. These are further categorized as farmers with limited land ownership. Hence, they are very vulnerable to poverty caused by the loss of their livelihood. The following is diagram on percentage of small farmers in ASEAN countries.

Diagram 5. Percentage of Small Farmers in Several ASEAN Countries

Source: IGJ Data Source, taken from Land Distribution Data, Grain 2013.

The above data shows that the ASEAN agricultural performance is declining in quantity and quality. This is alarming since agriculture supports development in these countries. The following table shows the agricultural sectors share against the Gross Domestic Product (GDP) of ASEAN countries from 2009-2011. While some countries experienced an increase, it is still not significant.

Table 1. Agricultural Sectors Share against GDP of ASEAN Countries 2009-2011

Country

2009 2010 2011

Brunei Darussalam 1.2 1.1 1.1

Cambodia 29.5 29.4 28.0

Indonesia 13.6 13.2 12.7

Lao PDR 32.5 31.6 30.0

Malaysia 7.5 7.7 7.8

Myanmar 41.8 39.9 37.8

Philippines 12.5 11.6 11.5

Singapore 0 0 0

Thailand 8.9 8.3 8.6

Vietnam 17.0 16.4 16.6

Source: IGJ Data Center, taken from ASEAN Statistical Yearbook 2012.

All these data show that the impact of AoA on ASEAN agriculture has been largely negative. Without government protection, AoA implementation has the potential to destroy local agriculture.

7Therefore, we need to study whether the G33 proposal will adequately protect the ASEAN countries by reasserting their food sovereignty in the face of AoA and other regional and bilateral free trade agreements.

Agricultural Liberalization in Indonesia

The elimination of import tariffs, brought about by the implementation of free trade in goods in WTO or FTA, has opened up the market access of goods in Indonesia to a maximum of 0%. Local products now compete with similar but cheaper imported goods, to the detriment of local industries.

In its food sector, the negative impact of free trade is considerable. The increase in food import has weakened the competitiveness of local farmers products and destroyed the local food market. In 2009 the value of food import reached USD 8.4 billion and increased by more than 2-folds to USD 17.2 billion in 2012. This is very detrimental to farmers as they are unable to compete with the influx of imported products.

To make matters worse, the incentives for farmers are dwindling: irrigations systems are unimproved, seed subsidy is nearly zero, pressure on price by the downstream actors2, and the governments financial assistance through food security loan is not yet optimally absorbed.

The Indonesian Peasant Alliance (API) calculated the loss suffered by its members due to a massive flooding of onion imports to local markets in 2011. They found out that Indonesian onion farmers may have experienced a loss of Rp 14.8 trillion, equivalent to 1.04 million tons, due to the import surge of onion. At the same time, local chili farmers may have experienced a loss of Rp 26.6 trillion or equivalent to value of 1.3 million tons chili.3

Less absorption of local food due to the surge of imported food has threatened Indonesian agriculture and even potentially depressed the Farmers Parity Power (NTP). This would result in increased unemployment and poverty. The Statistics Central Bureau (BPS) stated that the NTP has been declining from year to year, i.e. from 105.67 in January 2013 to 101.95 in January 2014. Massive food imports resulted in the decline of local food production due to the deterioration of the employment rate in the agriculture sector. In 2009, the employment absorption of the agri-sector was 38.36 million; this later decreased to only 36.54 million in 2011. This means that there were 1.82 million people who faced unemployment and poverty.



The opening of import access allows importers to take control of the local markets, giving rise to cartel practices. A case in point: from November 2011 to February 2013, the shortage of garlic in Indonesian markets resulted in the increase of garlic price from Rp 40,000/kg to Rp 90,000/kg. Upon examination by the Commission of Business Competition Supervisory (KPPU), 19 importer companies were found to have formed a cartel by controlling 56.68 % of garlic supply.4 This showed that the government had neglected its role and obligation to strictly control and supervise trade practices of importers.

IMPACT OF WTO BALI PACKAGE NEGOTIATIONS ON LOCAL AGRICULTURE

WTO Bali Package: Agriculture vs. Trade Facilitation

In order to achieve the Doha Round agreement that has been negotiated since 2001, WTO member countries agreed to start the Doha Round Settlement during the 9th Ministerial Conference, which was held last December 2013. The priority issues that were discussed in the conference are: (1) trade facilitation, (2) the G-33 proposal, especially in agriculture, (3) and the least developed countries development package. The three issues were summarized in one negotiation package called the Bali Package.

The Bali Package during the 9th WTO Ministerial Conference is important for developed countries because it allows their giant industrial corporations easy access to the local markets of developing

9countries. Given the recent wave of economic crisis which resulted in the slow growth of the economies of developed countries, this strategy will allow them to find new markets in the developing world as well as strengthen the WTO free trade system.

Global economic growth affects global trade. Last 2013, economic growth in development countries like the US and EU countries was predicted to only reach 1.2%. In contrast, Asian countries were forecasted to reach a high economic growth. For example, South Asian countries were predicted to have a 5.2% economic growth while East Asians and the Pacific countries were predicted to reach a 7.2% economic growth in 2013.5

It is for this reason that G20 and APEC countries are keen on making Asia the worlds growth engine. One of their strategies to get out of their economic crises is by prohibiting protection and promoting investment and trade liberalization through Free Trade Agreement agendas6 (FTA) or the multilateral trade system in WTO. This will allow them to increase their export volume to developing countries so that they could run the economic machines in trade or services sectors in developed countries.

In order to execute the strategy, developed countries need a strong instrument to facilitate the trade requirements in promoting trade facilitation agenda in various international fora such as the G20, APEC, and especially, WTO. It is for this reason that developed countries have such a strong interest in the WTOs Bali Package becoming the main issue during the 9th WTO Ministerial Conference in Bali.

In addition to trade facilitation, the Bali Package also touches on agricultural issues. Since the Doha Round, agriculture has been a sensitive issue, given the large investment stake of both developed and developing countries on this sector. Because of major differences in the interests of both parties, negotiations on this area have yet to be settled. This is why agriculture became the main issue in Bali Package negotiations during the 9th WTO Ministerial Conference. It was even used to increase the bargaining power of each party to win trade facilitation negotiations.

Essentially, the Bali Package covers the following issues:

a. Trade FacilitationTrade facilitation agreement an issue of interest to developed countries is also part of Singapore Issues7, which was proposed in the 1st WTO Ministerial Conference in 1996 in Singapore but was repudiated by all



WTO members. However, this issue successfully passed the discussion during the 4th WTO Ministerial Conference in 2001 in Doha, and the Council for Trade in Goods was mandated to discuss the issue as part of Doha Development Agenda.

This agreement will manage trading in goods across national borders (exports-imports) by simplifying and harmonizing custom procedures on the borders. It aims to make the movement of goods faster, more efficient and effective.

It consists of two parts. The first part stipulates all regulations and obligations regarding trade facilitation implementation also called technical issues such as custom procedures, goods in transit, custom brokers, etc. which are binding. The second part calls for flexibility for developing and least developed countries such as special and differential treatments, capacity buildings, and other technical issues8.

b. Agriculture Under this issue, there are several negotiation points that have not been settled since the Doha Round was launched in 2001. These include tariff-rate quota administration and export competition which was proposed by G20 countries. In addition, developing countries of G33 also proposed a list of general services and public stockholding for food security purposes.9

However, it is the public stockholding proposal by G33 countries that is the most interesting part of the Bali Package. Initiated by India, it attracted many discussions within the whole negotiation than most proposals and drew protests from developed countries like the US and EU. This is because it seeks to amend the domestic support regulations in the AoA which were found to be disadvantageous for developing countries.

c. Development Package for Least Developed Countries The development package negotiation is being lobbied by the least developed countries which are considered vulnerable in WTOs trade agreements implementation. The Doha Development Agenda gives mandate to prioritize the development package for these countries because the flexibility, special and differential treatment regulations for least developed countries are not fully enforced.10

Therefore, during the Bali Package negotiation, the least developed countries (LDCs) demanded immediate settlement on development issues that stimulate trade. The package includes (1) duty free, quota free market access, for LDCs, especially for cotton products from LDCs;

11Indonesia | G33 & Food Sovereignty

(2) preferential rules of origin; and (3) services waiver for LDCs .

G-33 Proposal: Public Stockholding for Food Security

The agricultural sector is the most sensitive issue in the Doha Round. Because of this, it was prioritized during the discussions at the 9th Ministerial Conference. There were three points during the discussion: (1) the G-33 proposal on public stockholding for food security, (2) the G-20 proposal regarding export subsidies, and (3) the proposal on tariff rate quotas. Of the three, however, it is the G-33 proposal that is most contentious, drawing a lot of attention during the conference.

The G-33 proposal aims to give exceptions to subsidies for public stockholding for the purpose of food security on aggregate measurement of supports (AMS) calculation. The proposal is meant to help poor farmers and increase local food security by stopping agricultural liberalization.

The rationale behind this proposal is that while AoA regulates the subsidy for public stock holding for food security to be placed in Green Box (See page 19), the value still has to be counted into AMS. This is regulated in footnote 5 paragraph 3 in Annex 2 AoA. The following is the proposed amendment:


Footnote 5, Paragraph 3, Annex 2 of AoA

For the purposes of paragraph 3 of this Annex, governmental stockholding programs for food security purposes in developing countries whose operation is transparent and conducted in accordance with officially published objective criteria or guidelines shall be considered to be in conformity with the provisions of this paragraph, including programs under which stocks of foodstuffs for food security purposes are acquired and released at administered prices, provided that the difference between the acquisition price and the external reference price is accounted for in the AMS.

Proposed Amendment

For the purposes of paragraph 3 of this Annex, governmental stockholding programs for food security purposes in developing countries whose operation is transparent and conducted in accordance with officially published objective criteria or guidelines shall be considered to be in conformity with the provisions of this paragraph, including programs under which stocks of foodstuffs for food security purposes are acquired and released at administered prices, provided that However, acquisition of stocks of foodstuffs by developing country Members with the objective of supporting low-income or resource-poor producers shall not be required to be accounted for in the AMS.

India and the rest of the G-33 countries strongly feel that the value of subsidies for public stockholding for food security should be taken out of the aggregate measurement of supports calculations without exception. Furthermore, they contend that the AMS calculation mechanism has many shortcomings. It is clear that the basic problem that G33 proposal seeks to address is related to the AMS calculation mechanism.

The AMS calculation is regulated in Article 6 and 7 as well as in Annex 3 of the AoA. All commitments on domestic subsidy reduction except ones in green box have to be included into the total AMS calculation. Each members commitment to reduce subsidy can be seen in Part IV of the Schedule of Commitments which was set last January 1, 1995.11

The AMS calculation is done to specific and non-specific products, both subsidies given on national and local level, including government and its agencies budget and revenue foregone. It is calculated by multiplying the gap between an external reference price and the applied administered price by the total production of specific or non-specific products.12

The external reference price is based on the average price in the years 1986 to 1988 and generally, the average f.o.b. (free on board) unit

13

value and the average c.i.f. (cost, insurance, and freight) net value for the basic agriculture product in a net importing country.13 This is due to the actual tariff rate which was applied on September 1986 when the WTO Uruguay Round negotiations started.14

Nevertheless, the aggregate measurement of support could be exempted from reduction so a country does not need to include its domestic subsidy into total AMS calculation. It can be applied if the subsidy does not exceed 5% for developed countries and 10% for developing countries of the total value of production of specific and non-specific products. This is called de minimis level.15

The G-33 views that AMS has been used as a loophole by developed countries to cheat on total subsidies calculation. According to the G-33, AMS shortcomings are as follows:16

(1) AMS calculation is based on the reference price of the base period 1986-1988 thus, the real expenses are eventually not accounted for in the AMS calculation.

(2) The period 1986-1988, on which the AMS calculation is based, is irrelevant in the light of the current situation where inflation and market commodity price increases occur which force the governments to increase the intervention price, causing developing countries to suffer losses.

Not surprisingly, the G-33 proposal received its share of critiques from other members. The biggest opposition to the proposal comes from the EU and the US. They are afraid that unlimited public stockholding which is not accounted for in the aggregate measurement of supports calculation will distort market prices. They also state that there is no guarantee that the subsidized products will stay in the domestic market and will not enter the international market.

Nevertheless, the United States is a country which provides a large amount of domestic subsidies which continue to increase to this day. And yet, the country has never given updates related to aggregate measurement of supports calculation based on their current expenses to WTO.17

The G-33 countries are trying to address the shortcomings and loopholes in the aggregate measurement of supports mechanism through AMS calculation revision. There are two emerging points: first, the G-33 demands a change in the reference price and that the AMS will be based on the current actual price, not the reference price in



the base period of 1986-1988; second, the G-33 seeks to increase the total production limit on the de minimis calculation for developing countries from 10% to 15%.18

To stop the settlement on the G-33 proposal, the developed countries responded with a counter-proposal called the peace clause strategy.19 The peace clause proposals by developed countries are as follows: (1) temporary waiver for all regulations in the Agreement on Agriculture, (2) a two-year flexibility period given to developing and least-developed countries to allow them to provide more subsidies than the agreed limits. Developed countries are pushing for a time frame of four years for the implementation of the Peace Clause but this is still subject to debate.

At the negotiation process in Geneva, prior to the 9th WTO Ministerial Conference in December 2013 in Bali, the debate got heated. WTO member countries were even made to agree on the draft text regarding this proposal which was issued by the WTO Director General on November 25, 2013. However, the G33 countries, especially India, insisted on refusing the draft text that would manage the peace clause without first reaching a permanent solution regarding their public stockholding proposal. The following are the points in question from the draft text:20

ISSUES DESCRIPTION

Peace Clause All WTO member countries are demanded to exercise due-restraint in challenging developing countries when they give subsidies to public stockholding for food security over the AMS or de minimis calculation. The time frame given for this is only four years until the 9th WTO Ministerial Conference.

There is no guarantee of achieving permanent solution

The draft text only mentions work programs that need to be set in order to find a permanent solution to the public stockholding proposal until the XI WTO Ministerial Conference without mentioning the permanent solution demanded by the G33. Therefore, there is no legal certainty that a permanent solution will be settled until the agreed deadline.

15

There is no guarantee of dispute free in the WTO Dispute Settlement System

Since a permanent solution is not guaranteed, there is chance for developing countries to be disputed under the WTO Dispute Settlement System.

Injustice in the WTO Agreement on Agriculture

The Agreement on Agriculture (AoA) has been in effect since the formal establishment of the WTO last January 1, 1995. It is one of the free trade agreements, which are regulated by WTO and bind all of its members by requiring them to adopt the agreement onto their national policies.

As part of the Bretton Woods system, WTO was established to push the global free trade agenda of industrialized countries such as the United States and European Union, who wish to expand their markets and take over the natural resources of least-developed and developing countries.

The goal of the WTO Agreement on Agriculture is to liberalize its members agricultural sector. Liberalization is exercised by eliminating both tariff and non-tariff trade barriers, thereby opening the countrys market economy to outsiders. This reduces the states role in managing trade and development while letting multinational corporations take a bigger role.

The AoA regulates a couple of main points: (a) market access and (b) commitment to reduce subsidies that distort trade.21 Agricultural products that will be liberalized are divided into two categories raw materials and processed products, except for fishes and forest products as regulated in the Agreement on Agriculture Annex 1.

a. Market AccessAgricultural market opening is carried out by reducing tariff barriers which impede foreign agricultural products from entering a country. The tariff reduction for agricultural products is applied under a scheduled commitment to use rates that are bound from January 1st, 1995; or for unbound tariffs, the actual rate charged in September 1986 when the Uruguay Round began.22

Developed countries were required to reduce tariffs and subsidies over six years from 1995 to 2000, whereas developing countries were given concession to do it from 1995 to 2004. Only the least-developed countries were not required to make a commitment to reducing tariffs



and subsidies. The following table is the schedules of commitments and the rate of tariff reduction for developed and developing countries.23 Table 2. Schedules of Commitments to Reduce Tariffs on Agricultural Products

Type of Commitments Developed countries: 6 years (1995-2000)

Developing countries: 10 years (1995-2004)

Average cuts for all agricultural products

36% 24%

Minimum cuts per product

15% 10%

Source: WTO (2012) compiled by IGJ (2013)

b. Subsidies ReductionThe AoA prohibits subsidies on agriculture because they are considered as the cause of trade distortion. There are two main foci in reducing subsidies: (1) domestic support and (2) export subsidies. Schedules of commitments are also applied on the subsidy reduction regulation. Domestic support is regulated in article 6 of the AoA. Domestic support is the subsidy given by the government to its agricultural sector. However, in accordance with its objective, the AoA prohibits governments to provide agricultural subsidies that could distort trade, thus they need to be reduced or even eliminated. These subsidies refer to ones that have direct effect on price and productions. These subsidies fall into the Amber Box category.

Subsidy reduction is calculated using the total aggregate measurement of supports (AMS) in the period of 1986-1988. The subsidy cannot be more than the AMS, which is calculated using the base year of 1986-1988. The following is the table for subsidy reduction commitments for developing and developed countries:

Table 3. Schedules of Commitments to Reduce Agriculture Subsidies Type of Commitments Developed countries:

6 years (1995-2000)Developing countries: 10 years

(1995-2004)Average cuts for domestic subsidy from total of AMS in the base years of 1986-1988

20% 13%

Calculating Total AMS:(Agricultural product subsidy world market price) X Quantity of Production = Total AMS

Source: WTO (2012) compiled by IGJ (2013)

17

However, the commitment to reduce subsidies cannot be applied if the subsidies both for market prices or productions are given at certain minimum limits or also known as de minimis. Subsidy limitation as allowed by this regulation is 5% of the total value of agricultural production in developed countries and 10% of the total value of agricultural production in developing countries.

Subsidy regulation, which requires one to limit production within defined minimal levels, is also an exception to the subsidy reduction commitment as long as the subsidies do not increase production or exceed the production level agreed in the base years of 1986-1988. These subsidies fall into Blue Box category. However, some of the subsidies in the Amber Box are also included in the Blue Box.

The other exception to the subsidy reduction commitment is a subsidy that is deemed to have no trade-distorting effects. This subsidy can be increased and is allowed without limits. This is categorized as Green Box as defined in Annex 2 of the AoA. Green Box subsidies can be given through government-funded programs and must not involve price support to producers.24

The following are government programs that fall into Green Box category:

(1) General services programs such as research, pest and diseases control, agricultural training and consultation, inspection services, including general inspection and inspection of particular products for health, safety, grading or standardization purposes, marketing and promotion services, and infrastructural services which include electricity reticulation, roads and other means of transport, market and port facilities, water supply facilities, etc.; (2) Public stockholding programs for food security purposes; (3) domestic food aid for the poor; (4) direct payment to producers that will not distort trade; (6) government financial participation in income insurance and income safety-net programs; (7) natural disasters assistance; (8) structural adjustment assistance provided through investment aid; (9) environmental program aid; and (10) various regional assistance programs.25

Developing countries receive special treatments for their public stockholding programs for food security purposes. However, they are still required to include the purchase price and world food price into the AMS calculation.



AoA also prohibits developing countries from providing export subsidies to local agricultural products because they could distort market. And yet, most developed countries provide export subsidies to their agricultural producers. Export subsidies that are prohibited by the agreement include direct payment by the government to exporters, non-commercial stock sales below domestic market price, producer-funded subsidies (that will affect production), production cost reduction action upgrading, handling, and shipments, subsidies for internal transport to ports, and subsidies on incorporated products.

The AoA also requires developed countries to cut the value of export subsidies by 36% and quantity of export subsidies of the base years of 1986-1988 by 21% in a span of six years, up to the year of 2000. Developing countries meanwhile, are required to cut their value of export subsidies by 24% and the quantity of export subsidies of the base years of 1986-1988 by 14% during the time span of ten years, up to the year of 2004. These commitments on subsidy reduction, both domestic and exports, have triggered a strong debate between developed and developing countries because of the huge differences. Developed countries urge developing countries to reduce or even eliminate subsidies for their agricultural sectors, but developed countries do not intend to reduce their own agricultural subsidies. In fact, the data shows that they even increase the subsidies every year. The OECD Report states that agricultural subsidies of OECD countries26 were increasing from US$350.65 in 1996 to US$406.74 in 2011. This sharp difference between the developed countries interest and that of developing countries has caused the dead-lock in the negotiations during the 4th Ministerial Conference in Doha, Qatar in 2001. To this day, this round of negotiation also known as the Doha Round has not yet been settled.

In practice, the AoA only benefits developed countries. Its three main components opening of market access, regulation of domestic

19

subsidies and prohibition of export subsidies merely ensure that the developing countries are bound to support the economy of the developed nations.

Domestic support regulations require developed and developing countries to reduce their government subsidies for agriculture which fall into the Amber and Blue Box categories within a certain period of time. All subsidies should be included in the AMS calculation using the base price of 1986-1989 and countries are prohibited from providing subsidies which exceed the AMS calculation. In accordance with the agreed commitments, they even have to reduce the subsidies. (See Table 4)

But in practice, developed countries apply a higher final bound total AMS than that of developing countries, which mostly apply zero AMS. This allows developed countries to continue giving subsidies to their domestic agriculture while at the same time, accomplish their commitment to reduce their subsidies up to 20% over a period of six years (1995-2001).

Even after the year 2001 when there is no more commitment to reduce AMS, developed countries like the US could still provide subsidies of US$19 billion and EU can still provide subsidies of US$72 billion. In stark contrast, developing countries do not have room for more subsidies, except for the 10% limit of total production (de minimis).27 The following shows various countries level of commitments on AMS:

Table 4. WTO Member Countries Level of Commitment on Subsidies

Source: Action Aid, 1998.

The other deception instigated by developed countries includes the strategy to place certain types of subsidy which normally fall to the Amber Box category into the Green Box category. This sharply increases their agricultural subsidies in contrast with that of developing countries. WTO data shows that the US Green Box subsidies increased from US$46 billion to US$120 billion from 1995-2010.28 Similarly, EUs Green Box subsidies increased from 19 million to 64 billion within same time period.



Developing countries, meanwhile, cannot do the same because their Green Box subsidies are limited to public stockholding for food security purposes where the implementation is limited to the aggregate measurement of supports. As previously pointed out, the developing countries commitment to AMS with 0 AMS is already at the highest level. This is why the developing countries were determined to push for the public stockholding proposal during the 9th WTO Ministerial Conference in Bali last December 3rd - 6th, 2013.

WTO AND FOOD POLICY IN INDONESIA

Indonesias commitment to Agreement on Agriculture

In 1995, Indonesia joined WTO right after it enacted a national law ratifying the Agreement Establishing the World Trade Organization. This made Indonesia an original member of WTO, and one which is obligated to obey WTOs regulations, particularly the Agreement on Agriculture.

There are three main impacts of WTOs agriculture liberalization. First, the market access opening has caused an increase in the number of agricultural import commodities penetrating Indonesias market. Second, the restriction on subsidies for local farmers in Indonesia has caused a decrease in agricultural productivity due to the high production cost which led to the farmers inability to compete against cheaper import commodities. Third, the role of Indonesian Bureau of Logistic or Bulog--a state owned company--as a staple price stabilizer has been weakened through privatization so that the state funding is no longer significant and Bulog is now more of a government official importer.29

In committing to reduce tariff in its agriculture sector, Indonesia now binds 100% of its tariff post. According to the regulation applied to developing countries, Indonesia has to reduce its tariff by as much as 24% within 10 years, from the period 1995-2004, with a minimum 10% reduction per product. The following is Indonesias commitment to tariff reduction for agricultural products based on the WTO schedule XXI.

Table 5. Indonesias Commitment to Agricultural Product Tariff Reduction 1995-2004

Bound tariff in 1994 (%)

Bound tariff in 2004 (%)

Cloves 75 60Dairy products 50-238 40-210

21

Soybean meal 45 40Garlic 60 40-50Wheat 30 27Wheat flour 30 27Rice 180 160Sugar 110 95Soybeans 30 27Alcoholic beverages 170 150

Souce: IGJ Data Center (2013) taken from FAO and WTO Schedule XXI

Regarding domestic subsidies, Indonesia in principle does not commit to reduce its domestic subsidies. Some of its domestic subsidy programs fall into the Green Box category, hence, special and differential treatments can be applied, exempting Indonesia from domestic subsidy reduction.30 Several of Indonesias domestic subsidy programs such as general service,31 agricultural development program, certain commodity price management, and domestic food aid are recorded in AoA schedule IV. Below is Indonesias domestic subsidies since 1995 to 2008 which were eligible for exempt from subsidy reduction commitment.

Table 6. Indonesias Domestic Subsidy Green Box Category 1995-2008 (IDR, billion)

Data is not available for years 2001, 2002 and 2003Source: IGJ Data Center (2013) taken from WTO Notification concerning

domestic support commitments 2000, 2001, 2012, 2013.

Because it has no commitment to reduce subsidies under AoA, Indonesia is subject to the de minimis regulation. In 2000, Indonesias domestic subsidy for rice product was included into AMS calculation. The subsidy was more than de minimis level, which was 10% from total production. The de minimis level is calculated by multiplying the total value of production by maximum subsidy, which is 10%. The total value of production is calculated by multiplying the intervention price by total production. The following is an example:



Intervention price: IDR 2,645/Kg External Reference Price 1988-89: IDR 1,632/KgTotal Production of rice in the yearof 2000: 2.174.807.000 KgTotal value of production of rice = 2645 x 2.174.807.000 = IDR 5.752.364.515.000De minimis Level of rice in the year of 2000 = 10/100 x 5.752.364.515.000 = 575.236.451.500AMS = (2645-1632) x 2.174.807.000 = 2.203.079.491.000

From the AMS it can be seen that the subsidy is over de minimis level. Therefore, Indonesia had to reduce its subsidy on rice in the year of 2000 as regulated in AoA.

Food Reserve Management in Indonesia

In 2012, the Indonesian government enacted the new Food Law No. 18. The law obligates the government to ensure a national food supply from its domestic production and national food reserves. Imports can only be done if the two main sources cannot fulfill the need. However, in this condition where agriculture liberalization and extreme climate change are occurring, food self-sufficiency is difficult to achieve. Therefore, a Food Reserves Policy is essential to achieve food security. The new Food Law obliges the government to establish a national food reserve in anticipation of the following conditions: first, food shortage; second, food surplus; third, food price fluctuation; and fourth, for emergency purposes. Under this law, national food reserves will consist of the central governments and local governments food reserves.32

The government must determine the type of commodity and the amount of food reserves of which procurement should come from domestic production, especially during harvest time. Food reserves distribution will be done in response to food shortage, price fluctuation, social and natural disasters, and emergency.33

Law No. 18 also mandates that the type of food crops available in the national food reserves will be determined by how critical it is for Indonesian consumption, i.e. whether or not a disruption in its availability and price will cause economic instability and social turmoil. However, until now the national food reserves are focused on rice as the countrys staple.

This rice supply is being managed by the Indonesian Bureau of Logistics (BULOG), the national food agency.

23

Despite the new food law issuance, a new technical regulation regarding food reserves was not been completed. Thus, food reserve matters were referred to the old technical regulation. In order to secure rice stock, the Indonesian government issued Presidents Instruction No. 8 of year 2011 to maintain rice price stability and anticipate a disruption in production and price increase.

The instruction covered rice stock security for both governments rice stock and the rice stock allotted for the subsidized rice program for low income families. The instruction also mandates BULOG as a government rice stock procurement implementer. BULOG was mandated to procure rice by taking the government purchase price (HPP) into account. However, if the prevailing market price for rice was higher than the HPP, then procurement was to be done at the higher price than HPP by taking the market price that was recorded by the Central Bureau of Statistics into consideration.34

The HPP scheme was implemented to provide a price guarantee over price equilibrium, especially during harvest time so that farmers income and business could improve.35 Such price intervention required a national rice policy, which is laid out in the Presidents Instruction No. 3 of Year 2012.

The Instruction states that the rice price is determined by the national government through the HPP scheme and that rice purchase and procurement will be done by Bulog.36 The HPP covered by the instruction are as follows:

1. Domestic dry grain purchase price with a maximum of 25% (twenty five percent) water content and a 10% (ten percent) gross content is IDR 3,300 (three thousand and three hundred rupiah) per kilogram from farmers and IDR 3,350 (three thousand and three hundred fifty rupiah) per kilogram from a rice milling company, or IDR 4,200 (four thousand and two hundred rupiah) per kilogram at a Bulog warehouse;

2. Domestic dry grain purchase price with a maximum of 14% (fourteen percent) water content and a 3% (three percent) gross content is IDR 4,150 (four thousand and one hundred fifty) per kilogram at a rice milling company or IDR 4,200 (four thousand and two hundred) per kilogram at a Bulog warehouse.

3. Domestic dry grain purchase price with a maximum of 14% (fourteen percent) water content, 20% (twenty percent) broken grains, 2% (two percent) grouts level, and minimum of 95% rices whitening degree is



IDR 6,600 (six thousand and six hundred rupiah) per kilogram at Bulog warehouse.

The Instruction also covers the possibility of rice procurement through importation which will only be done if the domestic stock is not sufficient to meet the stocking need or the government rice reserves, and to maintain domestic price stability. The rice imports will also be procured by Bulog.

Bulog is also tasked to implement the governments rice reserve distribution which is mainly for low-income families or families eligible to receive rice for the poor (Raskin). However, rice reserves may also be distributed through the market operation mechanism also conducted by Bulog- in order to stabilize the market price.

As per Minister of Trade Regulation No. 4/M-DAG/PER/1/2012, rice distribution is done through market operation only when the price increases up to 10% or more than the normal price for one week or when its troubling the people.37 The market operation is done in the traditional and main markets, and other places accessible by consumers where the highest retail price can be found during the market operation that is consistent with normal price in each region.38

The Role of the Indonesian Bureau of Logistics (Bulog) in National Food Reserves Procurement and Distribution

Bulog is the government agency which was established in 1967 to control the price and supply of basic food. These include crop staples such as rice, sugar, wheat, and soybean. Other commodities under Bulogs jurisdiction include cattle feed, cooking oil, eggs, and beef, as well as spices. In recent years, however, Bulogs development role has been getting smaller.

Bulog as a public corporation had two roles: public service obligation and commercial entity. Bulogs role in public service obligation was to manage the governments food reserves to stabilize prices and to distribute basic food to certain communities.39 Bulog was required to absorb local farmers production, yet was still allowed to import in particular conditions.

In 1998, when the economic crisis struck the region, the Indonesian government agreed to accept financial assistance from the International Monetary Fund (IMF) to end its fiscal disaster. Part of the IMFs bail-out package included a demand for the government to discontinue

25

Bulogs regulatory role over basic commodities. Consequently, Presidential Decree No.19 of year 1998 was passed, limiting Bulogs role to managing rice commodity while other commodities will be managed by the market.40

In 2003, Bulog underwent privatization, becoming a profit-oriented company instead of a public corporation. The Government Regulation No. 7 of year 2003 regarding Bulog public corporation establishment was amended by the Government Regulation No. 61 of year 2003 to include the provision that not only Bulog shares will be government-owned but will also be open to joint-venture projects or investment by other companies.41

Bulog used to have a monopoly on rice imports in Indonesia. But with the opening of the market through the issuance of the Indonesian Minister of Trade Regulation No. 12/M-DAG/PER/4/2008 which regulated rice export and import, private companies can now import rice. Bulog has now been relegated to importing low quality rice for the purpose of stabilizing price, or as an emergency response in cases of food insecurity or for the general consumption of low-end income market.

Because of its role in public service obligation, Bulog receives funds set by the Ministry of Finance to procure government rice reserves each year. However, for commercial purposes, Bulog uses commercial credit to procure the rice.

Bulog is required to buy rice from farmers at a government purchase price (HPP) which is determined by the government. Ideally, this would benefit farmers since they can increase their income but Bulog did not implement the policy as regulated.

Bulog works with rice milling companies or rice grain management units to procure domestic rice. A company has to meet several requirements to become Bulogs partner. First, they must have a business license; second, deposit money amounting to 98.5% of the first rice grain supply value to Bulog as collateral for grain procurement work contract; third, provide a drying floor, rice huller and warehouse; and fourth, provide guarantee for rick and sack procurement.42

In practice, however, grain rice management units buy grains directly from the farmers or vendors, using applicable prices during transaction. Afterwards, the units resell the rice to Bulog at HPP terms. This is the reason why the policy has not significantly increased farmers welfare.



Subsidies for Food Security in Indonesia

The Indonesian government has budgeted subsidies for food security and the food price stabilization program. These subsidies aim to improve food production, price affordability and food distribution, food diversification and quality and types of processed food, as well as provide protection and empowerment to farmers. The following are subsidies for food security in Indonesia for the fiscal year of 2013 and 2014:

Table 7. Subsidy for Indonesia Food Security 2013-2014

Subsidies in FY 2013 Subsidies in FY 2014

Activities The value of subsidy

Activities The value of subsidy

1. Irrigation infrastructure development in 111,251 acre and construction of 275 lakes.

IDR .19,5 Trillion 1.Food security for price stabilization and fulfill peoples need of food.

Ministry of Agriculture: IDR 15,5 TrillionMinistry of Maritime and Fishery: IDR .6,5 Trillion.

2. Raskin or rice for poor provision with target of 15.5 million households.

IDR 17.2 Trillion 2. Raskin or rice for poor provision with target of 15.5 million households.

IDR 18.8 Trillion

3. Strengthening food security which is used for a. increase food production targeting 10 tons rice surplus; b. improve price affordability and food distribution

IDR 63.2 Trillion 3 Governments rice reserves managed by Bulog reached 240 million tons. Price stability for soybean, beef, and granulated sugar.

IDR 2 Trillion+ IDR 4,95 Trillion

4. Government rice reserves managed by Bulog

IDR 2 Trillion 4. Fertilizer subsidies IDR 21 Trillion

5. Fertilizer subsidies IDR 16.2 Trillion 5. Seeds subsidies IDR 1.6 Trillion

6. Seeds subsidies IDR 1.5 Trillion 6. Credit interest subsidies

IDR 3.2 Trillion

7. Credit interest subsidies

IDR 1.2 Trillion 7. tax subsidies to support basic need price stabilization

IDR 4.7 Trillion.

Total (Curs 11,000/1 USD)

IDR 120,8 Trillion (US$ 10.98 Million)

Total (curs 12.000/1 USD)

IDR 78,25 Trillion (US$ 6,52 Million)

Source: IGJ Data Center, taken from Ministry of Finance Republic of Indonesia, State Budget of 2013 and 2014

27

Comparatively, the subsidies provided by the EU and US to their agriculture are way higher than that of Indonesias. In 2009 alone, the EU subsidy on agriculture reached US$ 106 billion, while the US in 2010, provided 130 billion.43 This is the consequence of a one-sided, unjust WTO Agreement on Agriculture (AoA) which is being imposed on developing countries.

In practice, agricultural subsidies - both quality and quantity, have problems. The government of Indonesia was not able to bring down the agricultural production cost which is a burden among farmers. The governments intervention strategy through the imposition of the government purchase price even failed to stabilize the rice market, resulting in low government rice reserves.

The implementation of subsidies for seeds and fertilizer also face similar problems. The private business sector essentially takes the states budget allocation because the subsidy distribution goes to seed and fertilizer companies. Farmers become victims of high retail prices implemented by official distributors which are limited and are often located far from the farmers. This mechanism rather puts farmers at a disadvantage. Moreover, seed and fertilizer production businesses are controlled by transnational companies (TNCs). For example, TNCs control 100% of pesticides products (insecticides, fungicides, and herbicides), hybrid rice and corn seeds and horticulture seeds while national corporations control 100% of inbred rice seeds. Indonesian corporations control 70% of fertilizer products while the TNCs control the remaining 30%.44

IMPLICATIONS OF THE G33 PROPOSAL FOR FOOD SOVEREIGNTY IN INDONESIA

The fate of the G33 proposal floats in WTO

The agreement on the Bali Package at the 9th WTO Ministerial Conference last December 2013 nullified the gains of the G-33 proposal. No longer were the discussions focused on achieving permanent solutions to the proposal; instead, it was focused on the implementation period of the Peace Clause which is being pushed by developed countries like the US and the EU. Moreover, support for the G-33 proposal from the G-33 member countries was diminishing. India became the only country to retain the proposal until the final seconds of the Ministerial Conference. In the end, it capitulated to the Peace Clause in exchange for a trade



off on the Trade Facilitation Agreement with Agriculture a strategy launched by the developed countries.

What was agreed upon within the Bali Package deal was to float the fate of the G-33 proposals for public stockholding without clarity and legal certainty. Nowhere in the text generated in the Bali Package was a permanent solution drafted. In fact, all member countries of the WTO were asked to negotiate the G33 proposal in order to find a permanent solution to the pre-determined time period.

Some of the terms agreed in the Peace Clause essentially provide flexibility for developing countries to increase their subsidies for public food reserves subject to the applicable rules. When we see it in details, the textual content of the Bali agreement on the public stockholding proposals is very weak. (See text in Appendix) Developing countries who want to make exemptions to the AoA provisions relating to domestic subsidies, especially on public food reserves, must meet several mandatory requirements which are not easy to follow. For example, the State should notify and fill out the form on relevant information about statistical data of commodities which will be exempted from the AoA rules. There is also a consultation process which must be conducted with all WTO country members. A request of a State for an exception takes a long time, and there is no guarantee that all member countries will approve the application. Even the 4-year time frame provided is not enough to make the consultation process. Therefore, the effectiveness of the Bali deal is very questionable.

G33 Proposal in Indonesia Food Policy

The failure of the G33 proposal in the Bali negotiations should become a reflection for the Indonesian food policymakers. Limitations of the rules which appear in the agreement text will not do much for Indonesia. Moreover, the national food policies also still have some drawbacks.

The main target in the G33 proposal is to amend Annex 2, paragraph 3, footnote 5 (refer to page 13) of the AoA. This will exclude the unlimited subsidy for the benefit of public food reserves from the calculation of AMS. If this is not achieved, then the alternative solution is to revise the reference price adjusted to the actual price and increase the de minimis limit of maximum levels from 10% to 15% to benefit the public food supplies of developing countries.

29

The Indonesian government subsidizes public food reserves only for rice, which it considers as staple food. The food security subsidy that goes into the category of public food reserves, as defined in the AoA Annex 2 paragraph 3, are managed by the government and the Bulog rice supply for the poor (Raskin).

In 2013, the Indonesian government has been distributing subsidized food reserves to stabilize prices using the intervention price for rice procurement totaling to Rp.2 Trillion. In addition, the provision for Raskin in 2013 has reached Rp.17, 2 Trillion. With a budget of Rp 2 trillion in 2013, Bulog is only able to absorb 606,060 tons of grain in order to increase the governments rice reserves. With a budget of Rp.17, 2 trillion, Bulog has channelled as much as 2.79 million tons. Bulog claims that in 2013, it absorbed as much as 3.5 million tons of rice, of which 3.43 million tons were set for Raskin.45

In practice, however, the absorption of the product by the domestic rice farmer does not work out well as imagined. Ideally, increasing the HPP (farmers basic price) can become an opportunity for increasing farmers income since it will increase the value of the public subsidy reserves. But in reality, the HPP does not guarantee wealth creation for farmers. This is because often times, the HPP is way below the market price, so farmers are not able to profit from their produce. For instance, the data gathered by the Indonesian Peasant Alliance (API) during the period of January-June 2013 showed that the average price of rice crop increased to $ 3.962/kg, far above the HPP which is only Rp 3300/kg.46

Local farmers experience losses because Bulog does not buy directly from farmers. The API research revealed that farmers sell their rice produce immediately after harvest in the form of a dry grain harvest (GKP) and even unprocessed paddies or paddies which are newly cut from the field to the milling business unit. As a consequence, farmers do not benefit from post-harvest added value.47

Based on data from the Central Statistics Agency (BPS), Indonesias national rice production in 2013 is equivalent to 50.41 quintal/hectare in a year.48 On the average, a farmer per hectare is only able to earn an income of Rp 1.41 million/month on the value of HPP. This value is way below the average of monthly household consumption value of Rp 5.58 million,49 which explains how poor the life of farmers in the village. Raskin also has many disadvantages. Its budget of Rp 17.2 trillion can



only be used to distribute rice to 15.5 million poor families, who are rationed by as much as 15 kg/month. Based on the BPS assumption that the average annual consumption of rice per person is as much as 113.7 kg or 9.5 kg/month, a family of four then requires as much as 38 kg/month.50 Therefore, with only a small portion distributed to Indonesias poor, the government-delivered food aid cannot really meet the over-all rice requirement.

Distribution of food aid should be enhanced to meet the food needs of the poor in Indonesia in consideration of the increasing population of poor people in the country.

From March September 2013, the BPS recorded an increase in rural poverty which amounted to 0.48 million people. Significantly in 2013, the population of poor people in Indonesia reached a total of 28.55 million people, with poverty rates reaching 17.92 million people in the rural level and 10.63 million people in the urban level.

Bulogs intervention in stabilizing prices has its drawbacks. Simply put, its effect on the market is only temporary. This is because, food prices are left to the market mechanism and the government does not have the authority to set the price. Price fluctuation does not only occur in rice, but also in other food commodities such as meat, soy, and sugar. All of these basic commodities do not enter into government food reserve program and are instead released to the market mechanism.

31

In addition, the import activity is not stopped entirely by the Government. From 2009-2013, the value of food imports increased from U.S. $ 5.94 billion to U.S. $ 7.21 billion. The worst spike was in the year 2012, which amounted to U.S. $ 12.05 Billion.51

The influence of the G33 Proposal to the national food policy is questionable. The strength of the proposal is the removal of restrictions on subsidies to public reserve that will open up opportunities for increasing the value of subsidy for national food reserves. This means the recipients of food aid will increase and the aid value can possibly increase to 39.5% of the total rice needed for a month, as has been implemented in the Raskin program.

However, we need to keep in mind that the rules of AoA do not allow food price distortion. So, it will be difficult for government to set a purchase price which is higher than the average price. The G33 proposal does not intend to eliminate the rules relating to the determination of food price benchmark, but only seeks to change the benchmark of the worlds food prices. Price distortion is still a big enemy to agriculture liberalization.

These gaps in Indonesias national food policy have hampered its objective of food self-sufficiency. This will also affect the effectiveness of the G33 proposal in the country. For example, Bulogs new mandate to restrict itself only to rice market regulation has made it unable to stop Indonesias dependency on imported food such as sugar, meat, and other basic commodities. Bulogs market operations cannot answer the issue of fluctuations in prices of other food commodities. Therefore, revising the national food policy should become the governments priority agenda. The G33 proposal will not make a significant impact if the national food policy is not revised.

G33 Proposal & Food Sovereignty

The weaknesses of the Bali Agreement text and the limitations of G33 Proposal on ending agricultural liberalization are obstacles towards Indonesias goal of food sovereignty.

Food sovereignty is the only answer to the liberalization of the agricultural system today. Wahono (2011) recommended several steps that can be done to restore the concept of food sovereignty: first, the need for state intervention in setting prices, so that the public can access affordable food and encourage welfare for farmers; second,



food (agriculture) should not be treated as a trade commodity, but as a basic right to life of the people; third, access and control over agricultural, especially land, water, and biodiversity should be given to farmers; fourth, women farmers must be put at the forefront of community organizing and not just a complement in agricultural system; fifth, support from the state in the form of production subsidies in order to maintain the resilience and protect local farmers culture; sixth, the implementation of a cooperative system which will generate good management of the agricultural communities in both upstream and downstream and not just profit-oriented; seventh, preserving local culture based on food sovereignty, which can be done through compulsory curriculum in the formal educational system of government.52

In the light of Wahonos articulations, we posit that the G-33 proposal cannot stop agricultural liberalization in Indonesia. This is because the proposal does not set out to eliminate the rules which open the market to import goods. It even limits its regulation to a single national staple crop, allowing the prices of other basic food commodities like meat, soybean, sugar to keep increasing. As a whole, the proposal does not encourage the G33 to change the commitments that have been established by the Government of Indonesia to the national staple food commodities.

The G33 proposal will not be able to return the control of agricultural resources, such as land, to the farmer. The biggest obstacle is related to the conversion of land that eventually displaces many farmers from food production. The BPS data in 2009 mentioned the conversion of 8,106,858 hectares of land. Land conversion is done with 41.32% allocated for plantations, 28.73% for residential, 4.82% for offices and industries, and 16.60% for other uses. This juxtaposes the fact that farmers in the villages only possess 0.5-1 acre of land. The population of farmer families has already reached 14.24 million, making land distribution for farmers a major responsibility that government should comply.

Likewise, the G33 proposal has not eliminated the obligation of Member States to ensure subsidies that would not distort the market price as provided in the AoA. This is because G33 Proposal only aims to change the basic reference price. A member state still cannot define their own food prices in accordance with the peoples purchasing power. Thus, any increase in food prices cannot be anticipated by a State. So, the benchmark price for the farmers still has to refer to the AoA.

33

An example is the increasing cost of agricultural production which results in the decline of agricultural productivity. The BPS data states that in 2013, there was an increase of 2.95% in the producer price index in agriculture and when compared to 2012 (year on year/ yoy), the increase was up to 4.39%. 53 This increase eventually led to the decline of the Farmers Exchange54 (NTP). BPS states further that in January 2014, there was a decline of 0.37% in the NTP. This is due to the increase in the index price paid by growers which is 1.09% compared to the index price received by farmers that is only 0.92%.

Hence, the G33 proposal will not be able to achieve national food security and sovereignty for Indonesia. The concept of food sovereignty is not included in the G33 proposal. This is because the instrument of AoA favors multinational corporations (MNCs) that will compete with each other for control of food resources in developing countries. Even developing countries are competing among themselves to win trade liberalization.

Priority Agenda

We cannot expect WTO to help Indonesia achieve food sovereignty. The AoA implementation has resulted in poverty and hunger for farmers everywhere. The G33 proposal cannot even stop the agricultural liberalization since it is a temporary fix to the flaws brought about by the AoA.

It is difficult to ascertain whether the post-Bali negotiations on the G33 Proposal will progress towards a permanent solution. The competing interests of both developed and developing countries will only continue. In fact, there are even competing interests between developing countries regarding this issue! In 2015, Indonesia and others ASEAN member countries will be integrated as the ASEAN Economic Community (AEC). This will also have an impact on the ongoing liberalization of the ASEAN agricultural landscape. The liberalization of the agricultural sector in AEC 2015 will run through the opening of market access and opening investment flows. That is, the multinational corporations (MNCs) will be the key players to control the industrialization of agriculture (agro-industry). This will further marginalize the role of farmers in agriculture. The ASEAN Economic Integration will only strengthen the rules related to foreign investment flows to support agricultural industrialization which has already been established by the Government of Indonesia through Presidential Decree No. 36 of 2010. This Decree allows ownership of foreign corporations of up to 95% dealing with agricultural cultivation



and the processing industry.

WTO cannot resolve Indonesias national food issues. The Bali Text Agreement should be refused because this is difficult to implement and will only harm national interest. Further, the success of the G33 proposal cannot be an indicator in stopping agricultural liberalization. Achieving a permanent solution under the G33 proposal is only the first step in the struggle for food sovereignty.

Therefore, the main agenda of the Government of Indonesia in the face of agricultural liberalization should be to revise the national food policy by restoring the regulatory oversight role of Bulog and stop imports from flooding the market. This effort will increase competitiveness and sovereignty of small farmers in Indonesia.

More importantly, the struggle to restore food sovereignty and the fulfillment of national food needs should start with the farmers re-asserting their sovereignty.

Endnotes1. Compiled by IGJ from ASEAN Statistical Yearbook 2012 on ASEAN Major Origin of

Agricultural Import Commodities 2010-2011 2. Erani Yustika, Food and Inflation Disaster, Kompas daily, 1 Agustus 2013.3. The Import and the Loss Caused by ACFTA: Agriculture, Food and Fishery Sectors,

Free Trade Watch Edition II-Indonesia for Global Justice, July 2011, page 89-914. Bisnis Indonesia Daily, 25th July 2013, Garlic Cartel: 19 Companies Become the

Reported5. World Bank: Regional Growth Forecast 2013. 6. FTA Agendas, which draw attention in Asia Region are ASEAN RCEP and Trans Pacific

Partnership. 7. Singapore Issue, also called New Issue, consists of investment, government

procurement, competition policy, and trade facilitation. 8. South Centre Analytical Note, May 2011, Trade Facilitation State of Play and

Implications of an Early Harvest on Developing Countries.9. South Centre Informal Note, WTOs MC9: Summary of Issues, November 2013.10. South Centre Informal Note, WTOs MC9: Summary of Issues, November 2013. 11. Article 7 paragraph 2 AoA and Article 6 paragraph (1) AoA.12. Annex 3 paragraph 1, 2, 3, and 8.13. Annex 3 paragraph 9.14. The Understanding WTO Agreement: Agreement on Agriculture, 2004, Page 5.15. Article 6 paragraph 4 AoA. 16. WTO Document, October 2013, Informal Meeting Report on Agriculture

Negotiations.17. Jacques Berthelot, Analysis of the G-33s proposal to change the AoA provision on

public stockholding for food security, 2013.18. WTO Document, October 2013, Informal Meeting Report on Agriculture

Negotiations.

35

19. A legitimate mechanism is regulated in the AoA without violating the AoA regulations. Developed countries use this to avoid the G-33 amendment proposal.

20. Draft text on public stockholding for food security purposes, WTO Trade Negotiation Committee Document JOB/TNC/29, 25 November 2013.

21. The WTO Agreement Series: Agriculture, 2003, page.422. The Understanding WTO, 2012, page.28.23. Ibid.24. Article 1, Annex 2, Agreement on Agriculture. 25. Article 2-13 Annex 2, Agreement on Agriculture.26. OECD countries include Australia, Austria, Belgium, Canada, Chile, Czech Republic,

Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxemburg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom, and United States.

27. South Views, WTO Food Security Issue South Experts Report, November 2013, www.southcentre.int

28. Ibid. 29. Bonnie Setiawan, Agriculture Globalization: Threats to Nations Sovereignty and

Farmers Welfare, 2003, page: 85-88.30. FAO Report, WTO Agreement on Agriculture The Implementation Experience,

Developing Country Case Studies: Indonesia, 2003.31. General services includes: agricultural research and development programs,

agricultural training and extension programs, livestock development programs, estate crops development programs, agribusiness development programs, food crops and horticulture development programs (regulated in Annex 2).

32. Article 23, 24, and 27 Law No.18 of year 2012 regarding food.33. Article 28 and 31 UU No.18 of year 2012 regarding food. . 34. M.Nuruddin, et. al., the Effectiveness of Government Purchase Price on grain and

rice for the year 2012 and the price multi-quality implementation, Indonesian Farmer Alliance, 2013, page.30.

35. Ibid, page. 31.36. First and third instructions of Presidents Instruction No.3 of year 2012, issued in

Jakarta, on February 27, 201237. Article 2 paragraph (2), article 1 no. 2, Ministry of Trade Regulation No.4/M-

DAG/PER/1/2012 regarding government rice reserve use for the purpose of price stabilization on January 18, 2012

38. Article 2, paragraph (1), article 6, Ministry of Trade Regulation No.4/M-DAG/PER/1/2012 regarding government rice reserve use for the purpose of price stabilization on January 18, 2012.

39. Article 6 Government Regulation No.7 of year 2003 regarding the establishment of Bulog on January 20, 2003

40. Bulog Profile, downloaded from http://www.Bulog.co.id/sejarah_v2.php on June 8, 2012

41. Article 9 Government Regulation No.7 of year 2003 regarding the establishment of Bulog on January 20, 2003

42. M.Nuruddin, et al.., the Effectiveness of Government Purchase Price on grain and rice for the year 2012 and the price multi-quality implementation, Indonesian Farmer Alliance, 2013, page:43.

43. South Views, WTO Food Security Issue South Experts Report, November 2013, www.southcentre.int

44. Dwi Andreas Santosa, Opportunities and Challenges on Agricultural Liberalization Agenda, 2013.

45. Bulog, disbursement figures RASKIN Grain Procurement and Internal Affairs, as of January 2, 2014.

46. M.Nuruddin, et al., p: 37.47. Ibid. Page: 5248. The production of rice crops across the province in 2013, the BPS.



49. Cost of Living Survey 2012, BPS.50. Bappenas, Social Protection Programme Implementation Report, 2014.51. Ministry of Agriculture, Book IV Macro Agricultural Statistics, 2013.52. Francis Wahono, Kedaulatan Pangan: Agriculture bukan Agribusiness, Mensiasati

Negara Lupa Bangsa, Bina Desa, 2011, hal.31-32. 53. BPS Statistics, Producer Price Index Developments Third Quarter, 2013.54. benchmarks farmers income

Photo credits : https://www.flickr.com/photos/endwto

37

Annex 1

PUBLIC STOCKHOLDING FOR FOOD SECURITY PURPOSES MINISTERIAL DECISION OF 7 DECEMBER 2013

The Ministerial Conference,Having regard to paragraph 1 of Article IX of the Marrakesh Agreement Establishing theWorld Trade Organization;

Decides as follows:

1. Members agree to put in place an interim mechanism as set out below, and to negotiate on an agreement for a permanent solution1, for the issue of public stockholding for food security purposes for adoption by the 11th Ministerial Conference.

2. In the interim, until a permanent solution is found, and provided that the conditions set out below are met, Members shall refrain from challenging through the WTO Dispute Settlement Mechanism, compliance of a developing Member with its obligations under Articles 6.3 and 7.2 (b) of the Agreement on Agriculture (AoA) in relation to support provided for traditional staple food crops2 in pursuance of public stockholding programmes for food security purposes existing as of the date of this Decision, that are consistent with the criteria of paragraph 3, footnote 5, and footnote 5&6 of Annex 2 to the AoA when the developing Member complies with the terms of this Decision.3

NOTIFICATION AND TRANSPARENCY

3. A developing Member benefiting from this Decision must:a. have notified the Committee on Agriculture that it is exceeding or

is at risk of exceeding either or both of its Aggregate Measurement of Support (AMS) limits (the Members Bound Total AMS or the de minimis level) as result of its programmes mentioned above;

b. have fulfilled and continue to fulfil its domestic support notification requirements under the AoA in accordance with document G/AG/2 of 30 June 1995, as specified in the Annex;

c. have provided, and continue to provide on an annual basis, additional information by completing the template contained in the Annex, for each public stockholding programme that it maintains for food security purposes; and

d. provide any additional relevant statistical information described in the Statistical Appendix to the Annex as soon as possible after it becomes available, as well as any information updating or correcting any information earlier submitted.



1 The permanent solution will be applicable to all developing Members.2 This term refers to primary agricultural products that are predominant staples in the traditional diet of a developing Member.

3 This Decision does not preclude developing Members from introducing programmes of public stockholding for food security purposes in accordance with the relevant provisions of the Agreement on Agriculture.

ANTI-CIRCUMVENTION/SAFEGUARDS

4. Any developing Member seeking coverage of programmes under paragraph 2 shall ensure that stocks procured under such programmes do not distort trade or adversely affect the food security of other Members.

5. This Decision shall not be used in a manner that results in an increase of the support subject to the Members Bound Total AMS or the de minimis limits provided under programmes other than those notified under paragraph 3.a.

CONSULTATIONS

6. A developing Member benefiting from this Decision shall upon request hold consultations with other Members on the operation of its public stockholding programmes notified under paragraph 3.a.

MONITORING

7. The Committee on Agriculture shall monitor the information submitted under this Decision.

WORK PROGRAMME

8. Members agree to establish a work programme to be undertaken in the Committee on Agriculture to pursue this issue with the aim of making recommendations for a permanent solution. This work programme shall take into account Members existing and future submissions.

9. In the context of the broader post-Bali agenda, Members commit to the work programme mentioned in the previous paragraph with the aim of concluding it no later than the 11th Ministerial Conference.

10. The General Council shall report to the 10th Ministerial Conference for an evaluation of the operation of this Decision, particularly on the progress made on the work programme.

39

Annex 2Template[Developing Members name]

General information1. Factual information confirming that DS:1 notifications and relevant

supporting tables for the preceding 5 years are up-to-date (e.g. date and document details)

2. Details of the programme sufficient to identify food security objective and scale of the programme, including:

a. Name of the programme

b. Traditional staple food crop(s) covered

c. Agency in charge of implementation

d. Relevant laws and regulations

e. Date of commencement of the programme

f. Officially published objective criteria or guidelines

3. Practical description of how the programme operates, including:

a. Provisions relating to the purchase of stocks, including the way the administered aquisition price is determined

b. Provisions related to volume and accumulation of stocks, including any provisions related to pre-determined targets and quantitative limits

c. Provisions related to the release of stocks, including the determination of the release price and targeting (eligibility to receive procured stocks)

4. A description of any measures aimed at minimising production or trade distortive effects of the programme

5. Statistical information (as per the Statistical Appendix below)

6. Any other information considered relevant, including website references



Statistical Appendix (per crop) (data for the latest three years)

Unit [Year 1] [Year 2] [Year 3]

[Name of the crop]

a. Opening balance of stocks

b. Annual purchases under the programme (value)

c. Annual purchases under the programme (quantity)

d. Annual releases under the programme (value)

e. Annual releases under the programme (quantity)

f. Purchase prices

g. Release prices

h. End-year stocks

i. Total production (quantity)

j. Total production (value)

k. Information on population beneifting from the release of this crop and quantities released:

- Estimated number of beneficiareis at the national level and, if possible, at sub-national level

- Quantity released to the beneficiaries at the national level and, if possible, at the sub-national level

- Other

l. In the case of government aid to private storage, statistics on the support granted and any updated statistics

m. Total imports (value)

n. Total imports (quantity)

o. Total exports (value)

p. Total exports (quantity)

INDONESIA

CONFRONTING A CHANGING CLIMATE IN INDONESIAA Case Study of Rice, Onion and

Opening the Floodgates

Documents

Transcript of Opening the Floodgates