Let the flag follow the trade

Jul 14, 2020

It’s a curious cluster – Jamaica, Luxemburg, Costa Rica and Jordan. Squashed in the middle at 73 is Indonesia. It’s a lousy rank on the World Bank’s Ease of Doing Business Register because it shouts at potential investors: Beware! Yet Australians are being urged by their government to take risks.

Simon Birmingham is a perpetual grinner. This makes the SA Senator ideal for dealing with Indonesian politicians and business folk who prefer smiling to stern.

The Minister for Trade, Tourism and Investment is doing high-fives at a distance having scored the free-trade goal which eluded his four predecessors. But pity his wife Courtney.

This is the likely response when she asks if he’d like a coffee: ‘I’ll consider putting it on the table once the situation resolves itself, for a breakfast beverage forges closer people-to-people relationships and creates a pivotal framework to unlock our bi-lateral partnership particularly when we share a common geographic zone which has many unrealised possibilities ….’

By the time he’s come up with an answer, Mrs B would have driven their two girls to school and the kettle would have boiled dry.

That’s how it was last week when Birmingham took almost half a one-hour webcast to tell 1,600 well-informed participants clichés they’d heard many time. His job was to launch the Indonesia-Australia Comprehensive Economic Partnership Agreement which has taken ten years of often stumbling talk to shred tariffs between the two neighbours.

The imbalance is stark. Last year Australia imported AUD 3 billion worth of Indonesian products and sent commodities valued at AUD 6.7 billion the other way. Jesters quip: ‘Indonesia has great potential – and always will.’

West Australian Phil Turtle, chair of the Australia – Indonesia Business Council which hosted the show, is also a cheerful guy; this shackled his task of prising anything specific out of the garrulous Birmingham. He never succeeded.

Apart from his instinct to maunder, the minister – along with the corporate world – doesn’t know how the IA-CEPA will work post-pandemic. It might be a splendid achievement which benefits all – or a good idea which doesn’t function, like the Covid-19 app.

The polies on both sides and the business folk who have been pushing for this logical deal deserve applause. Talks often snagged well-charted cays careful captains would have avoided.

The most recent was just 18 months ago when Scott Morrison reckoned steaming behind Donald Trump and recognising West Jerusalem as Israel’s capital was a smart idea. Though not the Indonesian negotiators.

Palestinian leaders pushed Muslim countries to ban Australian imports if the embassy was moved. Indonesia isn’t an Islamic state but officially 88 per cent of its 270 million citizens follow the faith.

Someone with a little knowledge of such issues pointed out the hazards. Morrison slammed the engines into reverse by saying no embassy move from Tel Aviv until there’s a peace settlement. The talks were refloated.

The big stuff looks OK. If all goes well in the next few years there’ll be more Ozzie grains flowing into Indonesian silos, and our free-range cattle penned into feedlots.

The deal includes a 575,000-head quota, expanding four per cent annually. This should give pastoralists more certainty than the on-off, up-down situation they’ve been facing.

That’s provided Black Sea growers and Indian buffalo farmers don’t undercut the Australian price or that the ultra-nationalists don’t start shouting that our wheats are contaminated and haram. These are the sort of tactics used in the past to thwart competition.

Tariffs are blunt instruments in trade brawls. Eliminating them is like banning knuckledusters – the thugs just turn to knives. There are regional regulations, VATs, import licences, luxury taxes, quarantine rules and wharf delays in the isolationists’ armoury.

Although the IA-CEPA boosters claim Indonesia will now send us furniture, fish and fabrics, they could have done so anyway. The 2010 ASEAN-Australia-New Zealand Free Trade Area agreement eliminated tariffs on most goods from developing countries. Few exporters have been interested because the Australian market is finicky and too small, one Aussie consumer to every 11 Indonesians.

Cars are also included, but there’s a problem under the bonnet. Australia wants electrics. There are plans for Indonesia to start production, but factories are still tooled to make internal combustion engines.

More encouraging is the deal allowing tertiary educators into the archipelago. Monash is the most ambitious, led by pro vice-chancellor Professor Andrew MacIntyre. It’s set to open post-grad courses in Jakarta in late 2021, making it the first foreign branch campus in Indonesia.

Although other nations have long allowed overseas educators onto their soil, (Monash is already in Selangor in Malaysia, Suzhou in China and Mumbai in India) paranoid administrations have resisted, knowing foreigners usually have better standards and higher qualifications than local academics, drawing students seeking quality.

The uni hopes for 2,000 masters, 1,000 executive education students and 100 doctoral candidates in the next decade. Grads will get Monash degrees.

Absent from the on-line rah-rah was former investment banker Thomas Lembong, the Harvard-educated one-time Trade Minister, now head of the Investment Coordinating Board.

Although he lasted less than a year in the ministry, he was an articulate and enthusiastic promoter of free trade. This delighted the Australians though not Indonesian protectionists urging the government to crimp imports and put more energy into making the Republic self-sufficient. The latest idea being promoted by President Joko Widodo is to create intensive farming ‘food estates’.

During the talks the Indonesians sought jobs for nurses, maids and construction crews – extending people exports beyond Hong Kong, Singapore and Malaysia.

Indonesian workers are often multi-skilled, willing and prepared to live in remote areas. Here the nervous negotiators fearing a domestic political backlash (cue unions and Pauline Hanson), took a tough line.

The IA-CEPA does boost quotas on work and holiday visas, eventually allowing entry for 5,000 Indonesians a year. Till Covid-19 arrived, visas were unlimited for most European backpackers who labour on market gardens and farms. Make of that what you will.

Overall this FTA is a leap forward for Australian primary producers and a shuffle ahead for courageous others. At this stage, it’s difficult to see many benefits for Indonesian shoppers unless the deal is backed by massive and consistent promotions highlighting Aussie quality and raising awareness of origins. The flag of friendship might then follow trade.

(Covid-19 update: As the mainstream media generally ignores the health crisis next door we sadly report more than 70,000 officially confirmed cases and close to 3,500 deaths.)

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