U.S. Wins WTO Trade Enforcement Dispute for American Farmers and Ranchers

Contact: Matt Swenson, Office of the U.S. Trade Representative, mswenson@ustr.eop.gov, (202) 395-6654

WASHINGTON, Dec. 22, 2016 – The Obama Administration has secured another trade enforcement victory for American farmers, ranchers, and businesses. United States Trade Representative Michael Froman announced today that a World Trade Organization (WTO) dispute settlement panel has found in favor of the United States’ challenge to Indonesia’s wide-ranging restrictions and prohibitions on horticultural products, animals, and animal products. The United States, working closely with New Zealand as co-complainant, filed this dispute to address trade barriers in Indonesia that restrict the importation of American fruits and vegetables (such as apples, grapes, and potatoes), animal products (such as beef and poultry), and other agricultural products.  

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

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

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WTO Panel findings will discourage Indonesia from simply substituting new trade-distorting approaches for the measures repealed, restoring American farmers' and ranchers' ability to compete.”

“American jobs – including thousands in my District – are jeopardized when other countries attempt to skirt trade rules,” said U.S. Congressman Rick Larsen. “Today’s report adds to a growing list of victories for the current administration’s record of enforcing trade rules and protecting US jobs that count on a level playing field to compete against foreign competitors.”

"Today’s announcement is a win for Washington’s apple industry and agriculture community. The Indonesian government’s trade restrictions have limited access for our exporters to this important market and harmed growers in my state,” said U.S. Congressman Dave Reichert. “We must always fight against these types of actions that hurt consumers and limit opportunity for our communities. I thank Ambassador Froman and his team for their commitment to eliminating barriers and supporting U.S. agriculture.”

Background on Dispute

Since 2012, Indonesia has maintained unjustified and trade-restrictive licensing regimes for the importation of horticultural products and animals and animal products. Indonesia has amended its regimes several times, adding additional trade-restrictive requirements. The United States launched a dispute with Indonesia in January 2013 and, working together with New Zealand, filed additional complaints in August 2013 and in May 2014 to address the modifications to Indonesia’s import licensing restrictions.  The WTO Dispute Settlement Body established the panel for this dispute in May 2015.  

The Panel found that all of Indonesia's import restricting measures for horticultural products and animal products are inconsistent with Article XI:1 of the GATT 1994.  The United States challenged Indonesia’s agricultural import regime as a whole as well as the following measures:  

• Requirement to import at least 80 percent of the quantity for each product specified on each importer’s license, or face steep penalties.
• Restriction on the importation of horticultural products during Indonesian harvest periods to avoid competition with domestic products.  For example, Indonesia would restrict the importation of oranges during the harvest season of its domestic oranges. 
• Restrictions on the use, sale, and distribution of imported products.  For example, imported beef could only be sold in restaurants and hotels, but not in traditional markets and supermarkets.  
• Restriction on the importation of certain products when their market prices fall below the government-determined “reference prices.”
• Restriction on the importation of horticultural products based on an importer’s ownership of storage facilities.  For example, an importer could only import 100 bushels of apples if it owns the storage space for 100 bushels of apples.  The importer cannot lease or rent storage spaces to satisfy this requirement.     
• Requirement to purchase certain amounts of domestic beef before importation of beef from other countries is permitted.
• Limited time period in which to apply for an import license and short validity periods of these licenses.
• Restriction on imports that can be entered under a license based on fixed type, quantity, country of origin and port of entry requirements.
• Prohibition on the importation of horticultural products that were harvested more than six months previously.
• Prohibition on the importation of animals and animal products if they are not specifically listed in Indonesia’s regulations.
• Prohibition on the importation of horticultural products, animals and animal products when Indonesia determines that its domestic supplies are sufficient to satisfy domestic demand. 

The Panel found that all of these break WTO rules because they either restrict or prohibit importation of these products.  The Panel also found that Indonesia has failed to demonstrate that the challenged measures are justified under any general exception available under the GATT 1994, including Articles XX(a) (public morals), XX(b) (human health), or XX(d) (compliance measures) of the GATT 1994. 
   
The Panel sided with the United States and New Zealand on 18 out of 18 claims that it reached.  The Panel report not only provides a win in this complaint, but it also would resolve the two U.S. complaints filed on previous versions of Indonesia’s import regime for agricultural products.

Indonesia is the fourth most populous country in the world and an increasingly important export market for many U.S. agricultural products, with exports of agricultural products affected by Indonesia’s import licensing regimes totaling nearly $115 million in 2015. 

U.S. agricultural products affected by Indonesia’s import licensing regimes and related prohibitions and restrictions include fruits, such as apples, grapes and oranges; vegetables, such as potatoes, onions and shallots; dried fruits and vegetables; flowers; juices; cattle; beef, including a ban on secondary cuts; poultry, including a ban on chicken parts; and other animal products.

In 2015, U.S. exports of affected horticultural products to Indonesia exceeded $87 million – including $28 million of apples and over $29 million of grapes. In the absence of Indonesia’s trade-restrictive import licensing regime, however, we would expect U.S. farmers to be able to compete more effectively for sales to Indonesian consumers. In 2015, exports of affected horticultural products to Malaysia, a similar market, totaled $106 million, $19 million more than exports to Indonesia, despite the fact that Indonesia’s population is over eight times larger than Malaysia’s.

U.S. exports of affected animals and animal products totaled $26 million in 2015. As with exports of horticultural products, however, we would expect U.S. producers to compete more effectively in the Indonesian market in the absence of Indonesia’s trade restrictions. For example, U.S. exports of affected animals and animal products to the Philippines, another similar market, totaled $205 million in 2015, notwithstanding the fact that the population of the Indonesia is 2.5 times larger than that of the Philippines.  

Under WTO rules, either party may request adoption of the panel report by the WTO within 60 days of the release of the report, and the report would be adopted unless an appeal is filed.  If the report is appealed, WTO rules provide that the WTO Appellate Body must issue its report within 90 days of the filing of the appeal.

The Obama Administration’s Trade Enforcement Record

• Since President Obama was inaugurated in 2009, USTR has filed 24 enforcement complaints at the World Trade Organization (WTO) – more than any other WTO Member. The United States has won every single one of those complaints that has been announced by the WTO so far – 14 wins, plus another 6 complaints resolved favorably.
• The Obama Administration has now brought 15 trade enforcement challenges against China, three against India, and several other complaints against a series of major economies including Argentina, the Philippines, and the European Union. To ensure the greatest economic benefits for American workers and exporters, the Obama Administration has used our trade enforcement actions to emphasize opening these large, strategic markets to which the United States exports a diverse array of products and services.
• The Obama Administration has also broken new ground on the enforcement of agricultural market access including challenges to China’s non-transparent and unpredictable administration of tariff-rate quotas, China’s excessive domestic support for production of certain grains, India’s non-science-based measures on poultry and other products allegedly to protect against avian influenza (U.S. prevailed in 2015), and China’s unfair taxes on U.S. broiler chicken products (U.S. prevailed in 2014; compliance challenge pending).
• Enforcement extends far beyond formal disputes. The Obama Administration has opened markets for American workers, farmers, and businesses by taking tough stands to resolve unwarranted trade barriers with trading partners. For example, we have eliminated restrictions in 17 countries since January 2015, gaining additional market access for U.S. beef in Brazil, Colombia, Costa Rica, Egypt, Guatemala, Iraq, Lebanon, Macau, New Zealand, Peru, Philippines, Saint Lucia, Saudi Arabia, Singapore, South Africa, Ukraine, and Vietnam. As a result, U.S. beef exports have doubled. We also successfully engaged with the Philippines – including through the Special 301 process – to enhance protection of intellectual property rights. These and similar actions have helped expand exports and level the playing field for American goods and services.

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