Free trade triggers more complex problems and could cause deficit on balance of trade, such we witnessed in Indonesian case. Derived from analysis of J. Fox (2001) nations in this world are now experiencing continuous pressures: The pressure comes “from the upper side” through globalization. It is signaled by the firm position of international institutions such as WTO, IMF and World Bank in the eye of countries. Countries are no longer the sole power for their own territory as they were but now they have to share power with those institutions.1
ASEAN-China Free Trade Agreement (ACFTA) is one of regional free trade models that have been taking its place in Indonesia. Since the beginning of 2010, the Government of Indonesia (GOI) has been implementing the full agreement.
ACFTA implementation means 0% import charge for 7,349 (out of 8,738) tariff posts. From those items, some are agricultural and other primary products generated mainly by small producers and peasants.
Consequently, abovementioned groups will directly feel the impact of the implementation of ACFTA. This means a surge of huge quantity of Chinese products ranging from electronic products, snacks, clothing to agricultural products. Some domestic products are then inevitably being supplanted by those products from China.
Real examples can be seen in some Small and Medium Enterprises (SMEs) in fabric weaving and as well as food packaging industry. Price is really the factor in these cases.
Later on, the process created imbalance of balance of trade—Indonesia compared to China. In 2010, export value reached US$ 1011.7 while imports value made US$ 1408.0, resulting in trade deficit. The situation continues until today.2
Checkmate for Farmers
What about the most vulnerable agricultural sector to the onslaught of agricultural products from China? In free trade, products with high competitiveness will be able to survive, continue to increase and expand.
Conversely, products or groups of agricultural products with low competitiveness will threaten its existence and may decrease domestic production and reduce the producers' income. This can be viewed in the case of garlic since 2005. ACFTA at the time had abolished tariff on imported garlic from China—after its tariff was reduced to 5 percent earlier in 1996. As a result, domestic market was flooded by garlic from China. The price has been much cheaper than local garlic. Consequently, the situation has been unattractive to produce the commodity and many farmers and businessmen related to garlic have been forced out of business.
Table: Comparison on Volume and Export-Import Value of Garlic
2004 | 2005 | 2006 | ||||
Vol (ton) | Value (USD) | Vol (ton) | Value (USD) | Vol (ton) | Value (USD) | |
Export | 39.3 | 43,166 | 18.1 | 7,308 | 20.4 | 12,090 |
Import | 244,446.1 | 53,474,300 | 283,403.3 | 66,700,100 | 295,057.1 | 103,066,900 |
Balance | - 244,406.8 | - 53,431,134 | - 283,385.2 | - 66,692,792 | - 295,036.7 | - 103,054,810 |
Source: Directorate General of Horticulture, Ministry of Agriculture
Besides garlic, the most imported goods from China are fruits, with the value reached US$ 134.6 million on January-September 2006 (or increased US$ 73.8 million compared to the same period in previous year). In addition to that garlic, other imported agricultural products around ASEAN countries are cereals, sugar, and its derivatives: milk, eggs, honey, and residue from food and cattle feed industry.
As far as agriculture concern, import from China is still dominated by horticultural subsector such as apples, pears, kuwini mango, and some other fruits. The most felt impact of ACFTA implementation is the surging imports that will threaten domestic market and price. In this case, peasants found it is not profitable to grow most of horticultural products and that can threaten food insecurity in Indonesia.3
Land Grabbing
What about the most wanted product to export, Crude Palm Oil (CPO)? From its overall export, Indonesia is selling to China (24.6%), India (17%), EU (12%), Pakistan (7%) and the rest to Bangladesh, Turkey and several countries in Latin America.
The world demand of vegetable oil grew 5.5 million tons in 2010—higher than the supply (3.25 million tons). Of that amount, around 50 percent will be supplied from CPO production. This makes its share in the structure of world vegetable oil market increasingly dominating: 60%, much higher than the niche of soybean and corn for instance. In this case, Indonesia has a quite big chance: It is estimated that by 2010, Indonesia's CPO production from 7.9 million hectares will be around 21 million tons. Around 5 million tons are going to be absorbed by the domestic market, and the rest will be exported.4
In GOI's record, CPO export has become a priority in these recent years. It was not surprising then that GOI has been insisting on expanding palm oil plantation in a massive scale. GOI also reasoning that expanding means opening employment and improving the welfare of palm oil farmers.
Nonetheless, this reason has been proven false.
According to the Minister of Agriculture, government issues licenses of palm plantation principle permit for 9.7 million hectares of plantations, of which 1.8 million hectares has not been planted. From earlier talks, GOI said that palm oil plantation is likely to be expanded to 18 around million hectares.
This raised a big question: How about the fate of real agricultural land, for food, as the consequence of this export-oriented and expansive palm oil policy by GOI? Indonesian Peasants Union (SPI) noted that due to the export orientation, GOI has been converting agricultural land into palm oil plantation. We can look to West Pasaman district - West Sumatra. Prior to 1990, this area was a rice production center with not less than 27,168 hectares of productive land. After palm oil introduction starting 1981 to 2005, it is recorded that West Pasaman only had 16,127 hectares left5.
Later on, cumulative decline reached 1,287 hectares in time span of 2005-2007. Last recorded, only 14,840 hectares of rice fields left in the area in 2008.
Even in the next few years, GOI plans to expand oil palm plantation with production target around 40 million tons per year in 2020.
To meet that ambitious target, GOI has been aggressively giving permit to new plantation areas, including in areas that had never been to plant palm oil such as in Sulawesi and Papua. Many of them have been identified as land grabbing, especially to indigenous people, forest dwellers and peasants working around forest areas. In year 2010, there are 504 cases6 reported concerning conflicts between indigenous people and peasants versus palm oil companies.
If expansion is still to continue related to export in ACFTA framework, it will create more cases of land grabbing. Thus, it will also create escalations in land cases all across Indonesia.*****
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