The wheat sector is excited about the prospect of Canada entering into trade agreement negotiations with Indonesia.
Global Affairs Canada announced earlier this year that it was launching public consultations on a possible bilateral trade deal with Canada’s largest export market in Southeast Asia.
China was Canada’s top wheat market in 2020 but Indonesia has been its largest market on average over the past five years.
It typically accounts for about two million tonnes or 11 percent of Canada’s annual wheat exports valued at $600 million per year.
“It has become a really important market,” said Daniel Ramage, director of market development with Cereals Canada.
Indonesia does not charge tariffs on imported wheat for human consumption, so there is no advantage to be gained on that front.
But there are a few other areas where Canadian farmers could benefit from entering into a bilateral agreement with their largest wheat customer.
Indonesia may not have any tariffs in place right now but it has the ability through the World Trade Organization to implement a duty of up to 27 percent, which is known as its bound rate or maximum rate.
That bound rate could be lowered through an agreement with Canada.
“If we lower that ceiling it just helps to maintain predictability,” said Ramage.
While there is no tariff on wheat imported for human consumption in Indonesia, there is a small tariff on feed wheat.
Australia has a free trade agreement with Indonesia that entered into force on July 5, 2020.
That agreement allows Australia to export 500,000 tonnes of feed grains tariff-free in the first year of the agreement, rising to 775,664 tonnes in year 10.
Canada’s wheat sector would like to see a similar clause included in any agreement it negotiates with Indonesia.
Ramage noted that Australia has not been able to take full advantage of that tariff rate quota due to Indonesia’s domestic subsidies for corn production and stiff competition from Black Sea feed wheat.
Australia also negotiated a reduction in non-tariff trade barriers in its bilateral agreement.
Canada’s wheat sector would like to see a chapter on that as well, perhaps modelled after what is contained in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) agreement.
Indonesia is not a signatory to the CPTPP agreement, which is why negotiating a bilateral trade deal with the country is important, said Ramage.
Canada has made significant market share gains in Indonesia at the expense of Australia, which has been dealing with crippling drought the past few years.
But Australian farmers are harvesting a massive 2020-21 crop and that will mean stiffer competition in Indonesia and elsewhere, said Ramage.
The Australian government is forecasting 33.3 million tonnes of wheat production, up from 15.2 million tonnes last year and 17.6 million tonnes the year before.
Ramage said Indonesia buys CWRS wheat from Canada, which is used to make bread and noodle products and to blend with cheaper wheat from Ukraine and Argentina.
Ukraine is the top exporter of wheat to Indonesia, supplying 21 percent of its imports, followed by Canada at 18 percent.