Tariff cuts on Thai sugar exports, bitter for farmers

The cancelling of an agreement that would have seen several duty tariffs for Thailand’s sugar imports to Indonesia eliminated by 2010 does not go far enough to protect Indonesian farmers, the local industry association says.

Indonesia will now gradually cut seven tariffs on Thai sugar exports from 30 percent and 40 percent to 5 percent and 10 percent, respectively, by 2015, under a memorandum of understanding on sugar attached to the Protocol to Provide Consideration for Rice and Sugar signed on Thursday between the two countries in Hua Hin, Thailand.

Under the new pact, signed during the 14th Asean Summit, Indonesian sugar is classified as a “highly sensitive” commodity, which means it is no longer included under the Common Effective Preferential Tariffs Scheme in the Asean Free Trade Agreement signed last year. Under the scheme, Indonesia would have eliminated seven tariffs for Thailand’s exported sugar.

Arum Sabil, the chairman of the Sugar Cane Farmers Association, or Aptri, said the MOU would do nothing to help the industry compete with imported goods.

“What the government is supposed to do is protect local farmers,” Arum said on Sunday.

Local farmers provide 2.8 million tons of Indonesia’s total sugar demand of 3.8 million tons per year, he said, with Indonesia needing to import another 1 million tons to meet domestic need.

“But for some reason they still set the import quota for sugar for up to 2 million tons per year, which means it’s so overstocked it threatens local products,” Arum said.

On average, imported sugar in Indonesia currently sells for Rp 4,500 (37 cents) per kilogram, while domestic sugar sells for Rp 5,000 per kg, Arum said, adding that even a concession from 0 percent to 5 percent and 10 percent would make local farmers less able to compete with imports.

Currently, duty tariffs for imported raw sugar is Rp 550 per kilogram and Rp 790 per kilogram for white sugar. “If the import tariff gets lower, local farmers will collapse,” Arum said.

Gusmardi Bustami, the Trade Ministry’s director general for global trade cooperation, could not be reached to comment.