THE 9th WORLD TRADE ORGANIZATION MINISTERIAL MEETING AGREEMENT 2013 AND ITS IMPACT TO INDONESIA’S AGRICULTURE SECTOR

Undergraduate Thesis

THE 9

th

WORLD TRADE ORGANIZATION

MINISTERIAL MEETING AGREEMENT 2013 AND

ITS IMPACT TO INDONESIA

’S AGRICULTURE

SECTOR

Written by:

Rangga Kharisma Muhammad 20120510096

INTERNATIONAL RELATIONS DEPARTMENT

FACULTY ON SOCIAL AND POLITICAL SCIENCES

UNIVERSITAS MUHAMMADIYAH YOGYAKARTA

2016

ii

Undergraduate Thesis

THE 9

th

WORLD TRADE ORGANIZATION

MINISTERIAL MEETING AGREEMENT 2013 AND

ITS IMPACT TO INDONESIA’S AGRICULTURE

SECTOR

Written by:

Rangga Kharisma Muhammad 20120510096

Advisor:

Drs. Djumadi M. Anwar, M.Si

INTERNATIONAL RELATIONS DEPARTMENT

FACULTY ON SOCIAL AND POLITICAL SCIENCES

UNIVERSITAS MUHAMMADIYAH YOGYAKARTA

2016

iii

THE 9

th

_{WORLD TRADE ORGANIZATION}

MINISTERIAL MEETING AGREEMENT 2013 AND

ITS IMPACT TO INDONESIA’S AGRICULTURE

SECTOR

UNDERGRADUATE THESIS

Submitted as Partial Fulfilment of the Requirements for the Attainment of the Degree of Sarjana Ilmu Politik (S.IP) in the International Relations Department,

Social and Political Science Faculty Universitas Muhammadiyah Yogyakarta

Written by:

Rangga Kharisma Muhammad

20120510096

Advisor:

Drs. Djumadi M. Anwar, M.Si

INTERNATIONAL RELATIONS DEPARTMENT

FACULTY ON SOCIAL AND POLITICAL SCIENCES

UNIVERSITAS MUHAMMADIYAH YOGYAKARTA

2016

v

STATEMENT OF ORIGINALITY

vi

ا ًرْسي رْسﻌْﻟ ﻊﻣ ﱠنإف

“

Karena sesungguhnya sesudah

kesulitan itu ada kemudahan

.”

vii

ACKNOWLEDGEMENT

If there is another way than grateful, I will do it as an expression of my infinite gratitude to Allah who has shown that the efforts never betray the results.

I dedicate this thesis to my parents, Ir. Rudi Prayoga and Sudarwati. Big thank for their support and their pray every night. I could not reach this success without their help.

Thank you very much to Mr. Drs. Djumadi M. Anwar M.Si, as my supervisor who always gives me motivation to finish my thesis, enlighten, advice and knowledge that has been given for me as your thesis student.

Thank you to Mrs. Nurul as my English supervisor because always patient to check my grammar.

Big thanks for my best friend, sister, motivator, advisor for the life experience and your advice to finish my thesis Himma Turrodiyah for almost 5 years. Without your solution and motivation I could not finish my thesis.

My maniac friend Adit, Addin and also Tomy who is my first family and friend in Yogyakarta where almost 4 years we been through together in Kontrakan Ceria.

Big Thanks to my Partner Linggar Pangestu. Thanks for your illogical advice and for you kindness as my friend.

Thank to my friend Hielmy as partner before the undergraduate thesis examination.

Thank to my IPIREL who indirectly contributed to my undergraduate thesis settlement.

viii

PREFACE

Praise and gratitude to Allah SWT for all the blessings, favors, and gifts that have been given, so that the writer can finish the thesis entitled " The 9th World Trade Organization Ministerial Meeting Agreement 2013 and its Impact to Indonesia’s Agriculture Sector". This thesis is submitted as a part fullfilment of the requirement for the attainment of the Degree of Sarjana Ilmu Politik (S.IP) or Bachelor of Political Science in International Program of International Relations Department, Faculty of Social and Political Sciences, University of Muhammadiyah Yogyakarta. The acknowledgement is dedicated to all those who have contributed in the process of study and writing of this thesis, in particular to:

1. Mr. Prof. Dr. Bambang Cipto, MA, as The Rector of Universitas Muhammadiyah Yogyakarta.

2. Mrs. Dra. Nur Azizah M.Si, as The Head of International Relations Faculty of Universitas Muhammadiyah Yogyakarta.

3. Drs. Djumadi M. Anwar M.Si. as The Advisor of undergraduate thesis. 4. Adde Marup W.S. S.IP M.A as the Examiner 1.

5. Grace Lestariana W. S.IP. M.Si as the Examiner 2.

Because of their help and suggestion, writer can made this thesis properly. The writer hopes that this thesis can be useful in the future. Critics and suggestions are expected from the writer to develop this thesis.

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TABLE OF CONTENT

VALIDATION PAGE ... IV STATEMENT OF ORIGINALITY ... V ACKNOWLEDGEMENT ... VII PREFACE ... VIII ABSTRACT ... IX TABLE OF CONTENT ... X LIST OF TABLE ... XIII

CHAPTER I INTRODUCTION ... 1

1.1BACKGROUND ... 1

1.2RESEARCH QUESTION ... 7

1.3THEORY ... 7

1.3.1 World System Theory ... 7

1.4METHODOLOGY ... 13

1.5HYPOTHESIS ... 13

1.6RANGE OF RESEARCH ... 14

1.7PURPOSES OF RESEARCH ... 14

1.8WRITING ORGANIZATION ... 15

CHAPTER II GENERAL IMAGE OF INDONESIA’S AGRICULTURE SECTOR ... 16

xi

2.1DISTRIBUTION OF LABOR AND IT PRODUCTIVITY IN INDONESIA ... 17

2.2DEVELOPMENT OF FARMER HOUSEHOLD,PEASANT AND AGRICULTURE COMPANY IN INDONESIA ... 20

2.3THE DEVELOPMENT OF TOTAL FOOD AGRICULTURE LAND,PRODUCTION AND PRODUCTIVITY IN INDONESIA ... 25

2.4INDONESIA AGRICULTURE EXPORT-IMPORT DEVELOPMENT ... 27

2.5ROLE OF INDONESIA AGRICULTURE TO INDONESIA GDP(GROSS DOMESTIC PRODUCT) ... 29

CHAPTER III AGRICULTURE POLICY IN WTO AND INDONESIA ... 31

3.1WORLD TRADE ORGANIZATION (WTO) AND ITS AGRICULTURE NEGOTIATIONS ... 31

3.1.1 Uruguay Round ... 33

3.1.2 Agreement on Agriculture ... 34

3.1.3 History of Agriculture Talks in Doha round ... 38

3.1.4 Road to Ministerial Conference in Bali ... 39

Agreement in Bali Ministerial meeting ... 44

3.2WORLD AGRICULTURE TRADE CONDITION AND INDONESIA AGRICULTURE SUBSIDY POLICY ... 51

CHAPTER IV INDONESIA POSITION IN AND AFTER BALI PACKAGE AGREEMENT. ... 60

4.1ANALYZING INDONESIA POSITION IN WTOSYSTEM ... 60

xii

CHAPTER V CONCLUSION ... 78 LIST OF REFERENCE ... 81

xiii

LIST OF TABLE

TABLE 1.2.1:PERCENTAGE OF WORKER DISTRIBUTION ACCORDING TO THE

ECONOMIC SUBSECTOR 2010-2014 ... 18

TABLE 2.2.1:AGRICULTURE PRODUCTIVITY COMPARED TO TOTAL ECONOMIC

PRODUCTIVITY ... 19

TABLE 3.2.2: TOTAL OF FARMER HOUSEHOLD ACCORDING TO THE SUBSECTOR

2003 AND 2013 ... 22

TABLE 4.2.2: TOTAL OF AGRICULTURE COMPANY ACCORDING TO THE SUBSECTOR

2003 AND 2013 ... 23

TABLE 5.2.3:TOTAL OF AGRICULTURE FARMER HOUSEHOLD ACCORDING TO THE

TOTAL OF LAND AREA OWNERSHIP IN AGRICULTURAL CENCUS (AC) IN 2003 AND

2013. ... 24 TABLE 6.2.3:LAND AREA BY UTILIZATION IN INDONESIA,2009-2013 ... 26

TABLE 7.2.3:PRODUCTIVITY BY COMMODITY IN 2007-2015 ... 26

TABLE 8.2.4:AGRICULTURAL EXPORT IMPORT IN INDONESIA BY SUB SECTOR IN 2008-2015 ... 27

TABLE 9.2.5:AGRICULTURE SUB-SECTOR CONTRIBUTION FOR INDONESIA GDP ... 30

TABLE 10.3.3.4:THE WTO'S NEGOTIATION TIMELINE:FROM DOHA TO BALI

2001-2013 ... 40 TABLE 11.3.2PERCENTAGE OF FERTILIZER SUBSIDY AND SEED SUBSIDY WITH THE TOTAL OF NON-ENERGY SUBSIDY,2008-2014 ... 58

iv

VALIDATION PAGE

ix

ABSTRACT

Indonesia was the host of the big multinational forum called ministerial meeting which is supervised by WTO. Agriculture agreement is one of big achievement of international trade after the 12 years of failure. WTO already publish peace clause policy to be implemented for four years that bring develop country cannot interrupt what will developing country do in their agriculture subsidy policy, but in return in 2017 if there is no permanent solution, subsidy will be prohibited. Therefore this paper will analyze decisions that have been taken by Indonesia in the meeting and what actually face by Indonesia

government, what is the challenges and how about the impact to Indonesia’s

agriculture sector, it will give benefit or not.

Keyword : World Trade Organization (WTO), Ministerial Conference 9 (MC9), Liberalization, Agriculture policy, Agriculture subsidy, Bali Package, Peace Clause.

1

CHAPTER I

INTRODUCTION

1.1 Background

Dramatic growth in international trade over the last few decades has intensified political debate over the cost and benefit of trade openness. In the United State, for example the controversy surrounding the creation of NAFTA (North America Free Trade Agreement) in 1933 was especially intense, and similar argument has arisen over the issue of enlargement of the European Union and over attempts to reform Common Agricultural Policy. Rapid trade policy reform had also generated a significant political backlash in many developing nations. Moreover, recent years have witnessed violent protest and demonstration by various groups of countries that hope to disrupt meeting of the World Trade Organization (WTO) which is the only global institution promoting free trade in every aspect. Political leaders around the world frequently voice concerns about the negative effect of trade and the need to protect their firms and workers from foreign competition1. For example, it contributed substantially to the failure of the September 2003 Trade Ministerial Meeting in Cancun to reach agreement on how to proceed with the DDA (Doha Development Agenda), after which it took another nine months before a consensus as reached in the Doha Work Program, otherwise referred to as the July Framework Agreement2. The failure was caused by the rejection of people especially fisherman, labors, activists, and governments

1

Michael, J. Hiscox. The Domestic Source of Economic Policies, Edited by J. Ravenhill, Global Political Economy (New York: OXFORD University Press, 2005), Pg. 53.

2

2 who mostly lived in various least developed countries rejecting the existence of WTO. The demonstration was to show that WTO already failed to bring their idea about sustainable growth and development for least developed country through trade liberalization.

One of the issues that always becomes hot topic in international economic sphere is about agriculture. It is known that when talking about food it talks about billions of people and millions of people who suffer and were dead caused by the lack of food. Moreover, the majority of the farmers especially in the developing countries still live below the poverty line.

Negotiation about food security is always the obstacle in every WTO ministerial in meeting its success. Million protesters all over the world always scream their demand to stop WTO agenda. In order to continue its struggle to liberalize agriculture sector through the basis of DDA (Doha Development Agenda), agriculture sector is always brought to the ministerial meeting agenda. After the deadlock faced in DDA and WTO ministerial meeting finally there is an agreement called Bali package. The meeting that had been successfully held in Indonesia exactly in Nusa Dua, Bali. The meeting held in Bali started on the 3rd of December 2013 and was planned to finish on 6th of December 2013, it released some agriculture policies. This meeting actually cannot be said giving a benefit to developing countries about their food security and public stock holding proposal. In addition, the continuation of this package brought into the next meeting in Nairobi, Kenya did not give any clear, firm and fair policy.

3 The meeting was held in Bali started on 3rd of December 2013 and was planned to finish on 6th of December 2013, but unfortunately because of some unpredicted situations, this forum needed to be delayed until 7th of December 2013. Bali was chosen by WTO to held this international ministerial conference forum by WTO and 160 ministers met in Bali not only discuss about developing countries proposal of food security but also to fix several multilateral trade issue contained in the Doha Development Agenda. The first is about Trade Facilitation

which is generally talking about reaffirming and recalling the principle in Doha round about tariff and non-tariff barrier reduction and also transparency in multilateral trade. The Second is about Agricultural as well as cotton production which are important for developing also least developed countries. Than the is third talking about the Least Developed Country Development Issue which will help least developed country to make them easier to export their products to developed country.

The International Chamber of Commerce (ICC), which has been said as streamlining custom procedures, could add $1 trillion and 21 million jobs to the world economy. It said the breakthrough would open the door to new trade talks3. However, most people in the world do not believe any more to WTO’s promises and its vision to bring fairness in trade and prosperity to all people.

Agreement in the meeting is only some part of Doha Development Agenda. It can be said that Bali package is a part to reconstruct Doha

3

Eliot, Larry, India Strikes Deal With US Over Food Breathing New Life Into Doha Trade Talks. Retrieved from http://www.theguardian.com/business/2014/nov/13/wto-food-security-us-india-trade-talks-doha-round, (2014, Nov 13).

4 Development round held in Qatar. So, this meeting will clearly make WTO’s credibility in the world forum back on stage which was broken after the failure of 12 year tread round of Doha Development.

In the Bali package forum, it was not absolutely running smoothly like the other WTO ministerial meetings before and almost ended up with another failure. This forum needed to postpone for several days due to issues of food security proposed by India. India and the other developing countries had a different perspective from develop countries especially United States with its industrial interest about how much subsidy should be given. The main content of proposal that have been made by the G334 with the idea of India and delivered in the WTO ministerial meeting, India with other 32 countries which had a demand to increase total subsidy for farmer from 10% according to Agreement on Agriculture (AoA)5 of WTO become 15% permanently without any exception. Then, United States and other developed states were reducing their demands by giving permission for developing countries to give 15% for only 4 years. Here other G33 member states including Indonesia agreed with the offer of developed countries, but only India still insisted with its decision. It believed that food security was not for

4

G33 is a group of developing countries that face similar problem toward economic and development issues that until now is chaired by Indonesia.

5

According to the information of WTO website document The Agreement on Agriculture, (the

“Agreement”), came into force on 1 January 1995. The preamble to the Agreement recognizes that

the agreed long-term objective of the reform process initiated by the Uruguay Round reform programme is to establish a fair and market-oriented agricultural trading system. This agreement is to control trade and non-trade activity of agricultural sector in country such as control the government protection in demand to reducing it time over time, export subsidies and market access, and non-trade activity such as including food security and the need to protect the environment, and provides special and differential treatment for developing countries, including an improvement in the opportunities and terms of access for agricultural products of particular export interest to these Members.

5 negotiation. It is none that the system in the forum is not based on the vote. So, in order to make the ratification passed, it needs all states to sign the package.

After closed-door meetings that lasted well into the early hours of Friday, the negotiators in Bali finally came to a provisional agreement, which was due to be finalized on Friday evening. In the last minute, India tense finally reduced and agreed to a four-year peace clause, meaning that they would not challenge India's food security measures before December 2017. In return, India has vowed to ensure that its policies "do not distort trade or adversely affect the food security of other [WTO] members", among a few other conditions6. All of the policies were already ratified by developed states said by ex-Trade Minister Gita Wirjawan7.

Indonesia is the one who proposed high level of ministerial conference to be held in Bali under the auspices of WTO. Indonesia is one of the states which really support the implementation of Bali Package even there are several protests from scholars, Non-governmental Organization and people. They held several demonstrations toward this conference. They were pessimistic about the content of the Bali package itself. They believe this conference will become a new imperialism especially in the developing countries.

If seen more deeply about what happen in Indonesia’s agricultural sector after the ratification of treaty of Agreement on Agriculutre (AoA), Indonesia

6

McClanahan, Paige, Why the WTO Agreement in Bali has Finally Helped Developing Countries. Retrieved from http://www.theguardian.com/global-development/poverty-matters/2013/dec/06/wto-agreement-bali-helped-developing-countries-india

7

Muliarta. WTO Capai Kesepakatan Perdagangan Global di Bali . Retrieved from http://www.voaindonesia.com/content/wto-capai-kesepakatan-perdagangan-global/1805665.html

6 becomes dependent on agricultural import from other countries. There are several products that are still imported such as rice, corn, meat, chicken, salt, milk, onion and there are other products which are easily produced in Indonesia. Since Indonesia ratified and joined WTO to liberate its agricultural sectors, it caused a significant increment in agricultural sector import followed by significant decreasing of food subsidy in some commodities that led to a decreasing on farmer’s revenue in the country. Therefore, it led to the protests against trade liberalization by the government.

Statistic Body Center (BPS) released the results of the agricultural census in 2013 with the total number of farming households of about 26.14 million. Most of the workers in the agricultural sector live below the poverty line.

The head of BPS Suyamin Said "Many workers in the agricultural sector live below the poverty line. They became laborers. The poor indeed many in this sector." He said it when announcing the results of agricultural census 2013 in Jakarta, Tuesday (08/12/2014).

Furthermore, he said, the labor absorption in this sector was quite large about 34.6 percent or 38.07 million people out of a total labor force in Indonesia. While the agricultural sector's contribution to Gross Domestic Product (GDP) amounted to 14.43 percent in the second quarter of 2014. Unfortunately, the trend in the contribution of the sector in the portion of the GDP at current prices slumped during the decade of the previous 15.19 percent8.

8

Fiki, Ariyanti, Sensus BPS: Penduduk Miskin RI Sebagian Besar Petani . Retrieved from http://bisnis.liputan6.com/read/2089809/sensus-bps-penduduk-miskin-ri-sebagian-besar-petani

7 Every data that released by BPS must be used by the government to analyze and determine the foreign policy outcome because the data represented what Indonesia people actually need. So, in order to impact foreign policy that has been chosen by Indonesia government in the World Trade Organization 9th high level ministerial meeting it is better to understand Indonesia domestic condition and international position. Then as Indonesia itself was not so different from India which really depends on the agriculture factor. It means that if Indonesia just ratified the treaty it could kill Indonesia’s agriculture sector. Lot of Indonesia people are only traditional and small farmers, and they are depending on it for their livelihoods. So, by ratifying the treaty it is like as selling it farmers into world market mechanism.

Developed states see the opportunity in countries like India and Indonesia. As always, Indonesia and India are two of the largest population in the world meaning that both countries are big market for United States food grain production and other products. With force of both states to ratify the treaty, it will give a huge benefit for United States.

1.2 Research Question

How is the impact from the implementation of Bali Package toward Indonesia position and Indonesia’s agriculture sector?

1.3 Theory

1.3.1 World System Theory

World system theory is a theory that part of structuralism approach of Karl Marx, which is an idea of capitalism criticism. Structuralism approach argues that

8 the system of capitalism world is built in order to give advantage to certain class that make the world system that unfair. In the international relation the relation among actors is created the international structure based on the capitalist that cannot be avoided. That relation is controlled by the institution work as puppet to spread the idea of capitalism. Structuralism belive that big institution that born from the idea of capitalism like WTO, World Bank, IMF is dominated by the elite group and hegemon country. So, that group cannot be trusted to help least developed country or reduce poverty because back in the fundamental of capitalism idea is only to gain profit.

World system theory is a most influenced theory in structuralism approach based on the Immanuel Wallerstein thought. This idea was born based on the critical view of modernization theory and also dependency theory9. World Capitalist System Theory is world systems theory that view the prospects and conditions of country development is fundamentally shaped by economic processes and patterns of relationships between countries on a world scale. This theory emphasizes that it is futile to analyze or to form development by focusing on the level of individual country where every state is rooted in a world system. The world system is basically started from the sixteenth (Berutu, 2015) century, where only located in part of the world, namely Europe and America that later extend over time that spans the whole world became the world economy and will always be the capitalist economy world. According to Immanuel Wallerstein world system is "world economy" which is integrated by the market, not by

9

9 politics, where two or more regions are interdependent to fulfill their need such as food, oil, and protection and or two or more policies that compete to dominate without the emergence of a single center forever.10

Immanuel Wallerstein Such a world economy-of which capitalism from the sixteenth century to the present has been (according to Wallerstein) the only long-lasting historical instance-is based upon a geographically differentiated division of labor, featuring three main zones which is divides the world capitalist economy: the Periphery area, Semi-periphery area, and the Core area.11

Simply put, these three areas can be distinguished by the dominance in the area. Core is independent countries that dominate other countries. Semi peripheries are among the countries that are dominated by one (or more) countries, but these countries also dominate some other countries. Meanwhile, the Periphery is among the countries that are dominated by other countries without dominating other countries. Some traits are the indicators of a country categorized as the Periphery countries such as: having cheap labor, exporting raw materials, and producing agricultural products. The central government in this country is weak or controlled by other countries. Then characteristics of Semi-periphery countries such as: having an advanced economy and diverse, but not dominant in international trade. Semi-periphery countries on the one hand to fend off political pressure, especially in the Periphery on the other side against the Core countries

10

Junaedi Berutu, Keputusan India Menyutujui Kebijakan Subsidi in The Bali Package. eJournal Ilmu Hubungan Internasional, Volume 3, Nomor 3, 2015, Pg 380.

11

Theda Skocpol, Wallerstein's World Capitalist System: A Theorytical and Historical Critique. American Journal of Sociology, 1977, Pg 1077.

10 so as to prevent a split. Meanwhile, the characteristics of Core countries are such as: Being active in promoting the accumulation of capital internally through tax policy, purchasing power of the government, sponsoring research and development, financing the construction of infrastructure, and prioritizing social order to minimize the demands. Core countries also promote the accumulation of capital in the world economy. Core countries have the political power, economic and military to push the exchange rate that is not balanced.

In his thought Immanuel Wallerstein believes that country can have decreasing or increasing class condition, core becomes a semi-periphery or periphery become semi-periphery12. These are three strategists that can implement by state in order to up their class.

1. The role of state here is very important not just as a facilitator but as a initiator in order to develop their state. So in order to up their class state need to take any opportunity that has. In the world system there will happen a condition which main product is very cheap and industrial product is very expensive, this condition bring state into a condition which need to do industrialization.

2. Second, through invitation of several of Multinational Corporation (MNC) that need expand their business because of the competitiveness in the core country. In this case, developing country can pull foreign investor to invest. This condition bring MNC to invite industries in the

12

Arief Budiman, Teori Pembangunan Dunia Ketiga, (Jakarta: PT Gramedia Pustaka Utama, 1995), Pg.110

11 periphery country to do cooperation, this condition can bring development to the periphery country become semi-periphery country. But Immanuel wallerstein believe that in order to get full advantage from this cooperation state have a vital role in order to coordinate and control to protect domestic industries.

3. Third, state need to have a radical policy in order to develop their domestic market and can be free from develop state domination. One of the strategies is with internal policy such as dumping policy, or protection in some production from Import surge in domestic market can give loose to state economy. Protection is the only vanguard in the side of economic policy which it is the government authority. Another strategy is through the government helps by giving a capital to increase domestic industries so they can compete with foreign company. Capital here can be money or such as developing domestic technology investment that developed by domestic expert, beside that support facilitation is also important such as bureaucracy, infrastructure and human resource development to develop.

Capitalism is also an economic theory that derives from neo liberalism theory. This research also analyzes the theory neo-liberalism which is proposed by Reagan and Margareth Thatcher after the agreement of Breeton Woods. So, international regime was established in 1944, and the role of state is minimized as much as possible. The point is the need to lose all policies that are force by state,

12 so the market can determine its own destiny and advocate states to implement their internal policy according to neo-liberalism policy, as follows.13.

1. Trade liberalization having a goal to erase any policy that is protecting domestic industries.

2. Investment liberalization 3. Financial liberalization.

4. Privatizations in the form of state company, stuff and public service selling to private sector.

5. Cutting the public budget for the social service 6. Currency devaluation.

7. Low wage labor

The establishment of WTO is a state of consciousness. State realizes that because of the development of trade relation and the development of dependency between state, there is a need of an organization to promote and to control any trade rules and to back the trade rules up with powerful dispute settlement system. So, in this case, WTO itself tries to be a facilitator for international economic growth by promoting international trade, and the system is known as free trade system. Therefore, in the previous high level ministerial meeting held in Nusa Dua, Bali, the proposal tends to gain social prosperity for people especially people in LDCs (Least Developed Country) by promoting free trade with reducing any trade barriers in every sector. Ironically, a series of liberalization penetration and the entry of neo-liberal ideology to the agricultural sector receive less attention by state. Once the existence of the GATT replaced WTO in 1995, almost immediately, the agricultural sector was in the grip of a multilateral regime

13

Hasibuan, A. I, Post Food Policy Ratification of the Agreement, Jurnal Kajian Politik Dan Masalah Pembangunan, 2015, Pg. 1635

13 through an agreement to liberalize agriculture sector (Agreement on Agriculture / AoA)14. With this condition where liberalization of agriculture is forced to be implemented without considering any negative impact there will be a marginalized actor such as developing countries who cannot compete with developed countries. So, there will be the increment of import product to domestic market that will crush domestic market.

1.4 Methodology

This research is using qualitative research methodology and this is a research strategy which is usually emphasized on word rather than quantification in the collection of data. Qualitative research focuses on key features of research design that may identify a study as ‗qualitative’, including a concern with ‗what’ ‗why’ and ‗how’ questions rather than ‗how many’, a focus on processes, and the flexible nature of qualitative research design.

1.5 Hypothesis

According to the theory framework chosen and the background, the researcher will formulate the research question.

 Indonesia position in the meeting tries to be neutral, caused current world condition which is requiring Indonesia to do it.

 Four year peace clause proposal is only a trade off from develop state to get trade facilitation that used to exploit developing state.

14

14  Indonesia try to takeoff develop state domination by doing strategies of radical policy in order to be Semi-Periphery country.

1.6 Range of Research

This research is focusing about Agriculture agreement on Bali and Indonesia agriculture condition after and before the meeting is held.

1.7 Purposes of Research

This research aims to achieve some purposes as follows:

1. To get through and understand on Indonesia decision on the World Trade Organization 9th Ministerial Meeting agreement.

2. To analyze Indonesia decision on the World Trade Organization 9th Ministerial Meeting agreement especially its Strength, Weakness, Opportunity,

Threats for Indonesia’s agriculture sector.

3. Understanding what is the implication of World Trade Organization 9th Ministerial Meeting agreement to Indonesia’s agriculture sector.

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1.8 Writing Organization

Chapter 1

This chapter contains background of the research that the researcher would analyze, research question, theory that the researcher would use, he purpose of the research and methodology of the research. In this case the researcher uses qualitative methodology.

Chapter II

In this chapter, the researcher will put the data about the condition of Indonesia’s agriculture sector in order to understand the Indonesia agriculture environment condition.

Chapter III

In this chapter, the researcher will put the relation between Indonesia with WTO in agricultural sector until the ninth level of WTO Bali ministerial meeting.

Chapter IV

In this chapter the researcher analyze the research question about Indonesia position in the meeting and also the impact for Indonesia agricultural

sector by implementing Bali package. It’s using the theory of world system theory

to analyze current situation why Indonesia tends to sign the WTO agriculture treaty.

Chapter V

This chapter is conclusion of the research according to the material that is already explained in the previous chapter.

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CHAPTER II

GENERAL IMAGE OF

INDONESIA’S

AGRICULTURE SECTOR

Indonesia is an archipelago country located in the south East Asia whose is almost half of the territory is consisting of sea territorial. The total land territory area of Indonesia is about 1,904,569 km2. It is a country passed by the khatulistiwa line, and lies between two continents, Australia and Asia, and two oceans, Hindi ocean and Pacific Ocean. Indonesia is also supported by its climate which is tropical, and with its vast fertile land and its biodiversity, every year the land can be planted with various plants. It is no wonder that most of the population works in agriculture, especially people living in villages. However it is very ironic that Indonesia cannot fulfill its national food demand, and there are still a lot of problems in the agriculture sector. Having such a gift of natural conditions, Indonesia should be able to give prosperity to the people and agriculture should also become a major contributor for Indonesia’s national income. Before revealing Indonesia’s agriculture sector condition, it is better to understand what the meaning of agriculture is. Agriculture from the point of view of the language (etymology) consists of two words, namely agri or ager, meaning land and culture or Colere which means management. So, agriculture in the broad sense is defined as land management activities. Management is intended to the interests of plant and animal life, while the soil is used as container or place the management activities, and all of which is to human survival.

People also need to understand what agriculture business activities are. The meaning of that term is activities of agricultural production with the goal of to

17

Agriculture; 35,09

Manufacture; 6,13 Trade; 20,9

Transportation; 4,51 Monetary; 2,4

Service; 15,43

Mining; 1,44 Industri; 13,87

sell/exchange partial or the entire production with business risk (rather than farm workers or worker’s family). Agricultural business includes business food crops, horticulture, plantation, farming, fishing, and forestry, covering agricultural services. Specialty crops although they are not sold (taken alone) remains covered as a business15. So, in the concept of agriculture here every business/activity is to utilize biological resource done by human, in order to produce materials especially food product used by society. The business covers agriculture, fishery, animal husbandry and forestry.

2.1 Distribution of Labor and it Productivity in Indonesia

Indonesia is an agricultural country and it is assessed by its total farmer households in Indonesia. Farming is not a popular job for majority of Indonesian people, but farmer is still a huge contributor in Indonesia employment.

Figure 1.2.1: Employment distribution according to the economic sub-sector 2012

Source: Directorate Food and Agriculture/ Ministry of National Development Planning/ Body of National Development Planning: Analysis of Household, Land and Agriculture Business: Agriculture Census 2013

15

Directorate Food And Agriculture Ministry Of National Development Planning/ Body Of National Development Planning, Analysis Of Household, Land And Agriculture Business: Agriculture Census 2013,Jakarta : Ministry of National Development Planning, Pg. 135.

18

The data in picture 1.2.1 shows about the distribution of employment. Based on the agricultural survey in 2013, it clearly presents that the majority of Indonesia employment is in the agricultural sector held by 35 percent, or 39.7 million people, followed by trade sector 21 percent. It means that the agricultural sector is still the largest buffer in national employment.

Table 1.2.1: Percentage of Worker Distribution According to the economic Sub-sector 2010 - 2014

Economic sector 2010 2011 2012 2013 2014

Agriculture 38.3 36.4 35.2 34.8 34.0

Industrial 14.0 14.8 15.3 14.8 14.9

Mining 1.2 1.3 1.4 1.3 1.3

Manufacture 12.8 13.5 13.5 13.5 13.6

Service 47.7 48.8 49.5 50.4 51.3

Trade 20.8 20.8 20.9 21.4 21.7

Service except trade 26.9 28.0 28.6 29.0 29.6

Total 100.0 100.0 100.0 100.0 100.0

Source: Analysis of the Worker Mobility, Body of Statistics Center: Survey Result of National Workforce in 2014

Table 1.2.1 shows that agricultural sector is still a major contribution in Indonesia employment. However, agricultural sector has decreased regularly than other sectors that were still fluctuating or increasing on a regular basis. Agriculture employment alone in 2010 listed as much as 38.4 percent, while in 2014 it fell into 34 percent. The other non-agricultural sector that has a significant growth rate especially in service sector is trade. It needs to be underlined here in 2014 that the agricultural sector still absorbs a lot of labor.

Although agriculture gives a huge contribution in employment absorption, but it needs to be underlined that the agriculture is still the lowest contribution on worker productivity and tends to decline each year and of course it is far below

19

from the worker productivity. Data got from publication of Food and Agriculture Directorate Ministry of National Development Planning, shows that there is an increase on agriculture labor productivity. However, its development throughout the years of 2004-2012 does not have any significant change. In 2004, labor productivity of agriculture is only 6.09 million, while the average of the entire sector has reached 17.67 million. In 2012 it slightly increased, but labor productivity on agricultural sector has still much lower average compared to other economic sectors. The productivity of agriculture sector in 2012 amounted to 8.42 million rupiahs and the average across all sectors reached 23.63 million16.

Table 2.2.1: Agriculture Productivity compared to Total Economic Productivity

Source: Directorate of Food and Agriculture/ Ministry of National Development Planning/ Body of National Development Planning: Analysis of Household, Land and Agriculture Business: Agriculture Census in 2013

16

Ibid.,

2004 2005 2006 2007 2008 2009 2010 2011 2012

GDP 17,675 18,34 19,35 19,657 20,306 20,777 21,389 22,473 23,629

Agriculture 6,087 6,146 6,538 6,589 6,886 7,111 7,345 8,01 8,424

0 5 10 15 20 25 30 35

PROD

UCTI

VIT

Y

(M

IL

LI

ONS

R

UP

IA

H

20

2.2 Development of Farmer Household, Peasant and Agriculture Company in Indonesia

According to the census in 2000 Indonesia total population was about 206,264,595. It has been increasing year by year and in 2009 it was about 230.472.833 and Indonesia is number four in world, in terms of country total population17. Before going further to know how many of total of farmer in Indonesia is, it should be understood the definition about farmer itself. In English definition, there are two terms for people who work in agriculture sector. The first is farmer and the second is peasant. The difference between farmer and peasant is in their social position. Peasant in feudal system is they are who serve the land owner and they serve under a Lord. They must farm the land in order to fulfill their duty and just have a very small land. In Indonesia, peasant also called “petani gurem”. Farmer is not a social position but rather a profession. Farmer is a free person who owns real big farm. Definition of farmer, according to the BPS (Badan Pusat Statistik/Body of Statistic Center) farmers are those who pursue agriculture (people food crops and plantations) at his own risk for the purpose of sale, either as farmer or sharecropper (rent / lease / revenue-sharing). People who working in the fields of others to expect a wage (peasant) are not included as farmers18.

However, in the BPS census, they are more likely to use the terms of farm household, and its definition is : farming household is one where at least one

17

Geografi Indonesia : Indonesia Government Portal, Data retrieved from Indonesia Government Portal website: http://www.indonesia.go.id/

18

Glossary : Badan Pusat Statistik. retrieved from Badan Pusat Statistik web site:http://www.bps.go.id/index.php/istilah/index?Istilah[katacarian]=pertanian&yt0=Shows

21

member of the household carries out farming or plantation activities such as planting trees or timber; farming fish in artificial ponds, baskets placed in streams or in ponds made by damming streams; working as fishermen; hunting or catching wild animals; farming cattle/poultry; or carrying on any farming activity, with the aim that a part or a whole of the yield will be sold, or to obtain income/profit at one's own risk19.

According to the agriculture census in 2013 Indonesia farmer household was decreasing from the agriculture census in 2003. Meanwhile, according to the agriculture census in 2003, total of farmer household is about 31.23 million people and in 2013 agriculture census on total of farmer house hold is about 26.14 million people. So, it can be clearly seen that is decreasing of farmer household about 16.32 percent or 1.77 percent per year. To see more about the decreasing, it is presented in the table according to the agriculture subsector total of farmer household in Indonesia in 2003 and 2013.

19

22

Table 3.2.2:

Total of Farmer Household according to the Sub-sector in 2003 and 2013

Source: Agricultural census year 2013

From the table 3.2.2 about 2013 agricultural census the majority of the farmer house hold was in the crops subsector (17.28 million people) and in livestock (12.96 million People). Almost all of those subsectors have significant decreasing in the ten years from the last census in 2003 and only fish cultivation that increased. Fishing, horticulture, and also livestock are the biggest contributors in the farmer household decrement.

Subsector _{Farmer Household}

ST2003 (000)

ST2013 (000)

Change Absolute

(000) %

Agricultural sector 31.232.18 26.135.47 -5.096.72 -16.32 SUBSECTOR:

1 Crops 18.708.05 17.728.16 -979.89 -5.24

- Rice 14.206.36 14.147.86 -58.49 -0.41

- Palawija 10.941.92 8.624.23 -2.317.69 -21.18

2 Horticulture 16.937.62 10.602.14 -6.335.48 -37.40 3 Plantation 14.128.54 12.770.57 -1.357.97 -9.61 4 Livestock 18.595.82 12.969.21 -5.626.62 -30.26

5 Fisheries 2.489.68 1.975.25 -514.43 -20.66

- Fish

cultivation 985.42 1.187.60 202.19 20.52

- Fishing 1.569.05 864.51 -704.54 -44.90

6 Forestry 6.827.94 6.782.96 -44.98 -0.66

23

Table 4.2.2:

Total of Agriculture Company according to the Subsector 2003 and 2013

Source: Agricultural Census year 2013

Table 4.2.2 shows total of company in agriculture sector in Indonesia is increasing. The increasing is about 3.87 percent of total agriculture company and it is dominated by Plantation Company which is based on the palm oil production. The number of agriculture companies incorporated plantation subsector in agricultural census 2013 is many as 2.216 companies, while the numbers of Forestry Company are 656 companies. Even though total of Crop Company is still few, but it there is an increase based on the agriculture survey in 2013, 87

companies compared to 2013 about 114 companies20.

20

Statistic Center Body, Report result of agriculture cencus 2013. 2013

Subsector Company

AC2003 (000)

AC2013 (000)

Change

Absolute (000) %

Agricultural sector _{4,010 4,165 155 3.87}

SUBSECTOR:

1 Crops 87 114 27 31.03

- Rice 69 75 6 8.70

- Palawija 18 47 29 161.11

2 Horticulture 225 185 -40 -17.78

3 Plantation 1862 2216 354 19.01

4 Livestock 475 636 161 33.89

5 Fisheries 631 379 -252 -39.94

- Fish cultivation 520 279 -241 -46.35

- Fishing 111 100 -11 -9.91

24

Condition of agricultural households is not worth with the effort. It can be seen from the land control owned by Indonesian farmers which are very small. This kind of farmer is classified as “petani gurem” in Indonesia or as peasant that only has small land or has less than 0.5 ha. In the agricultural census from 2003 to 2013 there was a declining of land ownership which was may be due to a declining of farming households in Indonesia, which is seen by overall decline in land owner approximately -16.32 percent, or a decrease of approximately 5,096,715 million people. In 2013, land owner under 0.1 ha (1000m2) looked drastically reduced as many as 4.34 million households, and decreased by 53.75 percent which is compared to 2003, totaled 9.38 million households. Land owner with an area of land held between 0.10 to 0.19 ha (1000-1999 m2) in 2013 is 3.55 million households, decreased by 1.45 percent compared to 2003 recorded for 3.6 million households. Group 0.20 to 0.49 ha land area (2000-4999 m2) in ST013 has recorded the number of farming households as many as 6.73 million households, decreased by 83.58 thousand households compared to 2003.

Table 5.2.3: Total of Agriculture Farmer Household according to the Total of Land Area Ownership in Agricultural Cencus (AC) in 2003 and 2013.

Land Total Categorized (m2)

AC2003 AC2013 Change

Absolut %

1 <1.000 9 380 300 4 338 847 -5 041 453 -53.75

2 1.000–1.999 3 602 348 3 550 185 -52 163 -1.45

3 2.000–4.999 6 816 943 6 733 364 -83 579 -1.23

4 5.000–9.999 4 782 812 4 555 075 -227 737 -4.76

5 10.000–19.999 3 661 529 3 725 865 64 336 1.76

6 20.000–29.999 1 678 356 1 623 434 -54 922 -3.27

7 ≥30.000 1 309 896 1 608 699 298 803 22.81

total 31 232 184 26 135 469 -5 096 715 -16.32

25

Farm land owner is dominated by Indonesia farmer household. It means that most of Indonesia farmer household is the owner of its own land even most of them is peasant. From total 26.14 million people of farmer household in Indonesia as much as 98.53 percent is land owner (25.75 million household). In addition, the rest is not the land owner. Then, new category is made out of two big groups of farmer household that only control small land, about less than 0,5 ha and more than 0,5 ha. The result from total of 98.53 percent, 55.3 percent (14.25 million household) is peasant household, and 44.67 percent (11.50 million household) is not peasant21.

2.3 The Development of Total Food Agriculture Land, Production and Productivity in Indonesia

As been said before, Indonesia has a very broad and very fertile territory but indeed it is regrettable that the use of land for agriculture has not optimally done by the Indonesian government. Based on BPS data in 2013, Indonesia has a land area of 191.09 million hectares. Only about 95.81 million hectares are potentially for agricultural activity, consisting of 70.59 million hectares of dry land, 5.23 million hectares of non-marsh wetlands, and 19.99 million hectares of wetlands. Most of that potential land is already used for agriculture activity. So, the land reserve is about 34.7 million hectares in which the area of cultivation is about 7.45 million hectares, 6.79 million hectares and approximately 20.46 million hectares in Production Forest 22.

21

Ibid,.

22

26

Table 6.2.3: Land Area by Utilization in Indonesia, 2009-2013

Land type Year Growth

2009 2010 2011 2012 2013 2013

over 2012

Wetland 8,068,427.

00 8,002,55 2.00 8,094,862. 00 8,132,34 5.91 8,112,10 3.00 -0.25 a. Irrigated wetland 4,905,107. 00 4,893,12 8.00 4,924,172. 00 4,417,58 1.92 4,819,52 5.00 -9.10 b. Non irrigated wetland 3,163,220. 00 3,109,42 4.00 3,170,690. 00 3,714,76 3.99 3,292,57 8.00 -11.37

Dry land 11,782,33

2.00 11,877,7 77.00 11,626,21 9.00 11,947,9 56.00 11,876,8 81.00 -0.59 Shifting cultivation 5,428,689. 00 5,334,54 5.00 5,697,171. 00 5,262,03 0.00 5,272,89 5.00 0.21 Temporary unused land 14,880,52 6.00 14,754,2 49.00 14,378,58 6.00 14,245,4 08.00 14,213,8 15.00 0.22 Eventhough the condition of agriculture gives a huge contribution in labor absorption there is declining or agriculture land shifting. Moreover, farmer performance need to get attention. The performance of agriculture productivity can be seen by looking of the productivity of agriculture itself. Productivity itself is calculated from total production per hectare of agricultural land.

Table 7.2.3: Productivity by Commodity in 2007-2013

Commodity 2007 2008 2009 2010 2011 2012 2013

Rice 47.05 48.94 49.99 50.15 49.80 51.36 51.52

Corn 36.60 51.79 49.54 48.44 48.99 45.65 44.36

Soy beans 15.51 14.16 13.48 13.73 13.68 13.48 13.13

Peanut 11.95 13.52 12.49 12.56 12.56 12.49 12.15

Green beans 10.53 11.24 10.91 11.48 11.30 11.60 11.24

Cassava 233.55 224.60 214.02 202.96 202.17 187.46 180.57

Sweet potato 152 147.47 139.29 123.29 113.27 111.92 107.80 Source: Center for Agriculture Data and Information System, Secretariat General – Ministry of

27

2.4 Indonesia Agriculture Export-Import Development

The development of Indonesian agricultural export imports always experiences a fluctuation which is caused by various internal and external factors. Data of export and import are important to see how the general condition of Indonesia agriculture is. In terms of international trade, export and import are two things that are very important. However, it needs to emphasize that too many importing commodities give indication that the state condition was not too good.

The agriculture in sub sectors of food crops is presented in table 8.2.4. The data of export-import development plant were not so good. Annualy, the demand for imported commodities increased gradually and did not match with the balance of trade. It is only plantation and horticulture that have a quite increasing especially of course it is for palm oil export commodities in which they are mostly dominated by large companies or even worse overseas companies.

Table 8.2.4: Agricultural Export Import in Indonesia by Sub Sector in 2008 - 2015

Sub sector Food Crops

Year

2008 2009 2010 2011 2012 2013 2014

Volume (ton) Export 812,29 0 786,62 7 892,45 4 807,26 5 234,27 4 357,33 3 367,664 Import 7,414,2 93 7,788,2 15 10,504, 604 15,363, 009 14,440, 737 16,78 0,553 18,19 5,889 Balanc e of Trade -6,602, 003 -7,001, 588 -9,612, 150 -14,55 5,744 -14,20 6,463 -16,42 3,220 -17,82 8,224 Value (US$000) Expor 348,88 3 321,26 1 477,70 8 584,86 1 150,70 5 185,96 0 205,531 Import 3,526,9 57 2,737,8 62 3,893,8 40 7,023,9 36 6,306,8 08 7,519,0 61 7,690,1 27

28 Balanc e of Trade -3,178, 074 -2,416, 601 -3,416, 132 -6,439, 075 -6,156, 103 -7,333, 101 -7,484, 596

Sub sectorHorticulture

Volume (ton) Expor 524,48 5 447,60 9 364,13 9 381,64 8 426,57 6 364,21 3 441,134 Import 1,429,9 67 1,524,6 66 1,560,8 08 2,052,2 71 2,138,8 02 1 ,543, 105 1 ,651, 547 Balanc e of Trade -905, 482 -1,077, 057 -1,196, 669 -1,670, 623 -1,712, 226 -1,178, 892 -1,210, 413 Value (US$000) Export 433,92 1 379,73 9 390,74 0 491,30 4 504,53 8 434,38 5 522,985 Import 926,04 5 1,077,4 63 1,292,9 88 1,686,1 31 1,813,4 05 1,529,8 23 1,637,0 67 Balanc e of Trade -492, 124 -697, 724 -902, 248 -1,19 4,827 -1,30 8,868 -1,09 5,439 -1,11 4,081

Sub sector Plantation

Volume (ton) Expor 25,182, 681 27,864, 811 27,017, 306 27,863, 746 29,826, 443 32,540, 504 35,027, 290 Import 2,683,7 39 2,963,5 32 3,578,0 61 4,311,9 82 3,954,2 02 4,501,5 46 4,037,4 50 Balanc e of Trade 22,498, 943 24,901, 279 23,439, 245 23,551, 764 25,872, 241 28,038, 958 30,989, 840 Value (US$000) Export 27,369, 363 21,581, 669 30,702, 864 40,689, 768 32,479, 157 29,476, 882 29,722, 438 Import 4,535,9 18 3,949,1 91 6,028,1 60 8,843,7 92 4,518,7 84 4,241,3 66 4,028,5 69 Balanc e of Trade 22,833, 445 17,632, 479 24,674, 704 31,845, 976 27,960, 373 25,235, 516 25,693, 869

Sub sector Livestock

Volume (ton) Expor 635,30 4 473,18 2 494,18 6 906,99 7 185,67 5 220,27 1 235,390 Import 1,065,2 35 1,124,7 37 1,231,5 25 1,190,6 30 1,201,7 42 1,393,4 39 1,485,1 41 Balanc e of -429, 931 -651, 555 -737, 339 -283, 633 -1,01 6,067 -1,17 3,168 -1,24 9,751

29

Source: Statistic Center Body (BPS), PUSDATIN

2.5 Role of Indonesia Agriculture to Indonesia GDP (Gross Domestic Product)

To see how Indonesian agricultural development and its achievements in the establishment of the Indonesian economy, it can be seen in terms of agriculture role in Indonesia GDP formation. Total value which was created by the agricultural sector in 2004 was amounted to IDR. 217 trillion and in 2012 increased to IDR. 314 trillion. Meanwhile, its contribution to development of the Gross Domestic Product (GDP) National in 2004 was 14.34 per cent and in 2012 slightly increase to 14.44, or on average over the period from 2004 to 2012 its contribution to GDP was only about 14 percent with the trend that has not

Trade Value (US$000) Export 1,148,1 70 754,91 3 951,66 2 1,599,0 71 556,52 7 592,69 2 587,798 Import 2,352,2 19 2,132,8 00 2,768,3 39 3,044,8 01 2,698,1 00 3,175,0 11 3,798,7 95 Balanc e of Trade -1,20 4,049 -1,37 7,887 -1,81 6,677 -1,44 5,730 -2,14 1,573 -2,58 2,319 -3,21 0,997 Agriculture Volume (ton) Expor 27,154, 761 29,572, 229 28,768, 085 29,959, 656 30,672, 967 33,482, 321 36,071, 479 Import 12,593, 233 13,401, 150 16,874, 998 22,917, 892 21,735, 483 24,218, 643 25,370, 028 Balanc e of Trade 14,561, 528 16,171, 080 11,893, 087 7,041,7 64 8,937,4 84 9,263,6 78 10,701, 451 Value (US$000) Export 29,300, 337 23,037, 582 32,522, 974 43,365, 004 33,69 0,927 30,689, 919 31,038, 752 Import 11,341, 139 9,897,3 16 13,983, 327 20,598, 660 15,33 7,098 16,465, 261 17,154, 557 Balance of Trade 17,959, 198 13,140, 266 18,539, 647 22,766, 344 18,35 3,830 14,224, 658 13,884, 195

30

relatively changed much, even in the last three years it was likely to decline. The highest contribution occurred in 2009 and 2010, and the lowest occurred in 2006. Relatively unchanged agricultural sector's contribution in the development of national GDP gives a strong indication that the productivity of the agricultural sector is still lower when compared to other economic sectors23. When viewed the agriculture GDP contribution per subsector food crops remained the highest contributor in the GDP contributor of the agricultural sector although it trend tends to decline and only fishery sub sector was likely to rise. Table 9.2.5: Agriculture Sub-Sector Contribution for Indonesia GDP

Business Field

2004 2005 2006 2007 2008 2009 2010 2011 2012 Food Crops 50,30 49,79 49,48 48,92 48,81 48,90 48,95 48,56 48,25 Plantation 15,08 15,50 14,63 15,07 14,79 12,99 13,81 14,08 13,42 Livestock 12,35 12,14 11,79 11,32 11,62 12,24 12,11 11,85 12,27

Forestry 6,16 6,20 6,94 6,67 5,63 5,26 4,90 4,74 4,61

Fisherie 16,11 16,38 17,16 18,03 19,15 20,60 20,23 20,77 21,45

Table 2.5.1 shows that Agriculture GDP does not seem to get attention from the government because it is declining gradually. It is also affected by the shifting of farm land, decreasing total number of farmer. However, food crop is still the largest contributor to Indonesia GDP. It indicates that food crops are still important for Indonesia’s agriculture sector.

23

Food and agroculture directorate of ministry of National Development Plan / Body of National Development Plan. Analysis of household, land, and Agricultural Business in Indonesia : Agriculture Cencus in 2013, 2014, Pg.12.

Source: Directorate Food and Agriculture/ Ministry of National Development Planning/ Body of National Development Planning

31

CHAPTER III

AGRICULTURE POLICY IN WTO AND INDONESIA

This chapter will explain about Indonesia relation with WTO that started when it became member in 1990 until the 9th ministerial meeting in Bali. This chapter will also explain abbout Indonesia agriculture policy, and also the G33 proposal in the meeting which is related to agriculture policy.

3.1 World Trade Organization (WTO) and Its Agriculture

Negotiations

The early start of the establishment of World Trade Organization is the desire of countries to create a multilateral trade system with fairness through promoting and stabilizing the economic exchanges among countries arranged against the regulations of national government that often seek to restrict those exchanges. So, the purpose of international rules is to reduce the protectionism of national regulation, and even more it is to reduce the uncertainty and unpredictability of international trade relation and to promote stability24. Then, this chapter will give an understanding about WTO.

WTO is the only international trade organization which has special right to control trade problem or trade policy among countries. System that has been made in WTO is made by the consensus among countries through the highest decision maker called Ministerial conference. The result of the ministerial conference is binding the government and having obligation to implement it in the domestic policy.

24

Winham R Gilbert, the Evolution of the Global Trade Regime. In J. Ravenhill, Global Political Economy, New York: Oxford University Press 2005, Pg. 88.

32

The first effort of world trade regime establishment is the launched of General Agreement Trade and Tariff (GATT) in the negotiation of Uruguay round in Punta del Este, Uruguay, in September 1986. At that time GATT only was controlls limited and general trade area such as reducing protectionism from non-tariff barrier.

The early of GATT is to establish International Trade Organization (ITO), United Nation Law Body which are parts of Bretton Woods (International Monitary Fund and World Bank). Even the ITO charter finally agreed on UN Conference on Trade and Development in Havana, in March 1948, the ratification process by the state legislative body did not run so well. The most serious challenge is from the United States. By United State’s action of not ratifying the Havana charter, it clearly showed that ITO effectively cannot be established. However, GATT still becomes the basis instrument to control multilateral trade between countries.

WTO was created as part of the Uruguay round negotiations result agreed on 15th of Decembers 1993, and it came into existence on 1st January 199525. WTO is the only international body who controls international trade activity. The organization keep developing also the world economic system, it make interdependence between countries through international trade. The main ideas are to release the policies of The Reciprocal Trade Agreement which mean policies of reciprocal to decreasing trade tariffs26.

25

Ibid,. Pg.106.

26

33

The goal of WTO, first is to push the flow of trade between country with decreasing or erasing any barriers which can disrupt the flow of goods and services. Second, facilitates the negotiation and provide permanent negotiation forum. Third, facilitates dispute settlement body among states, even though WTO policy is already agreed by countries but sometimes there is a different interpretation among states. So, there is need a neutral legal procedure to overcome these kinds of problem in order to establish a fair trade among countries.

Indonesia is one country that agreed and ratified the establishment of WTO in which UU No. 7/1994 became a prove that Indonesia government was ready to implement any WTO agreement signed by every WTO member country.

3.1.1 Uruguay Round

It is known that Uruguay round is the key of the international trade system creation. It started from it launch in September 1996, also called as Punta Del Este, until the negotiation of Geneva in January 1995 who was created international trading system organization (WTO) which covered all agenda of Tariffs Non-tariff barriers, natural resource products, textiles and clothing, agriculture, tropical products, GATT articles, Tokyo Round codes, Anti-Dumping, subsidies, intellectual property, investment measures dispute settlement, and the GATT system and Services. WTO replaced GATT as an international organization, but the General Agreement still exists as the WTO’s umbrella treaty for trade in goods, updated as a result of the Uruguay Round

34

negotiations27. The basis of Uruguay round is becoming a main problem in the discussion and work of WTO itself. WTO negotiated the issue among its members in the ministerial conference which is held every 2 years.

In every negotiation undertaken there are always problems faced by its members. It also happened in Uruguay round and every ministerial meeting in which agricultural sector has always been a constraint in every multilateral agreement. Although it only accounted for 13 percent of total world trade but agriculture is very important for most developing countries, Agricultural issues are closely related to socio-economic issues (among others, food security, livelihood security and rural development). Meanwhile for developed countries, the provision of domestic subsidies has an important political dimension in their agricultural policies.

3.1.2 Agreement on Agriculture

Early era of agriculture agreement at WTO is went to the agriculture agreement is sign in 1993. When WTO was established at that time, there was new issue in trade which is agriculture is intellectual property right. After that agriculture sector is in the hand of multilateral trade organization to liberalize agriculture sector. This agreement is also called as AoA (Agreement on Agriculture). With this new free market paradigm of agriculture sector it is meant that agriculture liberalization is an obligation that needs to obey by all country28.

27

World Trade Organization, The Uruguay Round. Retaken from www.wto.org: https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact5_e.htm

28

Hasibuan, A. I, Post Food Policy Ratification of the Agreement, Jurnal Kajian Politik Dan Masalah Pembangunan, 2015, pg. 1636.

35

AoA has a goal of fair trade that want to achieve in WTO “... to establish a fair and market-oriented agricultural trading system ..." (World Trade Organization. The Results of the Uruguay Round of Multilateral Trade Negotiations: The Legal Text, Geneva, Switzerland, 1994). WTO itself does not use the word of free trade but fair trade so it means that WTO does not want to make a free trade but fair trade29. It needs to emphasize that what happens practically are quite different condition, and words of fair trade are only mysterious words which only want to achieve a free trade.

AoA’s concept is to create fair market-oriented agriculture trade system and make agriculture commodities become industrial trade commodities or manufacture. The agreement also includes other issues outside trade such as food security, environment protection, and special right for developing country which are also market access for their agriculture product. In Agriculture agreement there are several classifications of agriculture product called Harmonized System of Product Classification (HS). There are classifications of commodities such as rice, oat, kind of bread, butter, yoghurt and more that are also classified as agriculture products but fish and forestry are not classified as agriculture product30.

So Uruguay round in 1993 and the implementation of AoA in WTO, as the basis of world agriculture regulation, makes WTO has a significant role as a determinant in agriculture policies of its members with it obligation to open its

29

Tito Pranolo, Pembangunan Pertanian dan Liberalisasi Perdagangan. Konpernas XIII Perhepi, 2000, Pg. 13.

30

Muhammad Nafan Aji Gusta Utama, Persetujuan Bidang Pertanian WTO dan Pembentukan Kelompok G-33, Jakarta : Penerbit Fisip Universitas Indonesia, 2010, Page 30

36

market for agriculture export import product, decreasing domestic support, and decreasing export subsidy.

1. Domestic Support Decreasing: Total decreasing of domestic subsidy known as Trade Distortion Cause is about 20 percent from AMS31 (Aggregate Measure of Support) from the basis period of 1986-1988. For developing country, the decreasing is two third about 13.3 percent. This regulation is not implemented for country whose AMS is not more than 5 percent or for developing country whose AMS is below of 10 percent. The exception is granted subsidy which has a small impact or trade.

2. Export subsidy: Export subsidy decreased about 21 percent in every product according to the average of 1986-1990. Meanwhile, the budgetary for export subsidy will also decrease about 36 percent in 6 years. For developing country, the decreasing is about two third with the time implementation of 10 years.

3. Market Access: All of export barrier will be converted to the tariff and decrease about 6 percent for developed countries with minimum decreasing in every line of about 10 percent with the implementation time for 6 years.

31

Aggregate Measure of Support is included in the calculation of the category of Domestic support pillars. The main Debate in domestic support opinion is that policies guarantee domestic prices will lead to a situation of excess production (Over-production). It is expected to reduce imports and in turn will lead to other policies which Export Subsidies and low-priced dumping on the world market. Agricultural agreement distinguishes between (a) direct assistance programs that excite and increase production in the country, and (b) assistance program that does not have a direct connection to production (no direct effect).

37

Meanwhile, for developing country the decreasing is about 24 percent with implementation time for 10 years32.

Reda Wayan and Made Susila in their writings entitled: "The essence and the Impact of Trade Liberalization on the Plantation Subsector" wrote a brief history of the agricultural liberalization which contains: "The issue of trade in agricultural products seems to have been destined to be the culprit of contention in the GATT negotiations. Since the preparation of Havana Charter (1940), which is the forerunner of the World Trade Organization (WTO), there is no agreement on how trade in agricultural commodities should be treated. This contradiction is then sustained in the preparation of the basic framework of GATT in 1947. Some delegations argue that trade in agricultural products must be free in accordance with the provisions of GATT and partly argued that the problem should be organized with the involvement of the exporting and importing countries and between developing and developed countries. From here on, the problem of trade in agricultural products continues to be a central issue at the next GATT negotiations, i.e. Dillon Round (1960-62), Kennedy- Round (1963- 67), the Tokyo Round (1973-79), and Uruguay Round (1986-1993), After going through a series of tough and long negotiations, GATT was finally signed on 15 December 1993. One of the peculiarities of this round is the inclusion of agricultural commodities on the agenda of the talks. In other words, the success of PU caused to the agricultural sector together with other sectors or the agricultural sector is no longer treated exclusively within the framework of the GATT. Thus, the distortion

32

Hasibuan, A. I, Post Food Policy Ratification of the Agreement, Jurnal Kajian Politik Dan Masalah Pembangunan, 2015, Pg. 1636.

38

of trade in agricultural products is expected to be lost or decreased so as to increase the efficiency and volume of trade in agricultural products ... "33.

3.1.3 History of Agriculture Talks in Doha round

In the fourth Ministerial Conference in Doha, Qatar, in November 2001, WTO member governments agreed to launch new negotiations. They also agreed to work on other issues, in particular, such as the implementation of the present agreements. The entire package is called the Doha Development Agenda (DDA)34. When members of WTO held that ministerial meeting, a lot of countries face a problem about current international trade issue. So, here DDA came up as a basis of international trade regulation or basis law. Doha Development Round or DDA is the current trade-negotiation round of WTO commenced in November 2001 under the general-director Mike Moore. Its objective is to strengthen, and to fix the rule of WTO which is more fair, and also to answer the development interest of developing countries and LDCs (Least Developing States). Another objective of DDA is to negotiate global market access.

Actually the deadline for all subjects to reach the agreement is in the negotiation by 1st January 2005. The only exceptions were the negotiation on improving and clarifying the Dispute Settlement Understanding (with a deadline of 31st May 2003 and technically not part of the “single undertaking”) and the negotiations on a registration system for geographical indications for wines and

33

Markus Eko Susilo, Liberalisasi Pertanian dan Kemiskinan di Indonsia, full at:

http://www.kompasiana.com/markus.simanjuntak/liberalisasi-pertanian-dan-kemiskinan-di-indonesia_55108a2b8133118e33bc6aec,

34

World Trade Organization, Understanding WTO, Geneva : WTO Information and External Relations Division, 2015, Pg. 77.

79 economic force by other countries especially from the core countries. Another condition that Indonesia called as periphery country is: having cheap labor, exporting raw materials, and producing agricultural products. This condition can be seen in the Bali meeting in which Indonesia lose its tension with developed state. Another category is from the export-import condition. Periphery countries tend to export agriculture or raw goods. According to this position, Indonesia still depends on other countries especially United States. So, that is why in the last minute, Indonesia tends to shift its position. Moreover, even Indonesia is suitable when categorized as Periphery country, but Indonesia position tend to increase into Semi-Periphery country because slowly but surely Indonesia starts to export produced goods such as electricity, cloth, footwear and more. Bali Package was not only connection about agriculture sector, but also was a trade facility and also easiness for LDC to gain market and export their product. This is another reason why Indonesia tends to shift its position, where Indonesia is also an exporter who needs a market and also needs a trade facility which will support its product.

One of the impacts after the implementation of Bali package is to the Indonesia agriculture policy. In 2014 Bali package is implemented by WTO general council and in Indonesia there is a new presidential inauguration. The new president Joko Widodo has a big homework in order to protect domestic agriculture from the Threat of peace clause. Agenda promised by Joko Widodo administration clearly gives the intention of lifting up classes from Periphery country become Semi-Periphery country.

80 There are strategies done by Indonesia government after the implementation of Bali package peace clause. The strategy is in order to prepare domestic agriculture sector to be strengthened before meeting deadline of peace clause. There are three strategies that has been done by Indonesia government based on the “NAWACITA” or Joko Widodo agenda in order to develop Indonesia, in agriculture sector to make food sovereignty.

First, strategy is by implementing import substitution and stop the import surge of agriculture commodities that make loss of domestic market. Then, second strategy is by implementing the strategy of investment. Joko Widodo believes that with investment, it can accelerate the development of national economic, especially agriculture sector. The third is through strengthening domestic agriculture sector and in this case through huge domestic support distributed to the farmer. The amount of the distribution is huge rather than in the Susilo Bambang Yudhoyono era and the amount is larger than the amount of energy subsidy. However, this is the first time that Indonesia ever gives a huge subsidy to agriculture sector. This is indicating that Indonesia tries to be Semi-Periphery country and tries to achieve its food sovereignty.

The thing that needed to do by Indonesia government is consistency in the realization of that agenda. However, Indonesia government also needs to do an improvement in term of public policy that is not against international trade rules, and for the next 4 years Indonesia should have a smarter system if there is unpredictable situation in international trade negotiation not allowing any subsidy in domestic agriculture. So, Indonesia’s agriculture sector will be ready.

81

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