Figures from across the U.S. agriculture industry are breathing a sigh of relief after the administration unveiled details of its second trade framework – a pact with Indonesia – and once again, agriculture featured prominently.
Details provided by the White House suggest the agreement could make headway on longstanding trade irritants and boost the competitiveness of U.S. ag products like dairy, but much will depend on how subsequent negotiations play out, analysts tell Agri-Pulse.
“I'm doing a little celebration,” said Cassandra Kuball, vice president at Torrey Advisory Group, a Washington-based agricultural and food policy lobbying organization. “It's great to see something come to fruition and give us a sense of what is able to, hopefully, be accomplished.”
The Trump administration has been negotiating with more than a dozen governments since President Donald Trump slapped new tariffs on almost all U.S. trading partners. So far, Trump has announced pacts with the United Kingdom, Indonesia, Vietnam and the Philippines, but has only released text for the UK framework. On Tuesday, the White House issued a fact sheet and joint statement on the terms of the Indonesia framework.
Ag industry representatives see plenty of reasons for optimism from the Indonesia arrangement, based on the details available so far.
A commitment to eliminate tariffs on almost all U.S. exports, Kuball said, could particularly benefit the U.S. dairy industry. The sector has been competing with products from New Zealand in the Indonesian market – which enjoy the benefits of closer proximity and a regional free-trade agreement.
“It looks very promising for dairy, especially,” Tony Rice, trade policy director at the National Milk Producers Federation, added.
In addition to lowering tariff barriers, Indonesia will recognize “U.S. regulatory oversight,” including around export facilities, according to the fact sheet. Rice said that this should also benefit U.S. dairy producers.
U.S. export facilities currently have to be audited by Indonesian officials to export to the country.
“It's a lengthy process. It takes several years for a plant to get through it,” Rice said, and “it's just duplicative of what's done here in the United States.”
Rice said that he hopes further negotiations will remove the audits but pointed out that much will depend on the details both sides eventually come up with.
A separate commitment to exempt U.S. agriculture from Indonesia’s import licensing procedures could also benefit U.S. animal product and produce exports, according to Sharon Bomer Lauritsen, former assistant U.S. Trade Representative for agricultural affairs.
Indonesia has long maintained licensing requirements for a slate of U.S. agricultural products, including horticultural products and animal products. The U.S. won a case at the World Trade Organization against Indonesia over the onerous requirements, but the Indonesian government has, until now, done little to ease U.S. concerns, according to USTR.
“I think that's particularly useful,” Bomer Lauritsen said.
A former Biden-era trade official granted anonymity to speak frankly about the framework also noted that if the U.S. has secured a commitment from Indonesia to permanently recognize U.S. plant products under Indonesia’s Fresh Food of Plant Origin scheme, it would be a “pretty big deal.”
The official noted that this scheme, which ensures various permits are obtained and regulations and standards are met prior to import, has been wielded by Indonesia to hold up U.S. apple exports.
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“It’s a welcome provision,” the official said. But the official added that as with the UK pact, the framework is light on specifics.
Multiple analysts pointed out the extent that the measures open Indonesia’s market to U.S. ag products will depend on what terms are agreed to in future negotiations.
The administration has not provided specifics on which products will see their Indonesian tariffs scrapped, and questions remain around what the two sides will ultimately negotiate regarding regulatory oversight, export licensing and geographic indications. The fact sheet only indicated that Indonesia will pursue ““transparency and fairness” in its GI regime.
“It’s like a puzzle,” Kuball said. The framework unveiled yesterday puts the edges of the puzzle into place. “Now we're still putting in some of the pieces in the middle.”
But several of the analysts Agri-Pulse spoke with said that the details of the Indonesia framework published yesterday would likely shed some light on what other pacts with Indonesia’s regional neighbors will contain.
They said that they expect the deals struck with the Philippines and Vietnam, as well as any future deals with Southeast Asian nations, will follow a similar structure to the Indonesia deal – with 15-20% U.S. tariffs remaining in place, purchase commitments, tariff reductions from trading partners and non-tariff barrier reductions that could be tailored to specific ag sector grievances with each country.
“We're starting to start to see the trend here of what will likely come with future frameworks,” Kuball said. “I wouldn't be surprised if we'll see other purchase commitments going forward that will have some type of agricultural good tied into it.”
The last time the U.S. made purchase commitments a central component of a trade pact was in Trump’s 2020 phase one agreement with China. Beijing, however, failed to live up to those purchase commitments after the pandemic hit shortly after the deal went into force. Trump has repeatedly lamented China’s shortfall.
Analysts were hopeful that Indonesia’s commitments will be more feasible than those China made. The framework includes purchase commitments worth $4.5 billion for U.S. soybeans, soybean meal, wheat and cotton, although no sector-specific targets have been issued.
The four commodities that the country already imports in significant volumes, analysts pointed out, putting Indonesia on solid footing to expand its imports. The products make up four of the top seven exports to the country, according to Agriculture Department data.
Accordingly, Bomer Lauritsen said she’s “optimistic” Indonesia will be able to follow live up to its commitments.
“I find it hard to believe that a government would make a commitment on a certain level if they didn't already have the Indonesian companies ready to follow through,” she argued.
“Provided the final assigned agreement and implementation is actually done in a way that is indicated in the joint statement,” Bomer Lauritsen continued, it would “offer some important improvements for US agricultural exports.”
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