The Turkey Rice Case and its Implications for Indonesia: Turkey Gets Taken to Task Over Failing to Fulfill its Tariffication Obligations

Most of my work while embedded in the Indonesian Ministry of Trade involved training and capacity building. This was one of the few pieces of published policy research I produced during that period. I wrote it and submitted it to the Minister as a heads-up: a WTO ruling against Turkey’s rice import regime had implications much closer to home.

Rice was politically sensitive in Indonesia, as it was across much of Asia. The difficulty was that Indonesia used several of the same instruments that had just landed Turkey in trouble. In my assessment, leaving those arrangements unchanged meant leaving Indonesia exposed to a challenge of its own.

What Turkey’s case revealed

The dispute, brought by the United States, concerned more than the level of Turkey’s tariffs. It concerned whether traders could actually obtain permission to import rice. Turkey denied or failed to grant the licences needed to import at its ordinary tariff rates. Access to lower tariffs under its quota arrangements also depended on buying domestically produced rice.

The panel found the licensing restrictions inconsistent with Article 4.2 of the Agreement on Agriculture, and the domestic purchase requirement inconsistent with the obligation to treat imported products no less favourably than comparable domestic products. The WTO’s account of the dispute sets out these findings.

Why this mattered for Indonesia

One of the major achievements of the Uruguay Round agriculture negotiations was “tariffication”: replacing certain restrictions on agricultural imports with ordinary customs duties. A tariff commitment meant little if an importer could not obtain the licence needed to bring the goods into the country.

My paper compared Turkey’s arrangements with Indonesia’s import bans, discretionary licensing and restrictions on where imported rice could be unloaded and how it could be used. Measures introduced to protect producers during the harvest could become much more enduring barriers. The similarities were sufficiently strong to warrant a serious review of the legal basis for Indonesia’s regime.

A warning, and a practical recommendation

The point was to consider how Indonesia could pursue its legitimate policy objectives using instruments that were more consistent with its WTO commitments. The paper suggested examining the scope to use tariffs within Indonesia’s agreed limits, alongside a review of the other restrictions. A politically important objective did not, by itself, settle the question of whether the means used to achieve it would withstand scrutiny.

This was advice written in 2007, in response to a newly circulated ruling. Looking back, it illustrates an important part of the job of an embedded adviser: spotting when a dispute involving another country has exposed a vulnerability in the policies of the government you are working with, and raising it before it becomes a dispute of your own.

Read the paper

The Turkey Rice Case and its Implications for Indonesia: Turkey Gets Taken to Task Over Failing to Fulfill its Tariffication Obligations, Simon Lacey. Written on 1 October 2007; posted on SSRN on 5 October 2008 and last revised on 30 December 2008.

Download the full paper (PDF) · View the paper on SSRN

Listing photograph: rice for sale in Ho Chi Minh City, Vietnam, by Justin Brinkhoff / Pexels.

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