Summer Course 2021 M Firdaus

Agricultural Trade and
Global Trade Agreement

Commitment Post Pandemic
Prof M. Firdaus, PhD

13 July 2021
CV
Muhammad Firdaus is a full professor at
Department of Economics, IPB University in
Indonesia. He graduated from Department of
Economics, UPM in 2006. SEARCA was his sponsor
during PhD program. Now he is active in trade
policy studies and participated in many
international trade related events (Chairman of
SEAITFA). He is currently Indonesian Government
advisor for WTO Agreement and for Minister of
trade . He is also active as expert in some agencies
such as National Productivity Organization and
support some projects from Central Bank,
Bappenas-ADB etc.
Department of Economics | Faculty of Economics and Management
☎ +62 251 8626602 ✉ ilmu_ekonomi@ipb.ac.id 🌐 http://ekonomi.fem.ipb.ac.id @dept.ieipb
Outline
CV
1. Covid-19 and Strategic Responses
2. Global Trade in Agriculture
3. Global Trade Commitment Post
Pandemic

Covid-19 and Strategic Responses

Update of Covid-19 as of 12 July 2021
Globally, as of 12
July 2021, there
have been
186.411.011
confirmed cases of
COVID-19:
4.031.725 deaths

Impact of Pandemic Covid-19 and Strategic Responses
Production activity Lower economic growth:

Tourism, Horeca, Agric, Manufacturing & informal sector
Investment: e.g. China dominated in Eastern Indonesia
Trade: Global recession discourages trade flows

Variable Coefficient Se P-Value
Using SPATIAL model to GDP 1.806586 0.194238 0.0000
estimate determinants Population 1.215334 0.147391 0.0000
of export in a region Exchange Rate -0.239713 0.059489 0.0001
Tariff -0.156521 0.055092 0.0050
ECONOMIC ATIVITY IS Distance -1.351730 0.136291 0.0000
THE MAIN PULL FACTOR Constant -54.08620 4.051198 0.0000
R-squared 0.819102
Adjusted R-sq 0.814078
F-statistic 163.0077
Prob(F-statistic) 0.000000
Source: Firdaus, et. al, 2019
FAO
• Income growth is slowing and job losses are severe: Despite the global economic
downturn, agricultural production has been less affected
• Intermittent malfunctioning of food supply chains: supply chains are being disrupted not
only by movement restrictions (e.g. subnational or international border closures), but also
by shifts in the source of consumer demand….consumer preferences and perceptions can
affect supply chains and lead to shortages or surpluses of particular goods in particular
locations.
• World food markets are relatively calm, with prices soft
• Domestic food prices are stable so far (in Indonesia, for horticulture products, seasonal
impact dominated: chili price was only 10k in August 2020, now approaching 60k per kg)
Strategic Responses (ASEAN Policy Brief, April 2020):
1. Mobilizing all available macro, financial, and structural policy tools
2. Preserving the economy’s productive capacity: diversity of production and
export bases. AGRICULTURE IS THE RESCUER OF INDONESIA ECONOMY 2020
3. Keeping the supply chains going
4. Leveraging on technologies and digital trade
5. Strengthening the social safety nets
6. Scaling-up regional pandemic responses
7. Redoubling the resolve to advance regional integration
FIRST QUESTION
As economy must stay on

productive, how to keep
balance between health
and the economic sector?
Global Trade in Agriculture

AGRICULTURAL MARKETS AND TRADE DURING PANDEMIC (FAO, 2021)
• The COVID-19 pandemic and the measures to control its spread affected the global
trading system, domestic and international supply chains and food demand alike. In
response to concerns over food security and food safety worldwide, many countries
immediately imposed policy measures with the aim to curb potentially adverse
impacts on their agricultural markets, producers and consumers. Despite disruptions,
global food commodity markets and agricultural trade have proved resilient to the
COVID-19 shock. Agricultural trade has continued to flow, global markets continue to
be well supplied and prospects are favourable, at least for basic foodstuffs. The full
economic and social impacts are still unfolding and as the disease continues to
spread, COVID-19 will continue to be a serious source of market uncertainty with
implications for demand and supply of food and agricultural commodities.

Agriculture Trade During Pandemic Commodities other than cereals have been
more affected by the pandemic.
FAO report: Oil crops experienced a COVID-19-related
stagnation of demand in the food and non-
food sectors in 2019/20 and sugar
consumption declined in 2019/20 due to the
lockdown and containment measures.
For dairy products, international prices,
measured by the FAO Dairy Price Index, fell
between February and May 2020, largely due
to a slump in global import demand, caused
by logistical bottlenecks, reduced sales by
food services, and market uncertainty.
Regarding meat, the pace of production
expansion across all meat types was
moderated by pandemic-related disruptions
to production processes and producers’
output restraints to balance supply under
uncertain demand
Agriculture Trade During Pandemic
FAO report:

SOME PROGRAMS DURING PNDEMIC (FAO, 2021)
• Data for Decision Making: Ensuring quality data and analysis for effective policy
support to food systems and Zero Hunger: AMIS, GIEWS
• Trade and Food Safety Standards: Facilitating and accelerating food and
agricultural trade during COVID-19 and beyond.
• Boosting smallholder Resilience for Recovery: Protecting the most vulnerable,

promoting economic recovery and enhancing risk management capacities.
• Food Systems Transformation: “Building to transform” during response and

recovery.
SECOND QUESTION
Would you explain how to

deal with market uncertainty
both in the domestic and
global market?
Indonesia Trade Flow During Pandemic (million USD)
COMMODITY EXPORT 2016 2017 2018 2019 2020 Trend(%)
VEGETABLE OIL 18,233.5 22,966.5 20,348.1 17,634.8 20,716.4 -0,09
RUBBER AND PRODUCTS FROM RUBBER 5,664.2 7,740.7 6,380.1 6,025.6 5,618.8 -2,63
COFFEE, TEEA, SPICES 1,896.5 1,964.7 1,550.0 1,618.9 1,719.8 -3,82
FOOD PROCESSING PRODUCTS 949 1,027.1 1,184.9 1,309.4 1,274.1 8,68
COCOA 1,239.6 1,120.3 1,245.8 1,198.7 1,244.2 0,75
TOBACCO 1,009.7 1,141.8 1,203.5 1,207.8 1,150.6 3,23
FLOUR PRODUCTS 814 969,4 1,016.3 1,056.5 1,150.0 8,08
FOOD IDUSTRY WASTE 553,7 604,5 801,7 802,3 983,4 15,40
FRUITS 712 936,2 825,2 797,4 934,3 3,90
DAIRY PRODUCTS 229,7 316,9 333,8 417,1 597,1 24,43
OILY SEREALS 268,5 254,5 338,6 324,8 307 5,26
VEGETABLES 93,6 104,3 105,1 121,4 166 13,84
LIVE ANIMALS 57,3 64 60,9 65,9 80,4 7,32
ANIMAL PRODUCTS 18,1 22,7 20,9 21,9 24,1 5,48
LIVE PLANTS, CUT FLOWER 20,9 17,6 18,6 17,8 18,5 -2,30
WHEATS 12,1 4,4 75 1,6 17,5 -2,50
MEAT AND FISH 20,7 18,1 16 17,1 14,2 -7,78
LEATHER 1,4 0,8 0,3 0,5 0,3 -33,38

Indonesia Trade Flow During Pandemic (million USD)
COMMODITY IMPORT 2016 2017 2018 2019 2020 Trend(%)
WHEATS AND WHEAT PRODUCTS 3,191.8 2,927.2 3,795.0 3,237.3 3,021.8 -0,09
FOOD INDUSTRY WASTE 2,479.9 2,652.2 3,057.4 2,649.4 2,910.8 3,24
OILY SEREALS 1,202.9 1,503.6 1,515.8 1,489.5 1,420.6 3,29
COTTON 2,096.2 2,261.8 2,396.8 1,974.9 1,327.7 -9,96
FRUITS 848,1 1,191.6 1,310.9 1,486.0 1,271.5 10,86
DAIRY PRODUCTS 832,4 990,5 1,014.5 1,143.4 1,156.6 8,34
VEGETABLES 695,9 820,7 738,4 770,1 846,4 3,34
FOOD PROCESSING PRODUCTS 666,5 731,9 900,9 824,7 818,7 5,45
TOBACCO 541,2 704,5 793,6 689,7 664,3 3,96
COCOA 350,4 646,3 706,8 776 650,7 15,27
FLOUR PRODUCTS 314,9 353,3 404,3 487,5 477,8 12,25
LIVE ANIMALS 616,1 548,4 608,9 631,1 471 -3,89
COFFEE, TEA AND SPICES 228,4 254 392,5 262,2 233,2 0,74
VEGETABLE OILS 179,4 198,8 207,9 250,9 220,7 6,68
FRUITT AND VEGETABLE PRODUCTS 172,9 198 208,2 224,8 197,8 4,04
PRODUCTS FROM ANIMALS 91,1 118,2 162,4 171,9 149,1 14,58
WOLL 147,3 111,3 124,3 114,6 44,9 -20,93
LIVE PLANTS 4,5 5,9 7,2 9,3 8 17,59

THIRD QUESTION
Can you identify determinants

of increase in palm oil exports
and decrease in wheat import
during pandemic?
Global Trade Commitment
Post Pandemic

TRADE OPENNES OF BIVIC COUNTRIES Value of Per Capita Agric. Export (US $)
Opennes of Trade (%)
2004 2016 2014 2019
0.374
184.7
0.218
0.151
0.106
0.039 0.055 0.067
133 0.0070.026 0.017
Indonesia Brazil India China Vietnam
Value of Per Capita Agric Import (US $)

59.7 2014 2019
37.4 37.5 40.2 37.5 37.21 0.264
29.7 24.5
0.101
0.057 0.052
0.020 0.017 0.0040.014 0.017 0.023

CURRENT ESTIMATION FROM WTO
• World merchandise trade volume is expected to increase by 8.0% in 2021 after falling 5.3% in
2020, a smaller decline than previously estimated.
• Trade growth will likely slow to 4.0% in 2022, with the total volume of global trade remaining
below the pre-pandemic trend.
• World GDP at market exchange rates should increase by 5.1% in 2021 and 3.8% in 2022, after
contracting by 3.8% in 2020.
• Merchandise trade in nominal dollar terms fell in 2020 by 8% while commercial services exports
declined by 20%.
All countries should encourage open trade, rule-based,

predictable and non-discriminatory trading system
AGRICULTURE IN THE SENSE OF WTO

SOME CHALLENGES FOR DEVELOPING COUNTRIES POST PANDEMIC
✓ Investigating some possibilities to reduce domestic support

✓ Investigating some possibilities to reduce tariff for market access
✓ Investigating some subsidies in SOEs
✓ Establish cooperation with partners for handling NTMs such as SPS,
TBT etc.
Currently Indonesia has renewed some rules with Law Ciptaker

EXAMPLE FOR POST PANDEMIC: PUBLIC STOKHOLDING (PSH)
Rational:
The Agreement on Agriculture (AoA) allows subsidies to be given to public food (stockholding) programs. The FAO notes that
during the pandemic the number of 820 million chronically insecure people is set to double and government procurement and
public distribution can be important expedients to preserve food system functioning and avoid food price inflation. Several
developing countries have used their public food stockholding programs to boost both food stocks and minimum income for
their farmers during the COVID-19 pandemic.
Debate:
➢ AoA allows PSH in developing countries with price support, provided that the difference between the acquisition price and
the “external reference price” is accounted for in total product-specific Aggregate Measurement of Support (AMS).
However during this fixed period global prices were low and definitely not comparable to current global agricultural prices.
So calculating current subsidies based on 1986-88 prices overestimates the subsidy. Nor does the method of calculation
take inflation into account.
➢ The Bali peace clause (2013) restricted to traditional staple food crops, very onerous transparency and notification
requirements, and has sweeping anti-circumvention and safeguard conditions, which makes it impossible to use.
Indonesia’s leadership (G-33) is strongly required

FOURTH QUESTION
Would you mention some

constraints for some
developing countries to
implement WTO rules?
Recommendation: How to Maintain Current Account?
Boosting
productivity
(technology
and market
efficiency)
Increasing
export (new
market and
product)
Reducing
import
contents

FIFTH QUESTION
Can you explain the role

of technology in order to
comply with the global
requirements?
Impact of MRL (NTMs) on Agriculture Export
Variable Cabbage Banana Ginger Curcuma

Ln(GDPRI) 4.531*** -0.551 -1.016 7.091***
Ln(GDPR) -3.083*** 4.967*** 3.781*** 0.156
Ln(POP) 7.052*** 0.002 0.751*** 0.693***
Ln(PROD) 2.044 2.997 0.046 0.317***
Ln(DIST) -2.135*** -3.388*** -2.881*** -0.207***
Ln(TRF) -3.607* -22.660*** -17.560*** -8.758**
MRL 1.773*** 0.333*** 10.268*** 0.036*
D -0.058 0.174** -0.254 -1.562***
RCA 0.037*** 0.817** 0.673*** 0.006**
C -150.824 -39.241 14.746 -155.854***
R2 0.906 0.634 0.945 0.985
Prob F-stat 0.0000 0.0000 0.0000 0.0000
DW 1.575 2.057 1.972 1.169

Hatur Nuhun
Department of Economics - IPB University
IPB Dramaga Campus, Bogor 16680
Telp.: 0251-8622602
E-mail: ilmu_ekonomi@ipb.ac.id
Web : http://ilmuekonomi.fem.pb.ac.id

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Agricultural Trade and

Global Trade Agreement

Prof M. Firdaus, PhD

Department of Economics | Faculty of Economics and Management

Department of Economics | Faculty of Economics and Management

Department of Economics | Faculty of Economics and Management

Production activity Lower economic growth:

Investment: e.g. China dominated in Eastern Indonesia

Trade: Global recession discourages trade flows

Department of Economics | Faculty of Economics and Management

As economy must stay on

Department of Economics | Faculty of Economics and Management

Department of Economics | Faculty of Economics and Management

Department of Economics | Faculty of Economics and Management

• Boosting smallholder Resilience for Recovery: Protecting the most vulnerable,

• Food Systems Transformation: “Building to transform” during response and

Would you explain how to

Department of Economics | Faculty of Economics and Management

Department of Economics | Faculty of Economics and Management

Can you identify determinants

Department of Economics | Faculty of Economics and Management

Indonesia Brazil India China Vietnam

Value of Per Capita Agric Import (US $)

Department of Economics | Faculty of Economics and Management

All countries should encourage open trade, rule-based,

Department of Economics | Faculty of Economics and Management

✓ Investigating some possibilities to reduce domestic support

Currently Indonesia has renewed some rules with Law Ciptaker

Department of Economics | Faculty of Economics and Management

Indonesia’s leadership (G-33) is strongly required

Would you mention some

Department of Economics | Faculty of Economics and Management

Can you explain the role

Variable Cabbage Banana Ginger Curcuma

Department of Economics | Faculty of Economics and Management

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