The Benefits of the WTO Bali Package for Indonesian Agriculture

 

The Ninth Ministerial Conference of the World Trade Organization (WTO) concluded on Saturday, 7 December 2013. The outcome of the conference in Bali helped ease the growing sense of frustration after years of WTO meetings had failed to produce meaningful agreements. Since the launch of the Doha Round in 2001 in Doha, negotiations had made little progress.

The beauty and warm atmosphere of Bali seemed to encourage delegates to engage in mutual compromise, ultimately leading to agreement. The outcome of the WTO Conference in Bali, known as the Bali Package, was warmly welcomed by participating countries with diverse economic development ideologies.

The Doha Round, also referred to as the Doha Development Agenda, was intended to establish a single set of rules applicable to 159 WTO member countries in various areas, such as reducing import tariffs, cutting trade-distorting agricultural subsidies, and creating standardized customs procedures. With uniform rules agreed upon and implemented, the movement of goods across borders was expected to become smoother and global trade to grow more rapidly. The underlying premise of the Doha Round was that if all countries adhered to the same trade rules, all—both developed and developing nations—would benefit. Expanding trade was expected to generate more business opportunities and create broader employment prospects.

In practice, however, many countries felt that freer trade had not delivered the expected benefits. Although trade volumes and values increased significantly, the distribution of its benefits was widely perceived as inequitable. This issue of fairness became a central source of criticism voiced by many groups outside WTO conference halls. In his opening remarks at the Bali Conference, the President of Indonesia emphasized the need for trade that ensures fairness for all.

The issue of fairness had long been a major obstacle to reaching agreements in previous WTO conferences and may continue to be so in the future. The lack of significant progress in the Doha negotiations prompted many countries to pursue bilateral and regional trade agreements, such as the Trans-Pacific Partnership and various free trade arrangements between the United States and the European Union. Therefore, the agreement reached at the Bali Conference was viewed as an important milestone in advancing the Doha Development Agenda and preserving the WTO’s relevance as a multilateral trade institution.

The Bali Package consists of ten documents covering trade facilitation, agriculture, and development issues. It provides policy space and flexibility for developing countries to manage their food security programs. For Indonesia, the Bali Package does not hinder ongoing food security and agricultural development policies. The maximum subsidy of 10 percent of total food production for public stockholding—one of the most debated issues in Bali—has never been exceeded by Indonesia. Improvements in customs procedures outlined in the Bali Package have also long been part of Indonesia’s reform agenda, aimed not only at facilitating trade flows but also at reducing corruption and illegal levies in customs administration.

The Indonesian government remains firm in positioning agriculture as a strategic sector in national development. Agriculture continues to provide livelihoods for the majority of Indonesia’s workforce, and many farmers still require improved living standards. Indonesia has also experienced the adverse effects of sharp food price spikes, which reduce purchasing power, fuel inflation, and create social and political tensions. Increasingly unpredictable climate conditions heighten production and price risks, making Indonesia’s food security vulnerable if it relies solely on international markets.

Maintaining national food stocks is therefore essential—not only for food security but also for poverty alleviation programs and disaster response. These considerations have consistently shaped Indonesia’s stance in WTO forums. At the Bali Conference, Indonesia, together with other developing countries, continued to advocate for agricultural subsidies.

For Indonesia, the Bali Package is not the end but the beginning of stronger efforts to enhance agricultural competitiveness, national food security, and farmers’ welfare. Price subsidies and support measures are short-term policies that can boost production and farmers’ incomes. However, they are often unsustainable and may create new inequities due to poor targeting. Price-based policies frequently face budgetary and timing constraints, reducing their effectiveness. They may also create conflicts between producers and consumers: raising prices to support farmers can increase consumer prices, while lowering consumer prices may depress farm-gate prices.

Sustainable agricultural development depends on policies that consistently improve farmers’ welfare. Investments in rural infrastructure, irrigation, marketing institutions, access to inputs, land and capital, improved seeds, and better cultivation techniques are essential public responsibilities. Governments at all levels must ensure steady growth in agricultural productivity. Agricultural expansion should not rely solely on land in Java; crop breeding and agro-ecology–appropriate technologies are needed across regions.

While price and subsidy policies tend to show quicker results and are widely used globally, they can distort markets and have socioeconomic drawbacks. In contrast, non-price policies—such as irrigation, institutional reform, and technological innovation—require long-term consistency and persistence before tangible results are realized. Indonesia’s challenge lies in maintaining such consistency across administrations and generations.

The journey of the Doha Round, of which the Bali Package is a part, is likely to remain lengthy and uncertain. Nevertheless, efforts to improve farmers’ welfare must continue and cannot wait for the conclusion of the Doha negotiations.

Agriculture was arguably the central issue at the Bali Ministerial Conference, particularly the proposal of the G-33 group concerning public stockholding for food security and flexibility in subsidies for poor farmers. Developed countries engaged in discussions on one of the three core agricultural negotiation pillars: domestic support (the other two being market access and export subsidies).

The success of the G-33 in securing a “peace clause” in the Bali Package was significant. While not a permanent solution, it allowed developing countries temporary protection. Under this clause, developing countries providing domestic support beyond the 10 percent ceiling agreed upon in the Uruguay Round (1986–1994) would not be challenged under the WTO dispute settlement mechanism for a limited period.

Although concerns were raised about potential market distortions—particularly if public food stocks inadvertently entered international markets—the agreement provides Indonesia with safeguards. It helps ensure that subsidy policies of other countries, such as Malaysia’s Bernas and India’s Food Corporation, do not distort Indonesia’s domestic market or undermine its food security policies. At the same time, it provides Indonesia with policy space to maintain subsidies, provided they do not distort other countries’ markets.

 

Resources:

1.      Thehe WTO Bali Package and Its Relevance to Indonesian Agriculture
By Harianto, Special Staff to the President of the Republic of Indonesia for Food and Energy
(http://www.setkab.go.id/artikel-11423-paket-bali-wto-dan-relevansinya-bagi-pertanian-indonesia.html)

2.      The Bali Package and Its Benefits for Indonesia
By Iman Pambagyo (Kompas, January 10, page 7)

 

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