Federal Court of Australia

Brett Cattle Pty Ltd v Minister for Agriculture (No 5) [2025] FCA 597

ORDERS

THE COURT ORDERS THAT:

1. Subject to further order, these reasons for judgment not be published otherwise than to the parties before 4 pm on 10 June 2025.

2. By 4 pm on 6 June 2025, the Commonwealth is to notify the Court whether it wishes to make any application in respect of the publication of the Court’s reasons, identifying any redactions sought.

3. The parties confer by 5 pm on 18 June 2025 with a view to agreeing appropriate orders to give effect to these reasons for judgment and ancillary matters and inform the Court as soon as reasonably practicable thereafter of any consent position with respect to appropriate orders.

4. The proceedings be listed for a case management hearing at 9.30 am on 11 July 2025, with leave for interstate practitioners to appear by Microsoft Teams.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THAWLEY J:

INTRODUCTION

1 These reasons for judgment concern a separate question relevant to the assessment of damages in representative proceedings under Pt IVA of the Federal Court of Australia Act 1976 (Cth).

2 The applicant, Brett Cattle Company Pty Ltd, is a producer of cattle and represents a class of group members who derived income from the trade in live cattle from Australia to Indonesia. The Group Members claim to have suffered loss from a ban on the export of live cattle which was operative from 7 June 2011 to 6 July 2011.

3 The respondents are the Commonwealth of Australia and the then Minister for Agriculture, Fisheries and Forestry (collectively, the Commonwealth). The separate question was ordered by Rares J after his Honour delivered reasons for judgment in Brett Cattle Company Pty Ltd v Minister for Agriculture [2020] FCA 732; 274 FCR 337 (LJ). Familiarity with those reasons is assumed in what follows. The same abbreviations are adopted in these reasons as were used in the Liability Judgment.

4 On Monday 30 May 2011 at about 8.30 pm, the ABC broadcast “A Bloody Business” on its Four Corners program on national television: LJ[110]. The program depicted cattle being cruelly treated during their slaughter in Indonesian abattoirs: LJ[111]. The Four Corners program caused an immediate public furore and presented the Government and the Minister with a major political crisis: LJ[114].

5 On 2 June 2011:

(a) the Minister made the Export Control (Protection of Animal Welfare) Order 2011 (Cth) (First Control Order): LJ[126]. It came into force on 3 June 2011. The First Control Order prohibited the export of live animals to 12 named places in Indonesia, except pursuant to an approval under cl 5 (exceptions clause): cl 4. In summary, the exceptions clause authorised the Minister to grant approval if satisfied that the slaughter of animals at any of the 12 otherwise prohibited places complied with the recommendations set out in the World Organisation for Animal Health (OIE) Code: LJ[127], [341].

(b) the Secretary made the Australian Meat and Live-Stock Industry (Protection of Animal Welfare) Order 2011 (Cth) (the First AMLI Order): LJ[128]. It prohibited the holder of a livestock export license from exporting livestock to any of the 12 named places: cl 4. It required a license holder to provide the Secretary with a declaration that the holder had taken all reasonable steps to ensure that the livestock would not be taken to any of those places and evidence that there was no intention to do so: cl 5.

6 At 9.30 pm on 7 June 2011, the Export Control (Export of Live-Stock to the Republic of Indonesia) Order 2011 (Cth) (Second Control Order) was registered on the Register of Legislative Instruments: LJ[204]. It came into effect on registration. The Explanatory Statement for the Second Control Order included:

Purpose of the Order

The purpose of the Order is to suspend the export of live-stock to the Republic of Indonesia for a period of 6 months from the date of commencement of the Order. This will enable the Australian Government to develop a robust regulatory and compliance regime to address concerns regarding slaughter of live-stock in the Republic of Indonesia.

7 The Australian Meat and Live-Stock Industry (Export of Live-Stock to the Republic of Indonesia) Order 2011 (Cth) (the Second AMLI Order) was made by the Secretary on 7 June 2011: LJ[205]. It prohibited the holder of a livestock export licence from exporting livestock to Indonesia for the next six months: cl 4(1).

8 In the Liability Judgment, Rares J held that the Minister committed the tort of misfeasance in public office by unlawfully making the Second Control Order: LJ[395]. That conclusion has not been the subject of any appeal.

9 Rares J held that, if the Minister had exercised his powers lawfully, then instead of the Second Control Order, the Minister would have made a control order (an “Exceptions Order”) framed as a general prohibition on exports of live cattle to Indonesia, with the power to grant exceptions as in the First Control Order: LJ[405]. The exceptions clause in the First Control Order authorised the Minister to grant an export approval if satisfied that the slaughter of animals at any of the otherwise prohibited places complied with relevant OIE recommendations: LJ[21], [126] and [127].

10 His Honour held that the Exceptions Order would have been made on 9 or 10 June 2011 (LJ[425]) and that it would have been “done … in an orderly way after seeking to gain the cooperation of the Indonesian Government and others”: LJ[405].

11 On 6 July 2011, the Minister made the Export Control Repeal Order 2011 (Cth), which repealed the First and Second Control Orders (cl 3), and the Secretary made the Australian Meat and Live-Stock Industry (Export of Live-Stock to the Republic of Indonesia) Order 2011 (No 2) (Cth) (the Third AMLI Order): LJ[237]. Accordingly, the Second Control Order was in place for a month: 7 June 2011 to 6 July 2011.

12 Also on 6 July 2011, the Minister approved the Export Supply Chain Assurance System (ESCAS): LJ[4]. Versions of the ESCAS were discussed with relevant Indonesian Ministers before it was approved: LJ[224]. In summary, the ESCAS required a “closed loop system”, which complied with various animal welfare standards, in which cattle could be tracked from export until slaughter.

13 The Third AMLI Order repealed the First and Second AMLI Orders “and implemented a closed loop system under which the Secretary could issue a livestock export licence for Indonesia only if satisfied that the licence holder had in place arrangements to ensure that the consignment of live cattle would be the subject of transport, handling, slaughter and related operations that were in accordance with the OIE Code (cl 6(2))”: LJ[237].

14 When the Second Control Order came to an end, shipments of live cattle to Indonesia resumed under the new ESCAS: LJ[4]. The first shipment left Australia on 10 August 2011.

15 Rares J made “provisional findings about damages”: LJ[494]. His Honour concluded that about 88,000 additional cattle would have been imported by Indonesia in 2011 if the Second Control Order was not made and an Exceptions Order had been made: LJ[462]. His Honour determined the number of lost exports in 2011 by estimating the unused capacity of the supply chains consisting of Indonesian feedlots and abattoirs that could have met ESCAS requirements and finding that the exports that would have occurred in the lost export period were likely to have been equivalent to those that actually occurred as soon as each of the three importers obtained its first ESCAS approval: LJ[441] to [462].

16 On 18 October 2023, Rares J ordered that there be a hearing on the following discrete question relevant to damages (Separate Question):

Had the Minister made an Exceptions Order (as defined in [405] of the [Liability Judgment]) on or about 7–10 June 2011 instead of the Second Control Order (as defined in [1] of the [Liability Judgment]), would any greater, and if so what, number of live cattle (for slaughter) have been exported into Indonesia in each of the calendar years 2011, 2012 and 2013?

17 The parties agreed that: (a) the Exceptions Order would have been put in place on 9 or 10 June 2011; and (b) the ESCAS would have been put in place no later than 27 June 2011, rather than 6 July 2011.

18 Although until closing submissions at the hearing of the separate question Brett Cattle had contended that more than 88,000 additional cattle would have been exported in 2011, by its closing submissions Brett Cattle accepted that only an additional 88,000 cattle would have been exported, consistently with what Rares J concluded. Only 2012 and 2013 remain at issue.

19 Brett Cattle contended that the Second Control Order caused Indonesia to respond in two ways which resulted in fewer cattle being imported in 2012 and 2013 than would have been imported under the “Exceptions Order Scenario”. Those two ways were, in summary, that the Indonesian Government: (a) set lower import quotas for 2012 and 2013 than it otherwise would have set; and (b) enforced those quotas strictly. Brett Cattle did not contend that the quotas for the 2012 and 2013 years were by way of retaliation or retribution: T713.37–40. Rather, Brett Cattle’s case was, in summary, that these responses were motivated by a perceived threat to Indonesia’s food security.

20 It is convenient to summarise the Exceptions Order Scenario as one where an Exceptions Order (see [9] above) had been made instead of the Second Control Order. That summary was used by the parties and is used in these reasons. The Exceptions Order Scenario is more precisely defined as a scenario where, instead of: (a) the Second Control Order effective from registration on 7 June 2011; and (b) the ESCAS introduced on 6 July 2011, the following occurred: (i) an Exceptions Order was made on 9 or 10 June 2011; and (ii) the ESCAS was introduced no later than 27 June 2011. Again by way of convenient summary, the Exceptions Order involved a total ban on exports with the power to grant exceptions, whereas the Second Control Order involved a total ban on exports, without such a power. The First Control Order involved a ban on exports to 12 identified abattoirs.

21 For the reasons which follow, in the Exceptions Order Scenario, no more live cattle would have been exported in 2012 and 2013 than were in fact exported in those years.

22 Before turning to the facts in detail, something should be said briefly about the evidence.

THE EVIDENCE

23 There were three statements of agreed facts (SOAFs), the first of which was tendered in the liability hearing. Much of the (voluminous) evidence on the separate question was documentary. This included agreed translations of various Indonesian laws, regulations, policies and other documents. It also included many communications between Australian government officials and some communications between Australian officials and Indonesian officials.

24 Five experts were called, two with expertise in Indonesian law and three with differing, but sometimes overlapping, expertise in economics.

25 Brett Cattle called Professors Lindsey and Butt, who together drafted two reports (L&B 1 and L&B 2): CBC20; CBC21; CBC23; CBC24. These two reports addressed various general aspects of the Indonesian legal system and specific laws relevant to the issues which arise in answering the separate question, particularly the importance of food security in Indonesia. Professors Lindsey and Butt gave their evidence concurrently. They did not disagree on any material issue.

26 The three economists provided opinion evidence relevant to the determination of the number of cattle which would have been exported in the Exceptions Order Scenario.

27 Brett Cattle called Mr Smith who provided two reports, Smith 1 (dated 8 September 2023) and Smith 2 (dated 13 December 2024): CBC22 and CBC27.2. Mr Smith is a practising economist and partner of the Deloitte Access Economics practice of Deloitte Touche Tohmatsu. Since 2022, Mr Smith has been the head of the Macroeconomic Policy and Forecasting Group of Deloitte Access Economics: CBC28.3 at [25]. The Macroeconomic Policy and Forecasting Group provides economic consulting services, which includes economic modelling, forecasting (including trade forecasting) and advisory services along with scenario and policy analysis to both public and private sector organisations: CBC28.3 at [29]. Mr Smith made various assumptions about Indonesian Government policy (in which he did not have expertise) and, on the basis of those assumptions, expressed views about the lower bound (Alternative 1) and upper bound (Alternative 2) of the number of cattle that would have been exported if the Second Control Order had not been made in the 2011, 2012 and 2013.

28 The Commonwealth called Professor Marx and Professor Malcolm.

29 Professor Marx is the Robert A Bandeen Distinguished Professor of Economics at the Fuqua School of Business at Duke University and a Partner at Bates White Economic Consulting: CBC25 at 692. She specializes in microeconomics, particularly the fields of industrial organization and applied game theory, with a research focus on collusion, auctions, and procurements. Professor Marx prepared two reports: Marx 1 (dated 14 June 2024) and Marx 2 (dated 3 April 2025): CBC25; CBC28.1. Marx 1 addressed Smith 1. Mr Smith responded to Marx 1 in Smith 2. Professor Marx expressed a view as to the number of cattle that would have been exported in 2011 if the Second Control Order had not been made. However, as noted earlier, Brett Cattle abandoned its case for the 2011 year in closing submissions, with the result that it is not necessary to consider Professor Marx’s opinion in that respect.

30 Professor Malcolm is a Professor of Agricultural Economics in the School of Agriculture, Food and Ecosystem Sciences at the University of Melbourne. Professor Malcolm provided a report dated 14 June 2024 (Malcolm 1): CBC26. Mr Smith responded to Malcolm 1 in Smith 2. Professor Malcolm was retained to provide comments in relation to Smith 1. He did not express alternative views about the number of cattle that would have been exported in the Exceptions Orders Scenario, nor was he asked to.

31 The three economists prepared a Joint Report dated 12 March 2025 which set out in tabular form their respective responses to various propositions: CBC28. They gave evidence concurrently at the hearing.

32 Although it was initially foreshadowed by Brett Cattle that more lay witnesses would be called, ultimately evidence was given only by three lay witnesses.

33 The first lay witness was Mr Gregory Pankhurst, who at material times operated two Indonesian-based cattle and beef importation companies, PT Agro Giri Perkasa (PT AGP) and PT Guna Prima Dharma Abadi. Mr Pankhurst operated these two companies with Mr Adikelana Adiwoso: T110–11.

34 The second lay witness was Mr Adiwoso. He has been the President of PT AGP since 2000: T159.34–6. Mr Adiwoso was responsible for maintaining the company’s relationship with the Indonesian Government and industry: T160.1–4. As President of PT AGP, Mr Adiwoso had dealings with the Australian Embassy, including in 2010: T178.28–34. Mr Adiwoso founded the Indonesian Feedlotters Association (APFINDO) in 1992, an organisation that lobbies the Indonesian Government on behalf of the feedlotting industry: T160.6–12. APFINDO is governed by a collective of directors and a board of advisors (Advisory Board): T160.14–16. Mr Adiwoso was an Executive Director from 1992 to 1994. From 1994 to 2013, he was a member of the Advisory Board: T160.18–23, 162.27–33. Throughout that period, APFINDO would frequently engage with the Indonesian Ministry of Agriculture: T160.25–30. Mr Adiwoso was “mostly” involved in those discussions: T160.25–30. The Advisory Board (including Mr Adiwoso) interacted with APFINDO’s constituent members to discuss the feedlotting industry, including forecasted national requirements for live cattle imports in a given year: T162.18–25.

35 The third lay witness was Dr Krisnamurthi. Dr Krisnamurthi was the Indonesian Vice Minister of Agriculture from 11 November 2009 to 19 October 2011 and the Indonesian Vice Minister of Trade from 19 October 2011 to 20 October 2014: SOAF 2 at [7].

SUMMARY OF BRETT CATTLE’S CASE ON THE SEPARATE QUESTION

Narrowing of the Case in Closing Submissions

36 Until its closing submissions, Brett Cattle had contended that, in the Exceptions Order Scenario, additional cattle would have been exported to Indonesia as follows (AS[16]):

(a) in 2011, a number greater than 88,000 and at the upper end of the range furnished in Smith 1 of 119,469 to 207,323.

(b) in 2012, a number at the upper end of the range furnished in Smith 1 of 62,743 to 302,157, yielding total exports of between 339,038 to 578,452 after adding the 276,295 actually exported.

(c) in 2013, a number at the upper end of the range furnished in Smith 1 of 159,820 to 297,393, yielding total exports of between 608,770 to 746,343 after adding the 448,950 actually exported, thereby exceeding the highest number of live cattle ever exported to Indonesia in a calendar year.

37 In closing submissions, Brett Cattle accepted “that the quantum of the reduction for 2011 would have been around 88,000 head (as found by Rares J)”, leaving only the 2012 and 2013 years in issue: ACS[2]; T697.41–2; T739.33–6.

38 As to the 2012 and 2013 years, Brett Cattle’s primary case was that about 500,000 cattle in total would have been exported in each of 2012 and 2013: T700.30–31. On this case, an additional 223,705 cattle would have been exported in 2012, and an additional 51,050 cattle would have been exported in 2013.

39 In closing submissions, and in light of its concession in relation to the 2011 year, Brett Cattle submitted that the separate question should be treated as asking the Court to “determine whether the making of the Second Control Order caused a reduction in the size of the market for the export of live cattle to Indonesia which continued beyond the end of 2011, and into 2012 and 2013, and if so, … the quantum of that reduction” ACS[2].

Summary of Submissions in relation 2012 and 2013

40 Brett Cattle filed points of claim (POC) dated 8 September 2023: CBA3. It provided particulars of the POC dated 20 December 2023: CBA6. Section D of the POC is titled “Impact of the Second Control Order”: CBA3 at 58. The critical proposition advanced by Brett Cattle was that the Second Control Order caused the Indonesian Government to change its approach to the “granting of import permits” in specific ways: at 58. Paragraph 47 of the POC, as modified by [7.1] of the particulars, and ignoring [47(c)] which was not pressed at hearing, stated:

As a result of the imposition of the Second Control Order on 7 June 2011, the Indonesian Government changed its approach to the granting of import permits for imports of Australian live cattle, including by:

(a)     lowering the number of cattle in the import quotas issued for the years 2012 and 2013, as compared with previous years;

(b)     applying the import quotas strictly (or more strictly than they otherwise would have applied them in the Counterfactual Scenario), rather than revising the quotas as needed to take into account demand for Australian live cattle imports and price stability;

41 In relation to [47(a)] of the POC, Brett Cattle clarified in its particulars at [11.2] that “that the previous years to which the issuing of import quotas in 2012 and 2013 are to be compared are 2010 and 2011”.

42 Consistently with its pleaded case, Brett Cattle submitted that:

(a) “the sudden announcement of a total ban on live cattle exports to Indonesia for a period of 6 months created a significant and immediate threat to Indonesia’s food security and caused members of the Indonesian [G]overnment to lose trust in Australia being a reliable source of beef for Indonesia in the future”: ACS[6];

(b) “a consequence of that uncertainty and loss of trust in Australia, [was that] the Indonesian [G]overnment decided that drastic and significant steps were required to address the risk, which it had long known existed, of dependence on Australian live cattle imports”: ACS[7];

(c) “the Indonesian [G]overnment felt the need to act immediately to re-frame its existing policies and accelerate its efforts towards becoming self-sufficient in beef production in order to decrease Indonesia’s reliance on Australian live cattle imports”: ACS[7]; and

(d) “[o]ne of the ways in which the Indonesian [G]overnment did this was by significantly reducing the annual quota for live cattle imports in 2012 and 2013 and enforcing those quotas strictly”: ACS[8].

43 Brett Cattle submitted that, whilst the reduction in quota numbers in 2012 and 2013 “resulted in rapid increases in the price of beef in Indonesia and resulted in a significant reduction in the size of the domestic herd” (ACS[8]):

the fact that the Indonesian [G]overnment persisted with this approach until around September-October 2013 underscores the seriousness of the threat that the Indonesian [G]overnment perceived that the making of the Second Control Order posed for Indonesia’s food security.

44 Brett Cattle contended that the Court should find that, in the Exceptions Order Scenario, there would have been no significant distortion in the market for live cattle export to Indonesia. According to Brett Cattle (ACS[9]):

What would have happened instead is that the Indonesian [G]overnment would have continued its pursuit towards self-sufficiency and indeed the 90% by 2014 target. But it would have done so with considerable flexibility – allowing sufficient imports to meet demand, so that prices remained stable and affordable[.]

45 As mentioned, Brett Cattle’s primary case was that about 500,000 cattle would have been exported in each of 2012 and 2013 (rather than 276,295 and 448,950). The figure of 500,000 was derived, essentially, by taking average imports over selected years (such as 2005 to 2022) and submitting that these averages, together with further facts, demonstrated that “Indonesia required imports of at least 500,000 per year on average for supply to meet demand and to keep prices stable and affordable”. The contention more precisely was as follows (ACS[10], omitting references):

In 2010, about 19% of the beef supplied into Indonesia came from live cattle. There had been a consistent increase in imports since 2004. A 350 kilogram limit was introduced in 2010. In July 2010 the Indonesian [G]overnment informed importers that import permits would only be issued to import 452,000 head of cattle into Indonesian in 2010. But ultimately 514,935 head of cattle were imported. … Rares J found that in 2011 there would have been at least 88,000 additional cattle imported in the counterfactual scenario (which takes the total in 2011 to around 500,000 head). If one adds 88,000 head of cattle to the 2011 year and excludes 2012, the average imports between 2005 and 2017 (the years the subject of agreed facts) was 543,633. If one applies that approach and takes the period 2005 to 2022, the figure is 529,344. Even the average between 2003 and 2011 is 486,136, bearing in mind that imports increased threefold between 2004 and 2011. What those different perspectives show is that in the period 2010-2013, Indonesia required imports of at least 500,000 per year on average for supply to meet demand and to keep prices stable and affordable. If supply does not meet demand, prices increase, which is exactly what occurred between June 2011 and September 2013 when there was an interruption to supply in the second half of 2011 and Indonesia announced and enforced quotas for 2012 (283,000) and 2013 (267,000) that were 43.4% and 46.6% less than the minimum number of imports that would have been required to meet demand.

46 Brett Cattle ultimately only relied upon Mr Smith’s reports in two “limited” ways: T748.43. First, Brett Cattle relied upon Mr Smith’s lower bound (Alternative 1) as providing “comfort” for adopting the position that Indonesia would have imported at least 500,000 cattle in each of 2012 and 2013: T739.40–44; T749.27–31. Secondly, Brett Cattle submitted that if the Court were to accept Mr Smith’s assumptions about the way in which the Indonesian [G]overnment would have pursued its beef self-sufficiency program, then the Court could embrace his analysis making adjustments where necessary or appropriate: T750.12–22. Whilst Brett Cattle may not have quite abandoned Mr Smith’s “Alternative 2”, its reliance on Mr Smith’s opinions was focussed more on Mr Smith’s “Alternative 1”.

47 Brett Cattle advanced an alternative case that, if the Court was not satisfied that 500,000 cattle (or some other number) would have been exported in total in each of 2012 and 2013, then the Court should conclude that the group members lost an opportunity to supply cattle into the market in 2012 and 2013: MFI 19 at [11] to [13]. On this alternative, as with its primary case, Brett Cattle accepted that it needed to “prove on the balance of probabilities that the making of the Second Control Order (instead of an Exceptions Order) was a material or contributing cause of the Indonesian [G]overnment deciding to impose lower quotas for imports in 2012 and 2013, and to enforce those quotas strictly”: MFI 19 at [14]. Brett Cattle submitted that the Second Control Order was (ACS[11]):

a material or contributing cause of the Indonesian [G]overnment’s decisions to try to reduce reliance on Australian imports by announcing and strictly enforcing quotas for 2012 and 2013 that were drastically lower than in previous years, until September-October 2013, when those policies had caused significant and sustained price increases that meant the government had to allow more imports to meet demand.

48 Brett Cattle addressed the question of causation by reference to ten contentions, each of which is addressed later in these reasons: ACS[55] to [74]. In summary, Brett Cattle’s case was that, as compared to what would have been the position in the Exceptions Order Scenario, the Second Control Order caused the Indonesian Government to change its approach to the imports of live cattle from Australia by: (a) lowering the live cattle quotas for the years 2012 and 2013 (compared to 2010 and 2011); and (b) adhering to the announced import quotas strictly, rather than revising the quotas, or issuing more import permits, to take into account demand for live cattle imports and price stability.

49 It is a necessary part of Brett Cattle’s case that, in the hypothetical Exceptions Order Scenario, the Indonesian Government would not have responded in the way it in fact did. It follows that it is necessary to consider whether the reaction of the Indonesian Government would have been any different if, instead of a total ban, there was a total ban with the power to make exceptions. If the Indonesian Government would have reacted the same way for the 2012 and 2013 years in the Exceptions Order Scenario, Brett Cattle cannot succeed.

OVERVIEW OF THE ACTUAL NUMBERS OF LIVE CATTLE EXPORTS

50 Live cattle have been imported by Indonesia from Australia for many years: SOAF 2 at [20]–[25]. During the relevant period all of Indonesia’s live cattle was imported from Australia: SOAF 2 at [58]. To the extent it was permitted by Indonesian laws from time to time, importing from other countries was difficult for reasons of bio-security and expense (particularly cost of transport). A substantial portion of Indonesia’s total beef consumption was sourced from “boxed beef” imports. Indonesia imported boxed beef from Australia (69% market share), New Zealand (30%), the USA and Canada (together, less than 1%): CBD611 at 33081. The First Control Order, the Second Control Order, and the AMLI Orders, did not apply to the export of boxed beef from Australia to Indonesia.

51 The evidence referred to different types of live cattle imports: “breeders” (female cattle suitable for breeding); “feeders” (cattle between 250kg and 350kg suitable for fattening in Indonesia before slaughter); and “slaughter cattle” or “ready-for-slaughter” cattle generally weighing significantly more than 350kg: CBD410.1 at 17364–6. This case is concerned primarily with the export of “feeders” to Indonesia.

52 The total number of cattle exported from Australia to Indonesia fell in 2003 and 2004 and then grew from 2005 to 2009. It peaked in 2009. Exports then commenced a significant decline from January 2010 for almost a year, before the Second Control Order made on 7 June 2011. In 2009, 751,143 cattle were exported: SOAF 2 at [25]. In 2010, 514,935 live cattle were exported: SOAF 2 at [30]. That is, cattle exports by number reduced by 31.4% from 2009 to 2010. As explained below, the steep decline in live cattle imports in 2010 was driven by a renewed and concerted push by Indonesia to achieve self-sufficiency in beef by 2014. Upon the introduction of its new beef self-sufficiency program (2014 BSSP) in January 2010, Indonesia began reducing the number of cattle imported (from January 2010) and began enforcing a 350kg weight restriction (from March 2010): CBD162 at 3452; CBD166 at 3469. By weight, rather than number, the decline in live cattle exports between 2009 and 2010 must have been more than 31.4%.

53 Beef self-sufficiency, along with self-sufficiency in other foods, had been a longstanding Indonesian Government objective. However, January 2010 marked the beginning of a new beef self-sufficiency program, the 2014 BSSP. The President of Indonesia had made a political commitment to that new program. Although estimates vary, about 35% of Indonesia’s population were farmers and agriculture supplied 43% of Indonesia’s employment: CBD614 at 33212; CBD1087 at 39333.

54 The 2014 BSSP sought to address past failings and was carefully planned and structured from central government through to regional and district bodies. The 2014 BSSP was supported by significant funding and financial support for farmers. The program was to be supported by a large number of Indonesian Ministries, with primary responsibility resting with the Ministry of Agriculture.

55 Beef self-sufficiency meant achieving the goal of 90% of Indonesia’s beef consumption being met from domestic sources: CBD410.1 at 17342. As is demonstrated by the 31.4% reduction in imports of live cattle (by number) between 2009 and 2010, and the contemporaneous evidence referred to below, Indonesia’s push towards self-sufficiency, which had begun in earnest around 18 months before the Second Control Order, had already seriously impacted Australian exports by the time of the Second Control Order.

56 The decline in exports from 2009 to 2010 continued in the first five full months of 2011, before the Second Control Order was made on 7 June 2011. The quota for 2011 was announced on 28 December 2010 at 500,000 cattle: SOAF 2 at [32]. From 1 January 2011 to 31 May 2011, exports to Indonesia totalled 203,505 cattle: CBG38. In the same period in 2010, exports totalled 249,166, representing a (further) decline since 2010 of 18.3% by number (and more by weight given restrictions were enforced from March 2010).

57 The decline between 2009 and 2010 and the further decline in the first five months of 2011 compared to the same period in 2010 were both consistent with Indonesia’s earnest pursuit of its 2014 BSSP. The low numbers of exports in 2010, and in the first five months of 2011, were necessarily unaffected by the Second Control Order which had not yet occurred. If exports had continued throughout 2011 at the same average rate as the first five months of 2011, exports would have totalled 488,412.

58 The total of live cattle exports from Australia to Indonesia in 2011 was 412,057, comprising: 220,163 from January to 7 June 2011; no live cattle in July 2011 because of the Second Control Order; and 191,894 between August and December 2011: SOAF 2 at [36], [39], [41] and [42]. The total exports for 2011 of 412,057 were 87,943 head lower than the quota of 500,000 which had been announced for 2011. Whilst his Honour’s reasoning did not proceed on this basis, the effect of Rares J’s conclusion – that about 88,000 more cattle would have been imported than the 412,057 which were in fact imported – is that in the Exceptions Order Scenario a total of about 500,000 head of live cattle would have been exported, consistently with the quota for the 2011 year. Brett Cattle now accepts that conclusion and it is not challenged by the Commonwealth.

59 The 2012 quota was announced on 15 December 2011 for 283,000 head of live cattle: SOAF 2 at [44]. The quota was not filled in 2012, with only 276,295 head of cattle being imported that year: SOAF 1 at [18]; SOAF 2 at [47].

60 In 2013, 448,950 head of cattle were exported from Australia to Indonesia: SOAF 2 at [53].

61 In opening submissions, Brett Cattle provided the following aide-memoire, showing actual cattle exports to Indonesia from 2005 to 2014:

62 The first dotted red line marks 7 June 2011, when the Second Control Order came into effect. The second red dotted line marks the end of 2013. Indonesia abandoned its quota system for live cattle imports on 2 September 2013 and replaced that system with a reference price system. Brett Cattle accepted that the Second Control Order did not impact the number of cattle imported after introduction of the reference price system. The green dotted line represents, in essence, the average of imports between 2005 and 2014 and Brett Cattle’s primary case that 500,000 cattle would have been exported in the absence of the Second Control Order.

63 The Commonwealth’s position was that (a) exports to Indonesia were falling because of Indonesia’s implementation and pursuit of the 2014 BSSP; and (b) export numbers would have continued to fall. On the Commonwealth’s case, even if no control orders had been made, the exports in 2012 and 2013 would have been no more than they in fact were. The Commonwealth contended (i) the Second Control Order could not be said to have materially affected the level or strictness of enforcement of the 2012 or 2013 quotas; and (ii) alternatively, if it could be said that the Second Control Order materially affected the level or strictness of enforcement of the quotas for 2012 and 2013, the Indonesian Government would have acted in relevantly the same way in the Exceptions Order Scenario, which would have involved a total ban with the power to grant exceptions and otherwise included all the other stressors on the live cattle trade and Indonesia’s relationship with Australia as in fact existed.

THE FACTS

64 The principal questions are whether: (a) the Second Control Order caused the live cattle quotas in 2012 and 2013 to be less than they would have been under the hypothetical Exceptions Order Scenario; and (b) those quotas, once set, would have been as strictly applied under the hypothetical Exceptions Order Scenario as they were in fact applied. These questions cannot be answered without an understanding of some aspects of Indonesia’s legal system and the political, social and economic context in which the events arose.

65 It is convenient to turn first to Indonesia’s legal system and the significance of food security.

The Indonesian Legal System, Food Security and Beef Self-Sufficiency up until 2010

66 Indonesia declared independence on 17 August 1945, receiving Dutch colonial law as it then stood, subject to the constitutional exclusion of those parts of it considered inconsistent with Independence: L&B 1 at 250 [12]–[13]. Indonesia’s Constitution was issued when it declared independence: at 253 [22]. Indonesia has a civil law system: at 250 [12]. Indonesia has a hierarchy of regulatory sources of laws which include its 1945 Constitution (Undangundang Dasar), statutes (laws) (undang-undang), government regulations (peraturan pemerintah) and presidential regulations (peraturan presiden): at 251 [14]. This is by no means a complete list: at 252–3 [19].

67 Indonesia’s Constitutional Court, the Supreme Court, has interpreted the Indonesian Constitution as providing that food security is an inseparable part of Indonesia’s independence, and a fundamental constitutional principle: L&B 1 at 263–4 [56(a)]. The Indonesian State has sovereignty over food security and a constitutional obligation to exercise that sovereignty to ensure food security: at 264 [56(b)]. The Indonesian Government has a constitutional obligation to secure a supply of food to realise food security for the welfare and prosperity of all Indonesian people: at 264 [56(c)].

68 Food imports, including imports of livestock, are permitted “incidentally” to ensure national food security, but only if they do not eliminate Indonesia’s sovereignty over food and those imports are aimed solely at ensuring food security: L&B 1 at 264 [56(d)]. When meeting its obligation to realise food security, the Indonesian Government must prioritise domestic food production, and ensure affordability, including by controlling and managing food supply: at 264 [56(e)].

69 Having considered Indonesia’s Constitution, Law 7 of 1996 on “Food” (the 1996 Food Law) and relevant constitutional cases, Professors Lindsey and Butt concluded at L&B 1 [56(f)]:

Livestock imports are … permitted only to meet the following constitutional imperatives:

1.     economic democracy (with the principles of togetherness, just efficiency, sustainability and independence);

2.     the greatest possible prosperity of the people, including by protecting the public against potential economic losses;

3.     food security, that is, strengthening self-sufficiency and sustainability of the Indonesian domestic livestock industry to strengthen sovereignty and national food resilience; and

4.     the national interest (ensured through supervision and control of imports by government and the national legislature).

70 Achieving self-sufficiency in beef production, along with certain other staple foods, had been a long-standing Indonesian Government policy. In 1999, the Indonesian Government instituted its first beef self-sufficiency program with the aim of achieving self-sufficiency in beef by 2005: CBD250 at 5863. Self-sufficiency in beef was not achieved by 2005.

71 President Susilo Bambang Yudhoyono was President of Indonesia for 10 years, from October 2004 to October 2014. In 2005, during his first term, a second beef self-sufficiency program was commenced, with the aim of achieving self-sufficiency by 2010: CBD250 at 5863. Self-sufficiency in beef was not achieved by 2010.

72 On 5 February 2007, the Indonesian Government enacted Law 17 of 2007 on “Long-Term National Development Plan of 2005-2025”: CBD513 at 31722. This implemented the “2005-2025 Long-Term National Development Plan”, referred to as the “National RPJP”. After referring to the economic crisis Indonesia faced in 1997, the National RPJP referred to poverty in Indonesia’s agricultural sector, stating that “poverty will still need to be given serious attention in development over the next 20 years”: at 31737. It was noted that “[t]he social economic condition of the people living in rural areas is generally much left behind compared with those living in urban areas” and that “the role of urban areas that was expected to induce the growth of rural areas has in fact provided an adverse effect on the growth of rural areas”: at 31746.

73 Chapter IV.1.2 was titled, “Realizing a Nation that is Competitive” (at 31772) and, under the sub-heading “Strengthening the Domestic Economy with a Global Orientation and Competitiveness”, referred to objectives of developing rural areas, reducing poverty in rural areas, strengthening food security and improving the welfare of farmers: at 31774. It was contemplated that Indonesia would develop its international trade in a way which would include a measure of protection of its domestic interests with a view to “reducing poverty, reducing unemployment, developing rural areas, and protecting the national economy from unhealthy international trade practices”: at 31777 [20]. In Chapter IV.1.5, the object of the food security system was described as being directed at maintaining the national food security and self-reliance by developing the domestic production capacity: at 31793 [14].

74 On 30 January 2008, the Minister of Agriculture (then Minister Anton Apriyantono) issued a regulation (Regulation 7 of 2008) concerning “Terms and Procedures for the Import and Export of Semen, Breeding Livestock and Beef Livestock”: CBD514. As revealed by the terms of the regulation, it was introduced after “considering” domestic needs and “in an effort to increase state foreign exchange earnings” which “can be done through the import and export activities”: at 31809. Amongst other things, the regulation contemplated that import permits could be issued for beef livestock with a maximum weight of 350kg (and a maximum age of about 1.5 years): CBD515 at 31836. As will be seen, the weight restriction was not apparently enforced until about March 2010: CBD162 at 3452; CBD166 at 3469.

75 On 4 June 2009, the Indonesian Government enacted Law 18 of 2009 concerning “Animal Husbandry and Health”: CBD286.1 at 7883. The improvement of the welfare of farmers and the community was an aim of regulations on animal husbandry and health: art 3 at 7842. Law 18 of 2009 included laws:

(a) directed to reducing the slaughter of female breeding livestock (“breeders”), including by making it an offence “to slaughter productive female ruminant livestock because they produce good livestock” (arts 18 and 86 at 7849 and 7878);

(b) directed to encouraging “as many people as possible to carry out livestock cultivation” (art 32(1) at 7853–4);

(c) obliging the Indonesian Government to organise and facilitate marketing activities for animals or livestock and animal products (with a view to fostering increased production) and providing for imports of livestock only where domestic production was insufficient to meet consumption needs (art 36 at 7854–5);

(d) requiring the Indonesian Government to “empower” farmers by facilitating sources of finance and capital and providing services and technical assistance and by “protecting prices and animal products from overseas” (art 76 at 7872–3).

76 The accompanying Explanation to Law 18 of 2009 indicated that the aims of the laws included “increasing state income and foreign exchange; expanding business opportunities and employment opportunities; and improving people’s welfare”: CBD286.1 at 7885.

Indonesia’s Renewed Push Towards Beef Self-Sufficiency

77 President Yudhoyono was re-elected to a second term in the presidential election in July 2009. He was sworn into office on 20 October 2009. Indonesia’s second cabinet was then sworn in.

78 President Yudhoyono had made a political commitment to deliver food security through self-sufficiency: T235.34 (Dr Krisnamurthi). This involved increasing domestic production, modernising the agricultural sector and addressing the welfare of farmers, including through an increase in income. The significance of this political commitment is difficult to overstate, not only because food security is constitutionally entrenched. The evidence indicated that a substantial proportion of Indonesians were either employed directly in, or were provided employment by, the agriculture sector. One estimate was that “labour-intensive agriculture has a dominant role in the economy, accounting for approximately 12.4% of GDP and provided employment for 43% of the population”: CBD614 at 33212 (March 2011).

79 The Special Adviser to the President on Food Security is reported as having stated in late 2012 that 35% of Indonesia’s working population were farmers and a large proportion of those were living under the poverty line: CBD1087 at 39333 [8]. He was also reported as stating at that time that it was “politically … very difficult to increase the import quota on beef and cattle, as the government needed to be seen to protect farmer’s interests”: at 39333 [8].

80 Poor Indonesian rural households derived around half of their income from agricultural activities: CBD527 at 32391. Small-scale subsistence farms accounted for about 87% of total cultivated land: CBD614 at 33212. Around 75% of farms in Indonesia are less than one hectare in size: CBD614 at 33179. Of those small-scale farmers, estimates suggest around 6.2 million were livestock farmers: CBD1152 at 40679.

81 Minister Suswono became the Minister of Agriculture in Indonesia’s second cabinet. He was tasked by President Yudhoyono with addressing food security, regional food self-sufficiency, farmer income and addressing the sustainability and modernisation of Indonesian agriculture: T236 (Dr Krisnamurthi). Minister Suswono was a member of Indonesia’s conservative Prosperous Justice Party (PKS), the support base of which had traditionally been smallholders and farmers: CBD166 at 3477.

82 In summary, as at late 2009 and early 2010, Indonesia’s revitalised push towards self-sufficiency in beef was motivated by a variety of considerations, including: the constitutionally entrenched obligation of the Indonesian Government with respect to food security; Indonesia’s longstanding desire to achieve self-sufficiency in various agricultural products including beef; addressing poverty in Indonesia’s agricultural sector (CBD513 at 31737, 31746, 31777); improving the welfare and income of farmers and accelerating rural economic growth (CBD286.1 at 7842, 7885; CBD410.1 at 17338, 17393, 17421; CBD527 at 32391, 32457); and economic considerations, including increasing Indonesia’s foreign exchange earnings or preventing a draining of foreign exchange reserves (CBD514 at 31809; CBD410.1 at 17421, 17437) and increasing state earnings (CBD286.1 at 7885).

83 Various Indonesian Government publications and regulations made in January and February 2010 are relevant to Indonesia’s revitalised push towards beef self-sufficiency, including:

(a) Regulation 5 of 2010, enacted by the President on 20 January 2010, concerning the National Medium-Term Development Plan for 2010-2014 (National RPJM);

(b) “Blue Print: Beef Self Sufficiency Program 2014”, published by the Ministry of Agriculture in January 2010 (Blueprint);

(c) Regulation 15 of 2010, made by Minister Suswono, about the “Ministry of Agriculture’s 2010-2014 Strategic Plan” (2010 Strategic Plan), enacted on 28 January 2010;

(d) Regulation 19 of 2010, made by Minister Suswono, concerning a “General Guide of Beef Self-Sufficiency Program 2014”, enacted on 5 February 2010; and

(e) Presidential Instruction No 1 of 2010 titled “Accelerating the Implementation of the 2010 National Development Priorities”, issued on 19 February 2010.

The National RPJM

84 On 20 January 2010, the President enacted Regulation 5 of 2010 concerning the “National Medium-Term Development Plan for 2010 to 2014”: CBD526. The National RPJM (annexed to the regulation) was “an elaboration of the President’s vision, mission and program resulting from the 2009 General Election”: art 2(1) at 32375. Article 2(2) explained:

The National RPJM contains national development strategies, general policies, programs of Ministries/Agencies and across Ministries/Agencies, regional and cross-regional programs, and a macroeconomic framework which includes a comprehensive picture of the economy including the direction of fiscal policy in work plans in the form of regulatory frameworks and indicative funding frameworks.

85 The National RPJM explained (CBD527 at 32380):

[T]he RPJMN 2010-2014 is the guideline that central and regional governments, society, and the business community should follow in order to achieve the goals of the nation contained in the Preamble of the 1945 Constitution of the Republic of Indonesia.

86 The National RPJM, being a “Medium-Term” Development Plan was the second phase of implementation of the 2005-2025 National Long-Term Development Plan promulgated through Law 17 of 2007: CBD527 at 32379, 32401; CBD412.1 at 20628. It included targets, related to the welfare of the people, including growth rate targets for production of paddy, maize, soybean, sugar and cow meat: CBD527 at 32423. The growth rate for “cow meat” was 7.3% per year.

87 Increasing food production was seen as important in improving the welfare of farmers, comprising a significant part of Indonesia’s population, and in decreasing poverty rates in rural areas (CBD527 at 32391):

The increase in food production has also been attained in other commodities, including sugar, soybean, and maize. The success in attaining the increased food production will be a benefit for both producers and consumers. Producers will experience an increase in their welfare, while consumers will benefit from the attained stability of food prices. As a half of the poor households’ income in rural areas relies on agricultural activities, the increased food production is a welcome benefit. This condition will in return decrease the poverty rate in rural areas, as it also did in the 1970s and 1980s.

88 The National RPJM stated that the (more generally framed) “vision and mission” as set out in the document “needs to be formulated and elaborated in a more operational way into a number of priority programs so that they can be implemented more easily and their outputs can be measured”: CBD527 at 32427.

89 The National RPJM set out eleven national priorities and three “other national priorities”: CBD527 at 32426–36. The fourth national priority was “reducing poverty”: at 32430. It was noted that “the poverty rate had declined from 16.7 per cent (36.1 million persons) in 2004 to 14.1 per cent (32.5 million persons) in March 2009”: at 32388. This reduction was seen to be due in part to intervention programs which were “continually being implemented” to provide “wider access to low-income communities in order to have them benefit from the economic growth”: at 32388. The interventions included the provision of subsidies and funding programs such as the Smallholder Credit Program (KUR). The mechanism for allocating the KUR was to be improved from 2010 and its coverage was to expand from 2011: at 32430. It was noted that there had been an increase in food production in some areas and that this had decreased the poverty rate in rural areas (at 32391 – see [87] above).

90 The fifth national priority was “food security”: CBD527 at 32431. This priority was summarised in a way which linked it to the income level of farmers and the “Farmers Terms of Trade” (at 32431):

This priority pertains to efforts to increase food security and continuation of the revitalization of agriculture for realizing self-reliance in food, increasing the competitiveness of agricultural products, increasing the income level of farmers, and conserving the environment and natural resources. Increasing the growth rate of the agricultural sector in the GDP to 3.7% and increasing the Farmers Terms of Trade to 115-120 in 2014.

The Blueprint

91 On 1 January 2010, the Ministry of Agriculture published the “Blue Print: 2014 Beef Self Sufficiency Program” (Blueprint), signed by Mr Suswono: CBD410.1. The Blueprint was prepared by the Ministry of Agriculture through the Directorate General of Livestock: at 17377. The Foreword included (at 17325):

This Blue Print is hoped to be useful and serves as a reference in managing the implementation of operational activities and coordination between relevant agencies involved in achieving beef self-sufficiency in 2014.

…

This Blue Print must be followed-up and further elaborated in general guidelines and technical guidelines at the central level, implementation instructions at the provincial level and technical instructions at the city and district level.

92 The Executive Summary stated that the 2014 BSSP was to be implemented through five “main activities” and thirteen “operational activities” (CBD410.1 at 17327 [6]):

The 2014 BSSP program shall be implemented through five main activities:

(A) Providing of feeder cattle/local beef; (B) Increasing the productivity and reproductive capacity of local cattle; (C) Preventing slaughter of productive female cattle; (D) Providing breeder cattle; (E) Regulating domestic beef supply. In more detail, the five main activities are organised into 13 (thirteen) operational activities which include: (1) Development of local cattle breeding and feedlotting businesses; (2) Development of organic fertilizer and biogas; (3) Development of livestock-crop integration; (4) Empowerment and improvement of the quality of slaughterhouses; (5) Optimization of IB [inseminasi buatan, meaning artificial insemination (AI): CBD412 at 20404] and INKA [Intensifikasi Kawin Alam, meaning intensifying natural mating – at CBD412 at 20404 and CBD410.1 at 17391] activities; (6) Provision and development of feed and water; (7) Countermeasures against reproductive disorders and improvement of animal health services; (8) Rescue of productive female cattle; (9) Improvement of areas of breeder cattle sources and breeding business institutions; (10) Development of beef cattle breeding business through VBC; (11) Provision of breeder cattle through interest subsidies (cattle breeding business loan (KUPS) program); (12) Arrangement for feeder cattle and beef supply; (13) Arrangement for distribution and marketing of cattle and beef; as well as Operations of activities of central/provincial/ district/city [governments].

(Bolding omitted.)

93 In the Introduction in Chapter 1, it was noted that the volume of imports had been increasing: CBD410.1 at 17336. It then stated (at 17336):

If we are not cautious of this situation, it could place this country farther from the independence and sovereignty over the issue of animal-based food, especially beef, that we have been expecting, which in turn may lead us to fall into the food trap of exporting countries.

94 The Introduction referred to President Yudhoyono’s previous beef self-sufficiency program, noting that it had not received adequate financial support and that it faced a number of other challenges: CBD410.1 at 17337. It noted the President’s support for the 2014 BSSP.

95 The Blueprint was to be used to direct operational activities; provide comprehensive targets; set benchmarks as indicators of success; and provide a reference for required resources, “especially the provision of multi-year funding”: CBD410.1 at 17338–9. The Blueprint recognised that the implementation of the 2014 BSSP needed political support from legislative institutions, policies with stronger legal force, and the participation of governments and all components of society at the central and regional levels: at 17339.

96 Although the Ministry of Agriculture took the lead role in the 2014 BSSP, the Ministry of Agriculture was “expected to be able to mobilise and increase the role of other ministries” including the Ministry of Finance (“by providing funds in the budgets to stimulate livestock businesses or to implement all government programs”), the Ministry of Banking (“by providing capital loans with their interest subsidised by the government, or providing capital loans through other different schemes”), the Ministry of Industry, the Ministry of Trade (“by controlling the distribution and marketing of livestock and its products at home and overseas”), the Ministry of Cooperatives and SMEs (“by providing credit assistance to small and medium scale farmers”), the Ministry of State-Owned Enterprises and the Ministry of Energy-Mineral Resources (“by supporting the use of CSR funds from large government-owned companies (which operate outside the agricultural/livestock sector) for the development of livestock businesses”): CBD410.1 at 17392–3.

97 The Blueprint contemplated substantial measures, and funds, to achieve beef self-sufficiency, including providing incentives, facilitating credit schemes with low interest (KUPS) and “continuing the pro-poor programs for small/medium scale breeders through APBN (National Budget) / APBD (Regional Budget)”: CBD410.1 at 17387 (emphasis omitted). The Blueprint contemplated that funding “will continue to be increased” (as in fact happened) and that funds would not only come from the APBN of the Ministry of Agriculture but also from funds from other Ministries such as the Ministry of Social Affairs, the Ministry of Manpower and Transmigration, the Ministry of Cooperatives and SMEs and the Ministry of Energy and Mineral Resources: at 17387–8.

98 The Blueprint contemplated providing direct funding to farmers through cattle breeding business loans (at 17327 at [6]), developing incentives for both upstream and downstream activities (at 17384–5), stimulating farmers “so that they will develop the local cattle farming businesses” and providing support: at 17421.

99 An objective underlying the Blueprint was to accelerate rural economic growth and increase the income of farmers, whilst balancing this against the cost to consumers. The strategy was “not solely oriented at meeting consumer needs by controlling imports (cattle and beef) but [was] more directed to the context of increasing production, welfare of farmers, and sustainability of cattle breeding businesses as well as increasing production competitiveness, to reduce dependence directly or indirectly on imported beef and feeder cattle”: CBD410.1 at 17338 (emphasis added).

100 As other documents make clear, a “fundamental” (CBD412.1 at 20690) aspect of the strategy comprising the 2014 BSSP was to keep cattle prices high to improve farmer income and promote livestock farming generally. Thus, “[p]olicies on pricing and trade must be able to provide assurance to businesses to enable beef prices to remain attractive but still affordable”: CBD410.1 at 17342.

101 Another reason for controlling imports was that “[d]ependence on imported beef and feeder cattle to meet domestic consumption could undermine efforts to improve domestic capabilities”: CBD410.1 at 17346. Dr Krisnamurthi agreed that it was part of the design of the Blueprint to decrease imports and increase local production: T257.45–258.11.

102 It was recognised that “[p]rotection for small farmers and businesses in general in the context of international trade can [be achieved] by taking advantage of non-tariff measures, such as ASUH [Aman, Sehat, Utuh and Halal, meaning Safe, Healthy, Whole and Halal: CBD410 at 17193; CBD410.1 at 17343] and SPS [Sanitary and Phytosanitary Agreement]”: at 17342. The Blueprint was replete with references to the use of both tariff and non-tariff (such as bio-security) barriers, or policies, for the “protection” of local farmers and businesses: CBD410.1 at 17342, 17366, 17358.

103 After referring to the fact that “current imports of beef and feeder cattle are very large (30 percent of national beef demand)”, the Blueprint observed that increasing imports “severely reduce[d]” Indonesia’s foreign exchange: CBD410.1 at 17326. It was further observed that “[i]f we are not cautious of this situation, it could place this country farther from the independence and sovereignty over the issue of animal-based food, especially beef, that we have been expecting, which in turn may lead us to fall into the food trap of exporting countries”: at 17336.

104 The Blueprint contemplated import restrictions, or “controlling imports” (CBD410.1 at 17338), as one of the measures which would be implemented to achieve self-sufficiency: at 17326, 17356 (“policies are needed to regulate import volumes”).

105 As has been mentioned, the Blueprint contemplated five “main activities” and thirteen “operational activities”: CBD410.1 at 17327 at [6]. The fifth main activity was “[r]egulating the domestic stocks of beef”: at 17436. A stated justification for the fifth main activity was that “imports have … harmed local cattle farming businesses”: at 17436. The Blueprint contemplated preventing harm to local cattle farming businesses caused by imports by introducing “regulations, guidelines, instruments, and incentives that are able to provide a conducive atmosphere for the development of competitive beef cattle agribusiness in a sustainable manner”: at 17436.

106 Within the fifth main activity, the twelfth “operational activity” was “regulating the stocks of feeder cattle and beef”: CBD410.1 at 17437. The stated aim of the twelfth operational activity was “to implement more conducive regulations in feeder cattle imports, so that they: (i) comply with the SOP’s [guidelines] in place, and (ii) follow correct quarantine procedures”: at 17437. The “action programs” included “[s]upervising and monitoring feeder beef cattle import activities in accordance with the existing regulations and legislation”, “[d]eveloping regulations at the Ministerial level on the import and export of beef cattle and their breeder cattle; as well as developing and disseminating the guidelines (SOP) for importing feeder cattle”: at 17417.

107 The twelfth operational activity also included, as an action plan in relation to boxed beef, “[r]efining and enforcing the Minister of Agriculture’s regulations on beef imports”: at 17438.

108 Dr Krisnamurthi agreed that the Blueprint contemplated that there needed to be regulations and policies to regulate and reduce imports: T254.38–255.12.

109 Indeed, the Blueprint contemplated as a “prerequisite for success” (CBD410.1 at 17455), “[i]mplementing cattle and meat import control regulations correctly and consistently by referring to statutory regulations”: at 17457. The Blueprint contemplated refining or reviewing existing import regulations, or improving or adapting Ministerial Regulations that were not “aligned with the intention or philosophy of the 2014 BSSP”, to realise the beef self-sufficiency plan: at 17369–70. As will be seen, regulations were introduced in September 2011 (see [271] below).

110 Consistently with the desire to enforce existing regulations, the Blueprint contemplated, in relation to “Policies and Legislation”, that “feeders” of an initial weight of less than 350kg would be “fattened” in Indonesia for three months or more: at 17374–5. As noted earlier, Regulation 7 of 2008 imposed a weight restriction of 350kg on imported cattle. This regulation was enforced from March 2010 after the Blueprint was published: CBD162 at 3452; CBD166 at 3469. The Blueprint noted that “[f]attening will provide added value and create jobs”: at 17368. The cost of feed in Indonesia was relatively low: at 17368.

111 The Blueprint contained a detailed organisational and operational structure from the “Central Level”, through to the “Provincial Level” and the “Regency/City Level” to the “Sub-District Level”, which contemplated a “Technical Task Force in each sub-district area”: CBD410.1 at 17445–50.

112 The Blueprint noted that Indonesia’s cattle population had increased from 2005 (10.6 million), with sharp increases in 2007 and 2008, but a slower increase in 2009 (12.61 million): CBD410.1 at 17348.

113 The size of the domestic herd was used in the Blueprint as a central consideration in determining when sustainable self-sufficiency would be achieved. The Blueprint was based on a cattle population in 2009 of 12,610,100 and contemplated that cattle numbers would be 14,231,700 in 2014, when beef self-sufficiency (at 90%) would be achieved: CBD410.1 at 17400–402 (Table 8). The Blueprint contemplated increasing productivity including through artificial insemination (AI) and breeding programs, reducing slaughter of productive female cattle and slaughter of cattle at a sub-optimal weight: at 17326–7 at [2], [5], [6], 17385.

114 The Blueprint contemplated holding a special census of cattle numbers around June or July 2011: CBD410.1 at 17357. Indonesia conducts an agricultural census every 10 years and has done so since 1963: CBD471 at 25693. As at early 2010, the next agricultural census was to be held in 2013: at 25693. As at January 2010, the pursuit of beef self-sufficiency by 2014 was sufficiently important to warrant an extensive earlier and more specific census. The Blueprint set out nine “pre-requisites for success”, the seventh of which was: “It is absolutely essential that the Indonesian Livestock Census (STI), especially on cattle, be carried out so that there is a clear basis in evaluating the success of the 2014 BSSP program”: CBD410.1 at 17457.

115 The Blueprint referred to the fact that Indonesia relied solely on Australia for its live cattle imports and recorded that it was “necessary to consider other countries or sources, while still paying attention to” the risk of exotic diseases: CBD410.1 at 17361.

116 The Blueprint recorded that, between 2004 and 2006, the proportion of imports of offal to beef had been “rather high” and that, as a result, the government implemented a policy in 2007 to reduce the types of offal from eight types (heart, liver, tripe, intestine, spleen, lung, kidney, and testis) to two types (cow’s heart and liver): CBD410.1 at 17362. The Blueprint stated that it was “hoped that future imports of offal can be reduced or minimised” or even banned altogether: at 17362.

The 2010 Strategic Plan

117 On 28 January 2010, Minister Suswono made Regulation 15 of 2010 about the “Ministry of Agriculture’s 2010-2014 Strategic Plan” (2010 Strategic Plan which was dated 29 January 2010): CBD412.1 The 2010 Strategic Plan is a lengthy and detailed document and addresses numerous agricultural activities, including by identifying production targets for 40 agricultural products: CBD412.1 at 20621–2.

118 The foreword to the 2010 Strategic Plan identified “achieving self-sufficiency and sustainable self-sufficiency” as the first of four “main targets”: CBD412.1 at 20610. The fourth “main target” was “increasing farmer welfare”: at 20610. The second and third main targets were increasing food diversification and increasing added value, competitiveness and exports: at 20610. A later edition of the 2010 Strategic Plan noted that the target of increasing farmer welfare is “determined by the success of three other success targets”, being the first three main targets: CBD414.1 at 21668.

119 Chapter I of the 2010 Strategic Plan contained a lengthy and detailed introduction: CBD412.1 at 20628. After an introductory paragraph, it explained that “the Ministry of Agriculture will position rice, corn, soybeans, beef, and sugar as the five main food commodities”: at 20628. According to the 2010 Strategic Plan, rice and corn were already in a position of self-sufficiency and accordingly they were targeted for sustainable self-sufficiency: at 20628.

120 Chapter II summarised the Ministry’s vision, mission and aims: CBD412.1 at 20657. Chapter III appeared after a title page “Five Main Food Commodities 2010-2014”: at 20658. Box 3.1 addressed the four main targets: at 20661. As to the first, it identified the main target of achieving self-sufficiency in soybeans, sugar and “[b]eef and buffalo meat: production of 0.66 million tonnes in 2014 (average increase of 7.13% per year)” and sustainable self-sufficiency in rice and corn: at 20661. As to the third main target, it identified amongst other things increasing the balance of trade surplus from US$24.3 billion (2010) to US$54.5 billion (2014): at 20661. As to the fourth main target, it identified “increasing farmer welfare” through government and private investment and support from other Ministries and institutions that support farmers: at 20661.

121 Table 3.1 identified the targets in the following way, with a target for beef increasing at an average of 7.3% per year, consistently with the National RPJM (CBD412.1 at 20662):

Table 3.1 Targets, Production Goals and Growth of Five Main Food Commodities 2010-2104 [sic]

Note: 1) MDG, 2) Dry Shelled (PK), 3) Carcass, 4) Forecast Figure III, 5) Target Number

122 Consistently with the Blueprint, Chapter III of the 2010 Strategic Plan identified five main activities to achieve beef self-sufficiency. It included (CBD412.1 at 20670):

Achieving beef self-sufficiency will be pursued through 5 (five) main activities, namely:

1.    Provision of local feeder/beef cattle;

2.    Increased productivity and reproductivity of cattle;

3.    Prevention of slaughter of productive female cattle;

4.    Provision of calves (bibit sapi); and

5.    Regulation of domestic beef stock.

123 The five main activities were detailed in thirteen “operational activities”, again consistently with the Blueprint. Table 3.6 provided beef production targets consistent with Table 3.1, with an average growth rate of 7.3% (buffalo had an average growth rate 0.32%): CBD412.1 at 20671.

124 The 2010 Strategic Plan recorded that the Cattle Breeding Business Credit (KUPS) scheme would continue for the next five years with its “utilisation optimised for farmers and livestock farmers”, and that the Ministry of Agriculture would “continue to fight for the provision of interest subsidies for farmers and livestock farmers” (CBD412.1 at 20678):

Credit interest subsidies are the interest difference between the interest received by banks and the interest paid by farmers. Interest subsidies are one of the incentives for farmers/livestock farmers who are in the credit scheme program.

There are at least three credit schemes currently receiving interest subsidies [relevantly for present purposes, including Cattle Breeding Business Credit (KUPS)], and these will continue for the next 5 years, and their utilisation optimised for farmers and livestock farmers. The Ministry of Agriculture together with related Ministries/Institutions will continue to fight for the provision of interest subsidies for farmers and livestock farmers and for agricultural development actors.

125 In relation to the third “main target” of increasing added value, competitiveness and exports, the 2010 Strategic Plan stated (CBD412.1 at 20687):

Increasing competitiveness will be focused on developing products based on local resources which (1) can increase the fulfillment of domestic consumption demands; and (2) can decrease the dependence on imports (import substitution). The indicators are a large market share in the domestic market and a decline in net imports.

(Original emphasis.)

126 The various strategies, action plans and ministerial support for improving farmer welfare – the fourth “main target” – were addressed in detail: CBD412.1 at 20689–92. Section 3.1.4 began by reinforcing the importance of farmers’ income and the Ministry of Agriculture’s role in seeking to ensure that farmer income increased. It included (at 20389–90):

An important element influencing farmer farmer income levels [sic: An important element influencing farmers’ welfare is farmers’ income levels.] However, efforts to increase farmers’ income are not always followed by an increase in welfare as this also depends on other factors such as household expenditure and non-financial factors such as socio-cultural considerations. However, it is farmer’s income that is directly related to the main tasks and functions of the Ministry of Agriculture. As such, the main priority of the Ministry of Agriculture is undertaking efforts to increase farmers’ income.

Currently, the average per capita agricultural income is only around IDR 4.69 million per year. In 2014, the Ministry of Agriculture has targeted per capita farmer income to increase to IDR 7.93 million per year. This means that efforts must be made to increase farmer income per capita by 11.1 percent every year.

(Emphasis added.)

127 The 2010 Strategic Plan noted that it was “fundamental” that selling prices did not decrease: CBD412.1 at 20690. One of the strategies to achieve this outcome was to provide protection against “import attacks” by implementing tariff and non-tariff barriers (at 20690):

The value of farmers’ income can come from agricultural business and non-agricultural business. The value of income coming from agricultural business is calculated as the difference between the sale value of agricultural commodities produced and farming costs incurred. The sale value of farming products will be determined by the production volume and the selling price. The greater the production volume, the greater the physical volume that can be sold. Meanwhile, even though the production of agricultural commodities has successfully increased, this will only significantly increase sale values if selling prices also increase or are at least constant. Therefore, in order to increase sale values, it is fundamental to ensure that selling prices do not decrease.

In order to achieve this, the Ministry of Agriculture has prepared a number of action plans to ensure an increase in farmers’ income. These action plans include:

1.     Continuing subsidies, including subsidies for fertiliser, seeds/semen and credit/interest.

…

7.     Providing protection against import attacks on agricultural products, both through tariff and nontariff instruments. This is particularly needed to protect against falling agricultural prices due to unfair international trade (unfair markets)

(Emphasis added.)

128 Table 3.18 summarised the various strategies, action plans and ministerial support for improving farmer welfare: CBD412.1 at 20692. Strategies included the revitalisation of livestock breeding and “Farmer Financing”. Ministerial/Institutional support was to be provided by the Coordinating Ministry for the Economy, the Ministry of Finance and the Ministry of Trade, amongst others. The Ministry of Trade’s support role was described as including the protection of domestic product prices, including through import controls (at 20692):

* Structure international and domestic marketing cooperation, tax arrangements and export and import procedures, protect local product prices

* Cooperation on promotion, diplomacy, negotiation, market intelligence

129 Later in the 2010 Strategic Plan, it was noted that the Ministry of Trade was to (1) provide support by “simplifying export and import procedures which support price increases for fresh and processed agricultural products”; (2) provide “[p]rice protection for import substitute products that the farming community is able to produce”; and (3) “[c]ontrol the effectiveness of the implementation of regulations on the import of livestock and livestock products”: CBD412.1 at 20724–5.

130 Chapter IV was titled “Policy Direction and Strategies”: CBD412.1 at 20697. It recorded that food security was identified in the National RPJM as the fifth of eleven national priorities and that it was the national priority that most directly related to the Ministry of Agriculture: at 20699. It again referred to the objective of increasing farmers’ income and Farmer Terms of Trade (at 20699):

Of these 11 National Priorities, the one that relates directly to the Ministry of Agriculture is the 5th Priority, that is Food Security. The priority of Food Security includes improving food security and continuing agricultural revitalisation to reach food self-reliance, increasing the competitiveness of agricultural products, increasing farmers’ incomes, preserving the environment and natural resources, increasing GDP growth in the agricultural sector by 3.7% and increasing the Farmer Terms of Trade Index (NTP) by 115-120 in 2014.

(Original emphasis.)

131 Under the heading “Revitalisation of Farmer Financing”, Chapter IV referred to the problem faced by livestock farmers of access to capital and identified that efforts were needed to optimise existing credit schemes including the Cattle Breeding Business Credit (KUPS): CBD412.1 at 20709–10. KUPS is a credit scheme provided by Banks to livestock business actors (groups/group associations, cooperatives and companies) supported by government subsidies: at 20679. The credit term is six years with a grace period of two years: at 20679. In addition to KUPS, there was a credit scheme with guarantee facilities (KUR) available in relation to all agricultural commodities: at 20679.

132 The 2010 Strategic Plan observed that much of Indonesia’s labour force worked in the agricultural sector and that it was the focus of labour absorption: CBD412.1 at 20696. It recorded that, in 2010, the agricultural labour force was 43,713,000: at 20696. Indonesia’s population in 2010 was around 242 million: CBD241; CBD258. Accordingly, around 18% of Indonesia’s total population was working in the agricultural sector. As mentioned earlier, roughly 35% of Indonesia’s working population were farmers: CBD1087 at 39333 [8].

133 Chapter V addressed the activities and financing of the agricultural development programs in the Ministry of Agriculture: CBD412.1 at 20715. It stated that achieving beef self-sufficiency was the fourth of twelve programs “being implemented by the Ministry of Agriculture for the 2010–2014 period”: at 20716. Each “Echelon I” official within the Ministry of Agriculture had one program, reflecting the name of the Echelon I organisational unit: at 20717. The Directorate General of Livestock was responsible for achieving beef self-sufficiency: at 20719.

134 Part 5.2 in Chapter V addressed “Financing of Agricultural Development”: CBD412.1 at 20722. Most of the investment required was to be sourced from the private sector, banks and the public: at 20722. Around 10 to 15% “of the budget is provided by the government either through the APBN or APBD”: at 20722. Table 5.1 identified the “Ministry of Agriculture’s 2010–2014 APBN Financing Needs” at 6,571.3 billion rupiah for the program to achieve beef self-sufficiency and to increase the supply of Safe, Healthy, Whole, and Halal (ASUH) animal foods: at 20722. Table 5.1 is a summary of the totals explained more fully in Appendix 50: at 20793.

135 Appendix 50 set domestic beef production targets for 2010 of 70.2%. The targets for the following years were 75.53% (2011), 80.5% (2012), 85.29% (2013) and 90% (2014). Item 6 in Appendix 50 provided a breakdown of funding for the beef self-sufficiency program and increasing the supply of ASUH animal foods: at 20816-8. Appendix 50 also referred in Item 9 to funding for research and development for the “[a]cceleration of the Beef Self-Sufficiency Production (P2SDS) Program”: at 20824. The P2SDS is also referred to in Chapter III of the Blueprint where it was stated (CBD410.1 at 17391):

Evaluation on the lack of success of the previous beef self-sufficiency programs along with technical and non-technical problems identified are used as a reference in preparing the current program’s main activities, operational activities and action plans. One of the important findings of this evaluation is the ineffectiveness of the Minister of Agriculture’s Regulation (No: 59/Permentan/HK.060/8/2007), which has been in effect since 2008, in implementing the beef self-sufficiency program due to a lack of budget support needed to take the seven operational steps of the 2010 Beef Self-Sufficiency Acceleration Program (P2SDS).

The Guide

136 Minister Suswono signed Regulation 19 of 2010 concerning a “General Guide of Beef Self-Sufficiency Program 2014” on 5 February 2010 (enacted on 9 February 2010): CBD289.1 at 8543.

137 Chapter I of the Guide contained an Introduction. It identified the advantages of becoming self-sufficient in beef by reference to five matters, the first of which was an increase in income and welfare of farmers (CBD289.1 at 8544):

By becoming self-sufficient in beef, advantages and added value will be obtained, namely: (1) increased income and welfare for farmers; (2) absorption of increased new workforce; (3) savings on the state’s foreign exchange; (4) optimisation on local cattle potential; and (5) increased provision of beef that are … ASUH … for the people so that peace can be better guaranteed.

138 Chapter II set out the purpose, objectives and targets of the 2014 BSSP: CBD289.1 at 8545. It included (at 8545):

Purpose

The purpose of this guideline is to serve as the basis and reference for the implementation of the policy and activities of 2014 BSSP at the National, Provincial and District/City levels, which shall be coordinated by the Department of Agriculture involving several other technical departments, in order to achieve uniform understanding of targets and aims, which must be achieved by the policy managers at the National, Provincial, District/City levels.

Objective

The objectives of preparing the General Guide for 2014 BSSP are:

1.     To direct the implementation of the operational activities to be more focused and integrated cross-sectors.

2.     To set comprehensive targets and stages of achievements as indicators of success

3.     To strengthen coordination and synchronisation at the central, provincial and district/city government levels.

Targets

1.     Increasing the population of beef cattle to 14.2 million in 2014 with an average growth of 12.48%.

2.     Increased domestic beef production by 420.3 thousand tonnes in 2014 or an increase of 10.4% per year.

3.     Reduction in imports of cattle and beef to only 10% of the people’s consumption needs.

4.     Increased absorption of the workforce by 76 thousand people/year due to the increase in population and production of livestock.

5.     Increased income for beef cattle farmers at least equal to the minimum wage of each province.

139 Chapter III addressed implementation of the 2014 BSSP which was said to include four (but it should be a reference to five) aspects, being technical, economic, organisational, policy and location aspects: CBD289.1 at 8545–6. Under the “Policy aspect”, reference was made to the need for supportive policies, including providing financial support and adopting policies to protect small farmers and business operators “in the context of international trade” through tariff and non-tariff measures, including quotas (at 8548):

Policy aspect

The agricultural sector, livestock agribusiness included, will only develop and prosper if it is supported by conducive policies.

1.     Upstream activities must be able to guarantee the availability of easy, affordable, and sustainable production inputs. The support of Cattle Breeding Business Loans [Kredit Usaha Pembibitan Sapi] (KUPS) must be optimised and continuously developed.

…

5.     Policies in terms of price and trade must be able to provide certainty to business operators so that meat prices remain attractive but still affordable. Monopolistic or cartel practices, importing of inferior products by dumping, importing illegal meat, etc, must be prevented. Protection for small farmers and business operators in general in the context of international trade can take advantage of tariff and non-tariff instruments such as quotas, ASUH [Safe, Healthy, Whole and Halal], and SPS [Sanitary and Phytosanitary Measures].

(Emphasis added.)

140 Chapter IV of the Guideline – “Principles of 2014 Beef Self Sufficiency” – identified the sixth and seventh (of seven) principles as (CBD289.1 at 8549):

6.    Livestock data collection is carried out involving competent institutions (BPS) to ensure up-to-date livestock parameters.

7.    Providing adequate funding to achieve beef self-sufficiency, including providing subsidies and incentives in certain areas with high risks.

(Italics omitted.)

141 Chapter V was titled “Road Map of 2014 BSSP” and set out various scenarios from pessimistic to optimistic: CBD289.1 at 8550. The three scenarios were based on domestic production and import scenarios, for both feeder cattle and (boxed) beef. It recorded that Indonesia contributed 63.5% of beef consumption in 2009 to 36.5% from imports. It identified a pessimistic view for the 2010 year of 52.1% domestic contribution, a most likely contribution of 70.2% and an optimistic contribution of 78.9%. Table 1 provided (at 8550):

142 The Guideline identified the “Most Likely” scenario “as the main target and aim of the 2014 BSSP” under the heading “Realistic Scenario”: CBD289.1 at 8551. It provided an overview of that scenario from a technical perspective in Table 2: at 8551. Table 2 provided:

Note: (….) population equals production of beef

143 The Guideline stated that “it appears [from Table 2] that to achieve beef self-sufficiency, the domestic cattle population in 2014 needs to be 14.2 million, so that there will be additional imports of 85.40 feeder cattle, equivalent to 15.4 thousand tonnes of meat and 31.2 thousand tonnes of meat [boxed beef]”: CBD289.1 at 8552. As will be seen, the results of the special census later carried out in June 2011 indicated that the cattle population on 1 June 2011 exceeded 14.2 million.

144 Chapter VII was titled “Strategies to Achieve the Objectives”: CBD289.1 at 8560. It addressed each of the strategies. In relation to the financing strategy, it recorded that most of the financing needs would be covered by the government and local government given the “urgent nature of the program”: CBD289.1 at 8560–61.

145 Chapter VIII was titled “Operational Activities”: CBD289.1 at 8561. It summarised the thirteen “operational activities”, according to the five “main activities” to which the relevant operational activity related. Under the heading “Management of Stock of Feeder Cattle and Beef” (the twelfth operational activity, within the fifth main activity), it was stated (consistently with the Blueprint) (at 8569–70):

This activity aims to empower local resource-based beef cattle farming businesses, through the following operational activities:

1)    Implementing of feeder cattle import regulations correctly and consistently.

2)    Preparing regulations at the level of Ministerial Regulations regarding the input and output of beef cattle and their breeds; as well as preparing guidelines (SOP) for imports of feeder cattle.

3)    Supervision and monitoring of beef cattle import activities in accordance with existing regulations and legislation.

4)    Coaching for feedlot companies to convert their businesses into fattening companies using local cattle or into breeding companies in stages.

(Emphasis added.)

146 Chapter IX was titled “Action Plan”: CBD289.1 at 8571. Again, it addressed each of the thirteen “operational activities” by reference to the five “main activities” to which the operational activity related. It included in relation to the first main activity (at 8571):

The 2014 Beef Self-Sufficiency Program shall be implemented with various steps formulated in the action plan as follows:

A. Provision of Local Feeder Cattle/Beef

Justification:

Local cattle must be the backbone of the national beef supply. The problems faced so far include the limited numbers of local feeder cattle that can be used for fattening. Therefore, feeder cattle imports tend to continue to increase, which can drain [our] foreign exchange up to IDR 4.8–5 trillion annually. Imports, which were originally intended to fill the shortage, may disrupt local cattle fattening businesses. The amount of foreign exchange absorbed abroad should [instead] be used to develop the business of providing feeder cattle and local beef, which will increase independence and competitiveness. To stimulate farmers to develop local cattle farming businesses, they must be supported with programs and facilities for local cattle breeding and fattening businesses.

Objective:

Increase the availability of feeder cattle and beef that are sourced from local cattle.

Target:

2,779 million potential feeder cattle for slaughter in 2014 and 525,477 tons of potential local beef

(Emphasis omitted.)

147 The Guide also included, in relation to the fifth main activity and twelfth operational activity, matters consistent with the Blueprint, including that the activity “aims to implement more conducive regulations in the implementation of feeder cattle imports” and an equivalent observation in relation to boxed beef imports: CBD289.1 at 8585–8.

Presidential Instruction Number 1 of 2010

148 On 19 February 2010, President Yudhoyono issued a “Presidential Instruction” (Instruction Number 1 of 2010), titled “Accelerating the Implementation of the 2010 National Development Priorities”: CBD531.1 at 32497; CBD533. It had a very wide distribution, including to each of the Ministers in Indonesia’s second cabinet, the Heads of various Government Departments (including the Head of Statistics), Governors, Regents and Mayors: CBD531.1 at 32497. The first instruction was (at 32498):

Take the necessary steps in accordance with their respective duties, functions and authorities, in order to accelerate the implementation of the 2010 National Development Priorities, with reference to the National Development Priorities in the 2010-2014 National Medium-Term Development Plan [namely the National RPJM.]

149 The second instruction was to be “guided by the programs stated in the Attachment to this Presidential Instruction” which included “Food Security” as the fifth priority: CBD531.1 at 32498. The Attachment addressed each of the national priorities, identifying actions, outputs, completion targets and responsible agencies.

150 In relation to “Food Security”, the first “Program” was “Increasing food production”: CBD533 at 32586. One action item was “[i]ncreasing access for farmers/livestock farmers to Credit Programs (KUR, Cattle Breeding Business Credit (Kredit Usaha Pembibitan Sapi/KUPS)”: at 32586. Another was “Increasing ruminant livestock production”: at 32587. These action items had a completion target of December 2010 and were the responsibility of the Ministry of Agriculture: at 32586–7.

The Impact on Australian Exports from 2010 until the Second Control Order

151 The actions identified in the Blueprint, 2010 Strategic Plan and the Guide were implemented from January 2010, consistently with the desire (and Presidential Instruction to all levels of government) to accelerate the program in its more organised and better funded way. The number of live cattle import permits were significantly reduced from January 2010. While import permits were still being released, they were for a shorter duration and most importers were not able to import the number of cattle they had requested: CBD166 at 3469. Other issues also arose, such as import permits being found to be invalid, demonstrating a stricter enforcement by Indonesia of its laws and regulations, consistently with what had been stated in the Blueprint, Guide and 2010 Strategic Plan.

152 Before March 2010, Australia had supplied consignments of both “slaughter” and “feeder” cattle: CBD166 at 3474. Industry estimated that between 20 to 30% of cattle exported to Indonesia had been between 400 and 450kg in 2009: at 3474. In pursuit of the renewed push for self-sufficiency, the 350kg limit in Regulation 7 of 2008 was enforced from about March 2010: CBD162 at 3452; CBD166 at 3469.

153 Dr Krisnamurthi agreed that, from early 2010, the Indonesian Government took a more restrictive approach to the granting of import permits in pursuit of its self-sufficiency policy: T241.03–242.15. The reduction in import numbers, and the enforcement of the 350kg weight restriction, was having a serious impact on the number of live cattle exported from Australia to Indonesia: CBD166 at 3468. This was the topic of trade and inter-governmental discussions between Australia and Indonesia throughout 2010 and into 2011.

154 In March 2010, Minister Burke (then the Minister for Agriculture, Fisheries and Forestry) and Minister Suswono held bilateral discussions at the Northern Territory Cattlemen’s Association Annual Conference in Darwin: CBD166 at 3474. An attachment to a Minute dated 30 November 2010 in relation to Minister Burke’s meeting and surrounding events, later provided to Minister Ludwig, recounted that importers were securing only around 30 to 40% of permits sought and that there had been a sharp decline in Australian exports to Indonesia (at 3474):

Import permits for live cattle

In January 2010, Indonesia’s Directorate General of Livestock Services (DGLS) announced its intention to suspend issuing new import permits for live cattle until all issued permits were used …

Minister Burke raised the issue with Minister Suswono during bilateral discussions in Darwin in March 2010 and was assured that the measure was not an attempt to restrict imports, but rather a move to refine the import permit system to facilitate more accurate forecasts of expected imports of live cattle to better match supply and demand.

Following Minister Suswono’s assurances, it was expected that DGLS would begin to issue new import permits in April 2010. However, it became clear in May 2010 that many importers were unable to secure import permits, and that permits that were issued provided for around 30 to 40 per cent of the cattle numbers requested.

Accordingly, in the six months to June 2010 there was a sharp decline in Australian live cattle exports to Indonesia.

155 On 31 May 2010, Minister Burke wrote to Minister Suswono raising the issue of a recent import permit being found to be invalid, the weight restrictions and the reduced number of import permits: CBD542. The letter relevantly included (at 32641–2):

I understand that in a recent inspection of live cattle being discharged at the Indonesian port of Tanjung Priok, Indonesian authorities identified that an import permit for part of a shipment of live cattle from Australia (2200 cattle) was not valid. I also understand that Indonesian authorities are working with the importer to resolve the issue.

…

Separately, I am advised that the most recently issued import permits have included a weight restriction of 350kg per animal. Australia is a key supplier of live cattle to Indonesia. I believe that without a common understanding regarding Indonesia’s import requirements and compliance mechanisms the sustainability of the trade will be compromised. The Australian Government and industry are interested to find a practical and cost effective way for this new condition to be met. As a priority the Australian Government would like to work with the Indonesian Government to establish an agreed understanding on meeting Indonesia’s requirements.

I would also like to raise my concerns about Indonesia’s restrictions on import permits for Australian live cattle. You may recall I raised the issue with you during our discussions in March at the Northern Territory Cattlemen’s Association Annual Conference in Darwin. The potentially significant effect on the live cattle trade from Australia is of increasing concern to the Australian Government and industry.

Based on your assurances that Indonesia’s restrictions on import permits for live cattle were not an attempt to restrict imports, but rather a move to refine the import permit system to facilitate more accurate forecasts of expected imports of live cattle, it was expected that new import permits would be issued in April. However, my department and Australian industry representatives inform me that in recent weeks, many importers have experienced difficulties obtaining import permits. Furthermore, it appears that import permits that have been issued are for around 30 to 40 per cent of the quantity requested.

156 Minister Suswono responded in a letter dated 4 June 2010, noting that the 350kg weight restriction stemmed from Regulation 7 of 2008 which was now being enforced: CBD546. In relation to the reduced number of import permits, Minister Suswono linked this to President Yudhoyono’s address to the new cabinet that Indonesia must promote self-sufficiency in beef production with a target of 90% of beef to be produced from domestic production by 2014. Indonesia’s importation of live cattle needed to be “adjusted” to meet self-sufficiency objectives and import permits would “only” be issued to “fill the gap” between domestic consumption and domestic production. The letter included (at 32663):

Furthermore, weight restriction of 350 kg per animal has been in effect since January 1st 2008 as it is stated by … [Regulation 7 of 2008] … The restriction has been our long concept, since the beginning of feeder cattle importation, with the objective of allowing all imported cattle to be fed for 3 months before they are marketed for slaughter.

It is the Presidential address to the new cabinet that Indonesia must promote its self sufficiency in beef production with a target of 90 per cent of beef to be produced from domestic production by 2014. Of course, it is a challenging for Indonesia, with current import of both feeder cattle and frozen/chilled meat amount to at least 35 per cent of the domestic consumption. Consequently, our imported cattle and beef will be proportionately adjusted with our domestic production by the local beef cattle farmers. Therefore, import recommendation letter will be prioritized only to fill the gap.

157 On 28 July 2010, Dr Tjeppy, the Indonesian Director-General of Livestock Services (DGLS), issued a notice to importers: CBD553. The notice referred to the 2014 BSSP and stated that, in light of domestic supply and demand for feeder cattle, and in order to pursue the goal of beef self-sufficiency, the Directorate of Livestock Services would give industry the opportunity to import a total of 452,000 head of cattle in 2010, which – given existing issued import permits – allowed for only another 92,235 head to be imported up until 31 December 2010: at 32704.

158 This was seen by the Australian industry as marking a further deterioration such that the market situation in Indonesia had reached a “critical” stage: CBD556 at 32709. On 3 August 2010, the Australian Livestock Exporters Council (ALEC) sent a letter to the Secretary of the Department of Foreign Affairs and Trade (DFAT) in relation to Dr Tjeppy’s letter of 28 July 2010: CBD556. ALEC’s letter to DFAT noted that a DAFF delegation had visited Indonesia the week before, but that the Indonesian Government seemed steadfast in its determination to restrict imports in accordance with Dr Tjeppy’s letter. ALEC’s letter included (at 32709–10):

I am writing to ask for your urgent assistance for the live cattle trade to Indonesia.

I know that you and your department are aware of the recent difficulties being experienced by the Australian live cattle trade to Indonesia, particularly surrounding the restrictions on cattle weight limits and the restricted issuing of permits by Indonesian officials. The assistance provided by your staff in Indonesia to date on this matter has been greatly appreciated by industry.

However, in the past week the market situation in Indonesia has deteriorated considerably and has reached a critical stage.

On Wednesday 28 July all importers of Australian live cattle received a letter from Director General, Directorate General Livestock Services, Dr Tjeppy, formally notifying them of the planned import volumes for the rest of 2010 (August-December).

This letter stated that in light of Indonesia’s goal to achieve self sufficiency of beef by 2014, the Directorate General Livestock Services will allow for only 452,000 head of live cattle imports during the 2010 calendar year. This number is approximately 300,000 head lower than the total imported in the 2009 calendar year. Industry estimates that this will mean that import permits for only 92,000 head of live cattle will be issued for the remainder of 2010 …

An Australian Government (DAFF) and Industry delegation travelled to Jakarta last week to reinforce the Australian industry’s concerns. However, the Indonesian Government appears to be·steadfast in their determination to follow through on the parameters of Dr Tjeppy’s letter.

159 On 12 August 2010, Minister Smith (the Minister for Foreign Affairs and Trade) wrote to Minister Mari Pangestu (Minister for Trade) and Minister Hatta Rajasa (Coordinating Minister for Economy): CBD559; CBD560.

160 In his letter to Minister Pangestu, which was in equivalent terms to the letter to Minister Hatta Rajasa, Minister Smith referred to discussions they had when he had visited Jakarta on 15 July 2010, stating that he had raised the issue of market access for live cattle and stating that Minister Pangestu had advised that she would be having further discussions on the issue with her Ministerial colleagues: CBD559. His letter continued by advocating for domestic improvements in Indonesia rather than import restrictions: at 32716. The letter included (at 32716–7):

I appreciate Indonesia’s interest in improving the productivity and profitability of its beef producing sector, particularly smallholder producers. There is already some good cooperation between our two industries, and involvement by Australian research bodies with the support of AusAID, in activities aimed at addressing these issues. Continuing to focus on domestic improvements will be possibly more effective in addressing Indonesia’s interests in a stronger beef production sector than any import restrictions.

Most recently Australian industry representatives have alerted the Australian Government to a letter from Dr Tjeppy Soedjana, Director General, DGLS, on 28 July, to Indonesian importers of Australian live cattle. The letter outlines a proposal to limit live cattle imports from Australia for the remainder of 2010. I would note the proposed allocation of 452,000 head of cattle for 2010 is a significant reduction on 2009 import levels of over 700,000 cattle. I am also advised the DGLS has informed importers that it will likely limit imports of boxed beef for the remainder of 2010.

I have instructed Australian officials to continue working with industry representatives and Indonesian officials to clarify Indonesia’s import requirements. I would be concerned at any suggestion the DGLS was imposing a quantitative import restriction on live cattle and boxed beef, as this would raise issues under international trade obligations.

161 In November 2010, Indonesia notified the World Trade Organisation (WTO) of its intention to implement a revised version of Indonesia’s regulation governing the importation and distribution of carcasses and meat from overseas and proposed a ban on offal imports: CBD581 at 32939. Again, this was consistent with implementation of its 2014 BSSP. The new regulation was anticipated to come into force on 17 January 2011 and to include an extension of Indonesia’s partial offal import restrictions to a ban on all offal imports, excluding tongues and tails: at 32939. Indonesian regulations had prohibited the import of all offal products except hearts, livers, lips, tails, feet and tongues, which had “a significant effect on the export of Australian beef offal to Indonesia”, resulting in volumes reducing by about 30% since 2007: at 32937, 32940.

162 The General Manager of the Bilateral Trade Branch of the Trade and Market Access Division of DAFF provided a Minute to Minister Ludwig dated 30 November 2010: CBD166. The Minute contained three attachments: “Trade Statistics” (Attachment A at 3473); “Australian Indonesia live cattle trade overview” (Attachment B at 3474) and “Australia-Indonesia political and economic overview” (Attachment C at 3477).

163 The Minute foreshadowed that a DAFF and industry delegation intended to visit Jakarta in mid-December 2010 “to present Australia’s concerns to key Indonesian agriculture officials”: CBD166 at 3468. The Minute made a number of recommendations to Minister Ludwig, as follows (at 3468):

That you:

a.     Note that Indonesia is pursuing an objective of self sufficiency in beef and has implemented a number of measures to manage imports of live cattle which have created uncertainty for industry and raised issues that require attention from government.

b.     Note that recent industry data indicates a number of live cattle, weighed in Australia, are at risk of breaching the 350kg weight limit being enforced by Indonesia on arrival.

c.     Note that Australia has taken a number of steps to respond to the situation and the Department continues to develop further elements of a strategic approach for dealing with the issues. The main elements are to:

-     Seek more flexible, certain and transparent arrangements with Indonesia to comply with their import permit and weight limit requirements;

-     Seek to influence key players in the Indonesian [G]overnment;

-     Seek removal of exemptions for Western Australia and the Northern Territory from the National Livestock Identification Scheme (NLIS) for cattle exported direct from place of birth;

-     Establish an emergency response plan to manage the potential rejection of a shipment of live cattle by Indonesia;

d.     Note that while the strategy is being implemented, risks associated with Indonesia’s implementation of measures to control the live cattle trade will remain.

e.     Note that it is proposed you travel to Indonesia in early 2011 to make representations aimed at maintaining Australia’s largest live cattle trade.

(Emphasis added.)

164 Under the heading “Key Issues”, the Minute noted that Indonesia was Australia’s largest market for live cattle and that it had grown significantly over the past several years with record numbers exported in 2009: CBD166 at 3469. It was observed that “[m]ost cattle go to feedlots, but an increased number of larger cattle were imported last year and went straight to slaughter”: at 3469. The Minute continued by summarising the developments in Indonesia and the steps that the Indonesian Government was taking to reduce imports of cattle from Australia (at 3469–71):

3.    From early in 2010, in response to an oversupply of beef and in pursuit of a self sufficiency objective mandated by the President, Indonesia has implemented a number of measures aimed at reducing imports of live cattle (Attachment C).

…

Live cattle import permits

5.    In January 2010, the Indonesian Government began limiting the number of import permits for live cattle in an effort to control import numbers. The lack of certainty and transparency surrounding implementation of this measure has made operational planning difficult for exporters and producers. Some exports have incurred significant costs, including shipping demurrage fees which can be in express of $30,000 per day. While input permits are being released, they are for a shorter duration than previously and most importers are not able to import the number of cattle they have requested.

6.    In addition, a multi-step process has been implemented to confirm permit validity, following an incident where a shipment was found by Indonesian authorities on arrival to have an invalid permit. Government and industry would like Indonesia to accept more flexible, less costly and more time efficient import management permit arrangements.

350kg weight limit for live cattle

7.     In March 2010, Indonesian authorities began to enforce a 350kg per animal weight limit for live cattle from Australia. The measure was a response to a decline in beef prices driven by increasing numbers of heavy cattle (above 350kg) being imported into the Indonesian market and sent straight to slaughter.

…

Australian Government Representations

14.     The Australian Government has raised its concerns with the Indonesian Government, including at ministerial level, on a number of occasions …

Next steps

16.     The Department has continued to develop its approach to addressing the issues and the current strategy includes the following elements:

* Continuing to negotiate with Indonesian officials to:

a)    streamline the release and validation of import permits;

b)     increase the number of cattle covered by each permit and the length of time the permit is valid;

c)     increase certainty and transparency around the individual weighing of cattle and agreement that weighing to meet the 350 kilogram limit occurs prior to departure from Australia.

…

17.     A senior DAFF and industry delegation intends to visit Jakarta in mid December to engage with the newly appointed Directors General for Quarantine and Livestock Services and Animal Health within Indonesia’s Agriculture Ministry;

18.     It is intended that you visit Indonesia in early 2011 to meet with your Indonesian counterpart …

19.     There are ongoing risks associated with the trade, including the potential for further policy shifts in Indonesia and for the rejection of a shipment by Indonesian authorities if exporters fail to comply with Indonesia’s requirements. The implementation of the strategic approach outlined above is expected to assist in managing these risks.

165 Under the heading “Sensitivity” which was identified as “[h]igh”, the Minute stated (CBD166 at 3471):

While Australian industry association representatives have been supportive of the Government’s efforts to date, the industry is becoming increasingly concerned with Indonesia’s policy position on live cattle.

166 Attachment A contained various statistics: CBD166 at 3473. These reflected a significant drop in live cattle exports to Indonesia over the 2010 year, consistently with President Yudhoyono’s food security and self-sufficiency agenda. Attachment B comprised the “Australia Indonesia live cattle trade overview” and broadly reflected the issues which have already been mentioned”: at 3474.

167 Attachment C – comprising the “Australia-Indonesia Political and Economic Overview” – indicated that, whilst views across the Indonesian Government differed in 2010, Indonesia was pursuing the beef self-sufficiency program with vigour, prioritising the interests of farmers by restricting imports which caused price rises (and greater income for farmers), and seeking to reduce reliance on Australia: CBD166 at 3477. It included (at 3477):

Presidential policy directive for Self Sufficiency

Indonesian President Yudhoyono’s administration is aiming to attain self-sufficiency for five key agricultural commodities: rice, corn, sugar, beef and soy.

Agriculture Minister Suswono has also been tasked with overcoming a number of agricultural challenges, including food security, regional food self sufficiency, increased agricultural productivity, stronger agricultural sectors, greater prosperity for farmers, more precisely targeted subsidies, a more favorable balance between agricultural imports and exports, increased production of livestock, intensified cooperation with other countries and the eradication of corruption.

To achieve the goals of the administration, Indonesia is actively seeking greater foreign investment in its agricultural sector (including from Australia) as well as increased capacity building initiatives.

Although Indonesia needs inputs in the form of agricultural imports to achieve its self-sufficiency goals, Suswono is currently pursuing a highly political agenda to appease domestic interests which compete with imported product. Suswono is also influenced by Indonesia’s conservative Prosperous Justice Party (PKS) of which he is a member. The PKS’s support base has traditionally been made up of smallholders and farmers.

Suswono’s agenda is impacting on Australia and has included the implementation of a food safety regulation for plant products, which had the potential to significantly increase costs for exporters, a proposed ban on all offal imports, weight restrictions on imported live cattle, and proposed new import regulations for dairy products.

This trading environment is making it difficult to convince Australian industry to invest directly in Indonesia or to provide support for capacity building initiatives.

Indonesian media reports on the volume, and in some instances the legality and food safety, of Australian product entering Indonesia have perpetuated anti-Australian sentiments among some elements of the Indonesian population. Conversely, however, some sections of the Indonesian media have also highlighted resistance to the Indonesian Government’s prioritisation of foreign investment in agriculture, in particular from Australia, over local farmers and domestic investors. This resistance has come from both Indonesian agricultural industry bodies and a number of Parliamentarians, including the Chairman of the Advisory Body of the Indonesian Farmers’ Association and, interestingly, the Deputy Chairman of DPR Commission IV.

Commission IV, who’s [sic] former Deputy Chairman was Minister Suswono, is the parliamentary body responsible for agriculture, plantations, maritime affairs, fisheries and food in Indonesia’s House of Representatives. It has significant influence, harbours protectionist views and is pursuing an agenda aimed at increased food security with a reduced reliance on Australia, which they perceive as monopolising the agricultural market. There have been recent calls from Commission IV to ban all offal imports, stop cattle and beef imports where growth hormones have been used, and introduce a lower weight limit on imported cattle. Recently, Parliament passed a law reducing foreign ownership of companies in Indonesia’s horticulture industry from 80 per cent to 30 per cent.

Conversely, there have been calls from some elements of the Indonesian Government that Suswono’s focus on self-sufficiency has contributed to a shortfall of quantities of live cattle and meat available to Indonesia consumers, and a subsequent spike in the related pricing of these commodities - particularly during the 2010 Ramadan period.

168 Between 12 and 15 December 2010, a senior DAFF delegation visited Jakarta: CBD578. Deputy Secretary Glyde was provided a briefing note concerning “market access for boxed beef and meat offals”: CBD581. This referred to Indonesia’s plan to ban (most) offal imports and the restriction in live cattle imports: at 32940. It noted that “political attention [was] on the Ministry of Agriculture to ensure cattle prices remain high for local farmers”: at 32940. It included (at 32940):

In 2009 there were significant increases in the volumes of both live cattle and boxed beef imported from Australia and entering the wet markets, which historically have only been supplied by local and/or feedlot cattle. Subsequently, political attention has been on the Ministry of Agriculture to ensure cattle prices remain high for local farmers.

Tightening of trade in live cattle has resulted in high prices for beef. Indonesian media has linked the significant price increases for beef to increased demand during the Ramadan season coupled with a reduction in the volume of imported live cattle.

While the live trade has been significantly impacted by Indonesian policies, it appears that boxed beef has been spared much of the angst in recent months.

169 The 12 to 15 December 2010 visit was referred to in a cable agreed by the parties to be dated 11 January 2011: CBD170. The cable included the following summary, indicating that the live cattle quota had been set at 500,000 head for 2011, but would be reviewed mid-year (at 32663):

The live cattle and beef trade will continue to be problematic because of political pressures in Indonesia, but there are indications that Indonesia is prepared to be more accommodating on permit administration and weight limits. Indonesia said it would revert to a three month duration period for import permits and would release permit allocations for the first quarter of 2011 soon. This has now occurred. Imports of live cattle have been set at 500,000 head for 2011 but will be reviewed mid year. Beef imports will be capped at 50,000 tonnes. The implementation of the proposed ban on offals is not yet certain. The new Directors General for Livestock Services and Quarantine have welcomed the invitation to visit Australia.

170 DAFF officials met with officials from the Ministry of Agriculture in Melbourne during the One Health Conference in Melbourne from 14 to 16 February 2011 to discuss live cattle and (boxed) beef trade issues: CBD601. DFAT Cable JA59344H, which related to that meeting, referred to the fact that the special advisor (Mr Agus Heriyanto) to the Director General Livestock Services (Dr Prabowo) had “acknowledged that Indonesia did not have good data on which to base their decisions about the level of [boxed] beef imports” and that they “had chosen 50 000 tonnes for this year as this was the same as the initial amount set last year, but acknowledged that there was some flexibility in this target”: at 33013–4. The cable included (at 33014):

Agus reminded us that the 500 000 head limit for live cattle in 2011 would be reviewed mid year and he volunteered that it was possible that the limit may go as high as 650 000 head if market conditions indicated the need for that level of imports.

171 Preparations for the cattle census contemplated in the Blueprint resulted in Memorandums of Understanding being entered into between the Ministry of Agriculture and the Central Statistics Agency on 3 March 2011: CBD606; CBD607. One was signed by Minister Suswono, the other by Dr Probowo, on behalf of the Ministry of Agriculture.

172 Between 8 and 13 March 2011, Minister Ludwig visited Indonesia. DAFF prepared a lengthy and detailed briefing package for Minister Ludwig, which covered many aspects of Australia’s trading relationship with Indonesia, in similar terms to summaries mentioned above: CBD614. The first of the issues identified was the “market access issue” concerning live cattle: at 33094. The Introduction noted that Minister Ludwig was to meet with Minister Suswono and a representative of Commission IV: at 33092–3. It noted that Minister Suswono had been the Deputy Chairman of Commission IV and that “Commission IV … has significant influence, harbours protectionist views and is pursuing an agenda aimed at increased food security with a reduced reliance on Australia”, including by banning offal imports, stopping cattle imports where growth hormones had been used, and introducing an even lower weight limit on imported cattle (250kg) (at 33092–3):

In Jakarta, your meeting with Minister Suswono will enable you to maintain pressure on Indonesia to progress Australia’s priority market access requests. Issues to be raised include market access for live cattle, Indonesia’s proposed restrictions on boxed beef imports (including a ban on offals) and high tariffs for some horticultural products.

…

A meeting is also scheduled with representatives from Indonesia’s Parliamentary Commission IV, the body responsible for agriculture, plantations, maritime affairs, fisheries and food in Indonesia’s House of Representatives. Commission IV, whose former Deputy Chairman was Minister Suswono, has significant influence, harbours protectionist views and is pursuing an agenda aimed at increased food security with a reduced reliance on Australia, which they perceive as monopolising the agricultural market. There have been recent calls from Commission IV to ban all offal imports, stop cattle and beef imports where growth hormones have been used, and introduce a lower weight limit on imported cattle.

173 In the “handling note” concerning Minister Suswono, it was again noted that the Minister was pursuing “a highly protectionist agenda” which was “particularly evident in current difficulties surrounding Australia’s live cattle and boxed beef trade”: CBD614 at 33094. Minister Ludwig was informed in the note that the meeting with Mr Suswono “is expected to be the most important … meeting in your program”: at 33094. The “key objective” was to “[r]egister Australian concerns on key market access issues relating to boxed beef and live cattle”: at 33094.

174 Minister Ludwig was provided with a Supplementary Briefing, being an industry brief provided by Meat and Livestock Australia (MLA): CBD293. It emphasised the impact on Australian exporters of the Indonesian Government’s “political” and “public” demonstration of its commitment to beef self-sufficiency targets: at 8985. It noted that “market access restrictions in 2010 significantly disrupted cattle flows in northern Australia and shipping operations of livestock exporters”: at 8985.

175 Minister Emerson, the Minister for Trade, visited Jakarta on 18 and 19 April 2011 for the 9th Australia-Indonesia Trade Ministers’ Meeting: CBD632. Minister Emerson’s visit was the subject of a cable from Jakarta on 26 April 2011: at 33376. The cable recorded the author’s view that “the political imperative of national self-sufficiency [was] taking precedence over the logic of securing supply to meet market demand”: at 33379. It included (at 33376–9):

In addition to discussions with his counterpart, Dr Mari Pangestu, Dr Emerson met the Coordinating Minister for Economic Affairs, Mr Hatta Rajasa, as well as senior representatives of the Australian and Indonesian business communities and industry associations and members of the Indonesian Parliament. Key issues raised at meetings were … problems in the boxed beef and live cattle trade.

2. In a private meeting between the two Ministers (with key officials present) in advance of the Trade Ministers’ Meeting (TMM), Dr Emerson raised concerns about market access for live cattle, boxed beef and offal, including the detention of large amounts of boxed beef at the Jakarta docks for a period of months, and problems associated with the 350kg weight restriction on live cattle exported to Indonesia. Dr Pangestu said Indonesia was currently reviewing its regulation of the trade and the Ministry of Trade would take over the issue of permits, resulting in greater transparency. She said she would do what she could to resolve the current difficulties, especially on boxed beef.

…

9. In a subsequent meeting with the Coordinating Minister for Economic Affairs, Hatta Rajasa, Minister Rajasa confirmed to Dr Emerson that the Ministry of Trade would assume responsibility from the Ministry of Agriculture for issuing permits for boxed beef and live cattle. Indonesia was conducting a review of its policy, and the final decision for import quota was to rest with Minister Rajasa’s office. This would enhance transparency of the boxed beef trade. Minister Hatta said it would be “worth looking into” whether Indonesia could be more flexible on weight restrictions …

Comment

…

15. On beef and live cattle, Dr Pangestu, Minister Hatta and Vice Minister Bayu Krisnamurthi all noted the review of Indonesia’s policy and said the transfer to the Ministry of Trade of responsibility for issuing permits after June would improve the situation, though the transition might present difficulties in the short term. It remains unclear why the decision to shift responsibility has been made, and whether the Ministry of Agriculture will ultimately be obliged to cede power over allocation of permits on quotas. The transfer is highly unlikely to end the practice of determining quotas on beef and live cattle, with the political imperative of national self-sufficiency taking precedence over the logic of securing supply to meet market demand.

(Bolding omitted.)

176 As will be seen below, regulations made in September 2011 brought about changes in Indonesia’s quota and permit system as had been foreshadowed by Ministers Mari Pangestu and Hatta Rajasa.

177 On 3 May 2011, Minister Suswono issued a “Circular Letter” to all Indonesian Governors and Regents/Mayors on “2011 Beef Cattle, Dairy Cattle and Buffalo Data Collection (PSPK2011) using a National Census Method”: CBD636 at 33403. It contemplated that the cattle census would be carried out throughout Indonesia’s 33 provinces from 1 to 30 June 2011: at 33404. Dr Krisnamurthi agreed in cross-examination that the census covered more than 7,000 villages, more than six million households and employed 100,000 people: T279.30–37. Field data collection for the agricultural census began on 1 June 2011 as planned: CBD413.1 at 21002.

178 DFAT Cable JA59724H was sent on 11 May 2011, titled “Indonesian beef trade - increase in annual trade quota but problems likely to remain”: CBD639. It included the following summary:

Indonesia has recognised demand for beef is high and has announced a small increase in the allowable quota for boxed beef this year. However, regulatory interventions and administration of the quota system for beef will likely cause continued difficulties for trade in the near term. Containers of beef detained at port for the past three months have been re-exported, mainly to third country markets.

179 The cable noted that the increase in boxed beef quota “brought an angry reaction from local beef producers who claim beef and live cattle imports are suppressing market prices”: CBD639 at 33417 [2]. The cable also included (at 33417–8):

3. Minister for Agriculture, Suswono, has indicated the following in remarks to the press:

*     The quota for boxed beef will increase from 67,000 tonnes to 72,000 tonnes. Previously, Suswono had publicly declared that the 50,000 tonnes of beef quota would be augmented by an additional 17,000 tonnes of beef quota held in reserve for the peak demand period following Ramadan and released depending upon supply and price signals. Hence, the effective previous quota is 67,000 tonnes - a number consistent with the government’s published self-sufficiency blueprint. Hence, actual net quota increase appears to be only 5,000 tonnes.

*     Minister Suswono said the beef self sufficiency plan is still on-track with contributions from imports this year expected to fill 25 per cent of consumption demand, down from 30 per cent last year. Consumption demand is estimated to be 424,000 tonnes, to be met by approximately 316,000 tonnes from local supply, 120,000 tonnes from live cattle imports and 60,000 tonnes from imported boxed beef. Interestingly, 120,000 tonnes from live cattle imports equates to 665,000 head according to the Agriculture Ministry’s own calculations, yet actual live cattle quota for this year is currently set at 500,000 head. This may signal the possibility of increasing the live cattle quota.

180 The cable also referred to the regulatory changes then in contemplation (consistently with the Blueprint) (CBD639 at 33418):

Changes to import permit arrangements and beef import trade review

5. Michael Mugliston and members of the IA-CEPA pre-negotiation delegation, including DAFF and Austrade, met with Vice Minister for Agriculture Bayu Krisnamurthi and Herry Soetanto, Head of Trade Policy Analysis and Development, on 20 April …

7. Krisnamurthi acknowledged that the Trade Ministry would have a hand in import permit issue. However, he was dismissive of queries about who we should consult with in Trade regarding regulation of import permits and quota. We understand that the functional role for the Ministry of Agriculture will be a technical recommendation role, while Ministry of Trade will take over issue of import permits. However, roles and responsibilities are not settled between the Ministries (see reftel JA59664H on the Trade Ministers’ Meeting and Hatta Rajasa’s comments) and last week the Ministry of Finance convened a meeting to develop a letter of arrangement to settle this issue. Prabowo told us (Wallner) that the new permitting arrangements would also apply to live cattle as well as boxed beef.

181 The cable noted that trade volumes were reduced to about half of the total volume compared to the year before (CBD639 at 33419):

Market information

11. Year to date trade volumes are significantly reduced to about half of the total volume compared to last year for the same period. Recent weekly exports from Australia were under 350 tonnes per week. This compares to an average of about 1300 tonnes per week for last year. This severe reduction in volume is a function of quota shortage. Independent monitoring of wet markets in Jakarta indicates very little boxed beef being imported, with demand being filled through increased abattoir output of local and Australian feedlot cattle. Prices for some imported cuts are rising, although price rises appear gradual over the past few months.

182 On Monday 30 May 2011 at about 8.30 pm, the ABC broadcast “A Bloody Business” on its Four Corners program on national television: LJ[110]. Rares J described the Four Corners program as having caused an immediate public furore and as presenting the Australian Government and Minister Ludwig with a major political crisis: LJ[114].

183 The events immediately after the Four Corner program aired are the subject of detailed analysis in the Liability Judgment and do not require repetition. What follows focusses on matters of particular relevance to the separate question.

184 On 2 June 2011, Minister Ludwig made the First Control Order which prohibited the export of live animals to 12 named facilities in Indonesia: LJ[126]. Also on 2 June 2011, the Secretary made the First AMLI Order: LJ[128]. The First Control Order came into force on 3 June 2011.

185 On 5 June 2011, Jakarta sent a cable which emphasised that “senior Indonesian Government officials … would appreciate some direct, official communication on the welfare issue and on Austral’s stance and response”: CBD727 at 33886 [6]. The cable continued (at 33886 [6]):

Ideally this would be a direct communication in the form of a letter from Senator Ludwig to Minister Suswono, or it could be a formal message from the Ambassador, cleared by DAFF, and ideally this communication would be in advance of action by post, including officers observing the unloading of cattle.

186 On 6 June 2011, Deputy Secretary Glyde of DAFF prepared a Cabinet-in-Confidence Minute to Minister Ludwig titled “Live Trade: Available Options” and marked urgent: CBD728. The minute included three attachments: two draft letters to the Prime Minister (prepared on 3 and 5 June 2011) and “Talking Points” (updated on 5 June 2011): at 33892, 33896, 33907. The Talking Points observed that “Indonesia has been supportive of our initial ban on the 12 abattoirs, but it is likely to react negatively to a more comprehensive ban”. The Talking Points included (at 33897–900):

The only options that will deliver the animal welfare outcomes are an outright ban, or a fully regulated system

* I have given consideration to the full range of regulatory options available.

* While there is legal scope to apply a number of arrangements that target individual facilities or exporters, the ability to ensure compliance limits our choices.

* Our point of compliance leverage is the issuing of export licences in Australia.

* A negative/banned list (like I have established) will mean constant revelation of new facilities of concern and ongoing criticism of the Government’s approach.

-    My ability to assure the Government, and the public, of compliance with these arrangements is negligible.

* A positive (approved) or a negative (banned) list requires a level of continual compliance monitoring and assessment (as we do in Australia).

-    The Government has no role or capacity to do this overseas.

-    And we are unlikely to be able to rely on assurances from other governments.

In the interim a pragmatic approach is to prohibit trade in live slaughter cattle to all bar a few countries.

…

The impacts will also adversely affect our trading partners

* Indonesia has been supportive of our initial ban on the 12 abattoirs, but it is likely to react negatively to a more comprehensive ban.

-    Australia is a significant supplier of live cattle to Indonesia

-    Indonesia will be able to source cattle from other suppliers, but there will almost certainly be shortages in the short term and an ensuing increase in beef prices in Indonesia during peak demand period (Ramadan is imminent).

-    We will have to rely on the broader and mature relationship that Australia has with Indonesia

-    Announcement of the approach will need careful handling (it would be best if I can advise the Indonesians personally, before it is announced) and we will need ongoing cooperation from Indonesia to reopen compliant supply chains as soon as practical.

-    If there is the possibility of assistance through the aid portfolio, then that should be explored, but I understand that there are other development priorities for Indonesia.

187 A part of Brett Cattle’s case was that the Second Control Order came as a “shock” to a number of Indonesian Ministers whose opinions were relevant to Indonesia’s response to the Second Control Order: ACS[15(h)]. In support of this contention, Brett Cattle sought to establish that Minister Suswono did not expect that Australia would introduce a total ban.

188 Mr Adiwoso gave evidence that he was involved in a meeting with Minister Suswono on 6 June 2011, at which Minister Suswono conveyed to Mr Adiwoso that he had spoken to Minister Ludwig and that there was no risk of a total ban (“it was going to be okay”): T166.36–7; T172.17–25. The Commonwealth objected to this evidence on the basis it was hearsay. I allow the evidence, it being relevant for various purposes.

189 In any event, quite apart from Mr Adiwoso’s evidence, it is to be inferred from the contemporaneous documents that Minister Suswono was surprised or “shocked” by the total ban when the Second Control Order was made. It is also to be inferred that, on 6 June 2011, Minister Suswono did not consider that there would be a total ban. Further, given the context of the meeting on 6 June 2011, it is likely that Minister Suswono conveyed to Mr Adiwoso that he did not consider that a total ban would be made.

The Position Immediately before the Second Control Order

190 In summary, from 2003 to 2005 there had been a downward trend in live cattle exports to Indonesia. From 2005 to 2009, there was an upward trend, peaking in 2009. This upward trend was deliberately interrupted by actions taken by the Indonesian Government from early 2010 to reduce imports by number (from January 2010) and by weight (from March 2010) and to increase domestic production: CBD162 at 3452; CBD166 at 3469.

191 The level of imports in 2009 had been seen to have “harmed local cattle farming businesses”: CBD410.1 at 17436. It was “fundamental to ensure that selling prices do not decrease”, because the objective was to increase farmers’ income and Farmer Terms of Trade and, thereby, farmer welfare: CBD412.1 at 20649–50, 20690, 20693, 20696, 20699. The deliberate reduction in imports was motivated by several often inter-related considerations apart from increasing the welfare and income of farmers (through beef prices), including food security, increasing Indonesia’s foreign exchange earnings and reducing reliance on Australia. The strategies and actions in the Blueprint, Guide and 2010 Strategic Plan were being pursued at all levels of government and nothing in the evidence suggested that the 2014 BSSP would not continue.

192 Indonesia began reducing the number of cattle imported from January 2010 and began enforcing a 350kg weight restriction from March 2010: CBD162 at 3452; CBD166 at 3469. Live cattle exports had reduced by 31.4% by number in 2010 compared to 2009. When the weight restriction is also taken into account, the decline in live cattle exports between 2009 and 2010 must be more than 31.4%. The decline in exports continued in the first five full months of 2011, before the Second Control Order was made on 7 June 2011. From 1 January 2011 to 31 May 2011, exports to Indonesia totalled 203,505 cattle: CBG38. In the same period in 2010, exports totalled 249,166: CBG38. The difference in exports in the first five months of 2010 and 2011 represents a decline of 18.3% from the number of exports in 2010 (which itself had declined from 2009): CBG38.

193 The decline between 2009 and 2010, and the further decline in the first five months of 2011 compared to the same period in 2010, were consistent with Indonesia’s earnest pursuit of its 2014 BSSP. The low numbers of exports in 2010, and in the first five months of 2011, were necessarily unaffected by the Second Control Order which had not yet occurred. If exports had continued throughout 2011 at the same (monthly) average rate as the first five months of 2011, exports would have totalled 488,412.

The Second Control Order

194 On 7 June 2011 at 12 pm, Australia’s Ambassador to Indonesia met with the Indonesian Vice Minister of Agriculture, Dr Krisnamurthi: CBD298. This meeting occurred after either the Ambassador had been told that the Second Control Order would be made or the relevant documents were signed, but in any case before Minister Ludwig’s telephone call to Minister Suswono at 5 pm on 7 June 2011. At 1.49 pm on 7 June 2011, Deputy Secretary Glyde sent an email in relation to the visit: CBD298. The email included (at 9058):

The Ambassador (Greg Moriarty) and Bruce Wallner rang to report on the outcomes of the meeting with Bayu [Krisnamurthi] (Conall’s equivalent) at 12 00pm Canberra time.

Bottom line is that the cessation of exports will be out in the marketplace very soon and that we have to be careful with our messaging re working with the Indonesian [G]overnment and in the type of standards we are seeking to accredit.

Main messages:

Positives:

* Indonesians said they would do their best to keep the issues from the press (Greg said we could expect 2 hours max) and would be informing Suswono

* Indonesians very keen to be seen that both governments are working together to solve this issue and would like “common lines” to be used by both governments

◦    Greg read out to me the text (based on the talking points and now attached) that they have shared with the Indonesians. Bayu supports the language in principle and Greg was hopeful that the Indonesians wouldn’t alter the text too much

◦    Only caution will be Suswono’s reaction

* Indonesians very committed to working together quickly to get abattoirs accredited; Bayu wants Australian officials on the ground within the next 10 days;

Negatives

* Bayu expects Australia and Suswono will be hammered by the Indonesian press

* Expressed great concern that this action was singling out Indonesia (they said that Australia has similar problems in other export markets); any ongoing singling out would be viewed very badly

◦    I reminded Greg of the supply chain review and that we are examining all markets

* Very touchy about Australia impinging on their sovereignty by demanding our own welfare standards

◦    Greg said that Australia was contemplating the use of international standards

(Emphasis added.)

195 Cable JA59830H was sent from Jakarta at 6.53 pm on 7 June 2011 and also addressed the meeting with Dr Krisnamurthi earlier that day: CBD299. It stated that the Australian Ambassador and others had met Dr Krisnamurthi to advise of the decision to suspend the export of live cattle until a regulatory framework for trade was established: at 9060. The Australian Government wanted to work with Indonesia to make improvements and looked forward to working with the Indonesian Government to raise standards for the longer-term viability of the trade: at 9060 [2].

196 The cable recorded that Foreign Minister Rudd had met Foreign Minister Natalegawa in Budapest and they had spoken briefly about the issue: at 9060 [3]. Minister Ludwig would seek to speak directly with Minister Suswono about the issue and Trade Minister Emerson would also be seeking to speak directly with Trade Minister Pangestu (which he did: CBD304). Dr Krisnamurthi said that Foreign Minister Natalegawa had advised the President and a small number of ministers of his discussion with Mr Rudd and Dr Krisnamurthi had been copied into the communication by text message: CBD299 at 9061 [4]. The Cable included (at 9061–3):

4 … Krisnamurthi said he would speak plainly, as usual. He said until last night (6 June) he and Minister Suswono, as well as other colleagues, had seen this matter as largely an internal matter for Australia. He was aware that there were problems in animal welfare, but these were not exclusive to Indonesia … Following the Australian Government’s decision to implement a ban, this matter had ceased to be merely an internal problem for Australia and would now have an impact on Indonesia. Until this time the Indonesian Government had tried to restrain itself and not talk to the public. Indonesia wanted Australia and Indonesia to see each other as partners and not just as trading partners. Indonesia was not just a market, but was a partner, a neighbour and a friend. It needed to be treated as such.

5. … We assured Krisnamurthi that we would seek to work cooperatively to help Indonesia meet international standards. Indonesia was an important partner and friend, and we understood Indonesia’s domestic sensitivities. We should work together on this matter in the spirit of that strong partnership.

6. Krisnamurthi said he wanted to make several points. First, Indonesia depended to some extent on Australia for its food and food security needs. Indonesia sourced around 40 percent of its meat needs from Australia: that was how much Indonesia trusted Australia …

8. Krisnamurthi said that, before last night, Indonesia had hoped a solution could be reached without harming the live cattle trade, notably as the peak demand period of Ramadan was less than one month away, followed by ld Ul Fitr …

11. Krisnamurthi said he was likely to be approached by the media in the coming hours. We said we were keen to agree on points for the media for use by both sides to suggest that we were cooperating closely to resolve this difficulty. After the meeting we met with some of Bayu’s key staff and drafted lines which have been provided to Canberra (see emails Lawson/Barton).

Comment

12. While clearly irritated at Australia’s decision to suspend the trade, Krisnamurthi responded to our points professionally and with an eye to the future. He implied at several points that attitudes at the political level were less conciliatory. Krisnamurthi and Indonesia clearly want quick action to have some abattoirs recognised as meeting the appropriate standards and then, in their view, be eligible to receive Australian cattle.

197 At 5 pm on 7 June 2011, Minister Ludwig telephoned Minister Suswono to advise him that the Australian Government would temporarily suspend exports of live slaughter cattle to Indonesia effective from 8 June 2011: LJ[208], [389]; CBD186 at 3818 [5]; CBD316 at 9118.

198 There was no consultation with Minister Suswono about the suspension before that telephone call: LJ[389]. The Second Control Order was registered on the Register of Legislative Instruments at 9.30 pm on 7 June 2011: LJ[204].

Indonesia’s Immediate Reaction to the Second Control Order

199 A series of diplomatic cables and other contemporaneous communications cast light on the Indonesian reaction to the Second Control Order.

200 Cable RG15093H was sent on 7 June 2011: CBD186. It noted that “[i]n an effort to achieve animal welfare standards that meet Australian community expectations and to give the live export trade a sustainable future, the Australian Government has temporarily suspend[ed] exports of live slaughter cattle to Indonesia effective from 8 June 2011 [sic: on registration at 9.30 pm on 7 June 2011]”: at 3818. It recognised that “[t]he suspension of trade will seriously impact on the supply of cattle to the Indonesian market, to which Australia supplies 100 per cent of live cattle imports”: at 3818. It recorded (at 3818):

Indonesian officials have previously raised concerns that a shortage of meat during the upcoming Eid ul Adha religious festival could inflame the situation. Accordingly, we anticipate Indonesia may respond negatively to the announcement, with potential for an unqualified reciprocation of trade suspensions for Australian agricultural exports. There is also potential for Australia’s decision to impact on the broader bilateral relationship.

201 Minister Ludwig made an announcement on 8 June 2011, which confirmed that, while the order implementing the interim suspension was valid for six months, the Australian Government had been clear that it was committed to working with the Indonesian Government to re-open the Indonesian market for Australian exporters as soon as possible: CBD316 at 9136.

202 Emails between officers of DFAT and the Office of the Prime Minister and others reveal concern that senior Indonesian politicians might react negatively to the announcement of the total ban – see, for example: CBD304; CBD305.

203 DFAT Cable JA708458L was sent at 9.13 pm on 8 June 2011: CBD301. It noted that the “suspension of live cattle exports to Indonesia continues to dominate Australia-Indonesia related news but has not yet received high local media attention overall”: at 9068. It included (at 9068):

2. Most of the media reporting has been balanced, thanks mainly to constructive comments by several Indonesian Ministers. Trade Minister Mari Pangestu has been reported widely stressing to journalists that this action represented a “temporary suspension” and that Australia’s action identified weaknesses in animal welfare practices in Indonesia, an area which the Indonesian Government wanted to improve upon … The renowned Tempo magazine’s online news reported Agriculture Minister Suswono saying he respected Australia’s decision. According to Suswono, the Australian Government came under pressure from an NGO and, as a result, both Australia and Indonesia will verify these claims together.

3. Less helpfully, Vice Minister for Agriculture Bayu Krisnamurthi told several media outlets, including Australian journalists, that Indonesia was concerned that the suspension was “unilateral” and has raised the prospect of a claim of “discrimination”. He said the suspension should be based on animal welfare, not “bilateral trade politics”. Bayu added that if there was evidence that the decision was related to a “trade war”, the Indonesian Government would bring the issue to the World Trade Organisation. Coordinating Minister for Economic Affairs, Hatta Rajasa, told TV reporters that the suspension was an opportunity for Indonesia to become more self-sufficient.

204 DFAT Cable JA59838H was sent at 9.47 pm on 8 June 2011: CBD780. It confirmed that Indonesian versions of Minister Ludwig’s statement had been provided to a number of senior Indonesian politicians. It included (at 34198, 34200):

3. [Redacted] told us (Dunstone) that the Ministry of Trade felt marginalised in Indonesia’s domestic response to the suspension of the live cattle trade with Australia. Although Trade Minister Pangestu had already made some initial public comments in regards to the suspension, the Ministry was trying to figure out whether, and how, to wade into the public debate. Ministry officials were considering their communication options. This was a change of internal dialogue from a week ago, when Ministry officials were circulating conspiracy theories that the partial suspension of trade (at that point, only a handful of abattoirs) was a ploy by Australia to take a greater share of the boxed beef trade. [Redacted] view was that Ministry officials now understood the seriousness of this issue.

4. A source in Parliamentary Commission IV (Agriculture) told us (Muir) that the commission was prepared to work with Australia, recognising Indonesia’s dependence on Australia for meat, but said Indonesia would also be looking to other sources of supply. A day previously he had told us, after a commission meeting, that the parliamentary reaction was likely to be bad for Australia. A number of other sources have said Indonesia will look to other sources of supply.

…

Comment

…

11. The Ministry of Trade continues to take a constructive tone, possibly to quell concerns about price rises. Trade Minister’s Pangestu has publicly stated that this issue should not affect broader cooperation, including negotiation towards an Indonesia-Australia Comprehensive Economic Partnership Agreement. We think it may take some weeks before the full political impact of the suspension can be ascertained.

205 DFAT cable JA59841H was sent on 9 June 2011: CBD785. It included (at 34223–5):

On 9 June we (HOM) advised Cabinet Secretary Dipo Alam of latest developments in the suspension of live cattle trade to Indonesia in line with talking points. We said the issue may take some time to resolve and that expectations that approval would be given to recommence some of the trade in ten days were unrealistic …

2. Alam said the Indonesian Government had partially prepared for the outcome as a result of the meeting between Mr Rudd and Foreign Minister Marty Natalegawa in Budapest. Alam said the Government understood Indonesia’s livestock system was flawed and expressed interest in any proposals for technical assistance to improve standards. Alam agreed it was important the issue did not spill over into the broader bilateral relationship. We advised Alam on the plan for Deputy Secretary Glyde to come to Jakarta in addition to the team of officials and experts. Alam welcomed the visit and said the key was for the visit to take place as quickly as possible - effective handling of this matter, for the time being, required speedy action.

…

8. Comments by the Indonesian Ministers and Government officials in Indonesian press on 9 June, including by Agriculture Minister Suswono, Trade Minister Pangestu and Coordinating Minister for Economic Affairs, Hatta Rajasa, have focused on reassuring the public that existing beef supplies will be adequate in the lead-up to Ramadan. While noting that Indonesia will look at other sources of supply, Agriculture Minister Suswono gave public assurances that exports of frozen beef from Australia would continue. Trade Minister Mari Pangestu and Coordinating Minister for Economic Affairs, Hatta Rajasa, both emphasised the importance of bilateral relations between Indonesian and Australia. Director General for Livestock at the Ministry of Agriculture, Prabowo Respatiyo Caturroso, was reported in the Jakarta Globe online as saying “we have to respect the Australian Government’s decision to stop its live cattle exports to Indonesia”, saying also that there was “no plan to increase quote for frozen beef” …

Comment

9. The current focus of the Indonesian Government is managing the domestic political dynamics and messaging to the public. While publicly talking about diversifying source of supply, the government is aware that its options are limited. The clear message to us is that an early visit by senior officials and experts from Australia will be important in managing these domestic dynamics, as well as in minimising the impact on the bilateral relationship.

Oral Evidence concerning the Reaction to the Second Control Order

206 Mr Adiwoso gave evidence of a meeting he had with Dr Krisnamurthi shortly after the Second Control Order was made: T173.28–31. His evidence was that he recalled Dr Krisnamurthi saying: “we cannot trust – we cannot rely wholly on Australia”. Mr Adiwoso also gave evidence that he had a conversation with Minister Suswono in which Minister Suswono said: “We cannot trust any more on, to rely solely on Australia”: T173.46. The meetings to which Mr Adiwoso referred occurred on either 7 or 8 June 2011: T173.12–6. Brett Cattle submitted that this evidence demonstrated that, after the Second Control Order, Dr Krisnamurthi and Minister Suswono “believed that the Indonesian Government could no longer rely on Australia as the sole source of imported live cattle”: ACS[65]. The Commonwealth objected to the evidence on the basis it was hearsay. Brett Cattle submitted Mr Adiwoso’s evidence was not hearsay and that, if it was, then s 66A of the Evidence Act 1995 (Cth) applied: T771–2 and MFI 23.

207 Even if the evidence is inadmissible to prove the belief of Minister Suswono and Dr Krisnamurthi, it is to be inferred from the contemporaneous documentary evidence that the Second Control order (1) surprised Dr Krisnamurthi and Minister Suswono when it was made; (2) affected each of their thinking as to what Australia might do in the future; and (3) would naturally have shaken their trust in Australia to provide uninterrupted supply, whether justified or not. A cable written on 7 July 2011 reported (CBD335 at 9323 [3]):

Vice Minister for Agriculture, Bayu Krisnamurthi, said the suspension had been a useful experience for Indonesia as it had become better aware that relying too much on the international market was risky for the country’s food security.

208 Dr Krisnamurthi gave evidence that the Second Control Order came as a shock to him and there is no reason to doubt that evidence: T222.1–18. His evidence, on which Brett Cattle placed particular emphasis, was (at T222.1–18):

MR WITHERS: Okay. And what was your reaction to that?

DR KRISNAMURTHI: Surprise, shock, and of course, yes, to some extent, I disbelieve that this is how our friends could do that to us, and especially at that time of year, that I think the Indonesian [G]overnment were very keen to maintain the stability of food availability, and – and especially – including for the red meat for – for – for cattle meat.

WITHERS: Yes. You mentioned at that time of year, what was the significance of the time of year?

DR KRISNAMURTHI: I think that’s on June, and I’m not sure, but probably on August, or near, that is Ramadan, and for Indonesia, Ramadan and Eid al-Fitr is very important to maintain the availability of food stock, and to maintain the – the price stability of food, and that’s again come to as a surprise, as a shock, because I think our friends in Australia know that we – every Ramadan, we have to make sure that there is a stable supply of food, including – even specially sometimes especially red meat.

209 Whilst no adverse inference is to be drawn in the circumstances, the fact is that there was no attempt to adduce and therefore no evidence from Dr Krisnamurthi about whether and why his reaction would have been different in the hypothetical scenario that, instead of the Second Control Order, an Exceptions Order had been made.

210 Dr Krisnamurthi also gave short and sometimes imprecise evidence of discussions with the Minister of Trade, the Minister of Finance and the Minister of Industry – see: MFI 23 [12]–[15]. He gave evidence about cabinet meetings and what was said by the President – see: MFI 23 at [16]–[18].

211 The Commonwealth objected to a number of aspects of the oral evidence of Mr Adisowo and Dr Krisnamurthi: MFI 23. One aspect of the evidence was the subject of an agreed limitation. I have ultimately concluded that none of the evidence objected to should be rejected (including the evidence at [206] above), the evidence being relevant to various factual issues and inferences to be drawn.

212 It is sufficient to state the following conclusions, drawn from a combination of the oral evidence and the contemporaneous documents. Mr Adiwoso met with Minister Suswono on 7 or 8 June 2011: MFI 23 at [4], [6], [7] and [8]. One matter which was discussed was Indonesia’s food security and the impact of the Second Control Order on food security. Mr Adiwoso stated that Minister Suswono was “expediting” the cattle census. That may well be the case, but the speed with which the cattle census was being pursued was unrelated to the Second Control Order. As mentioned above, Memorandums of Understanding for the cattle census had been entered into earlier and the month-long census had already commenced when the Second Control Order was made. The census had long been considered important to the success of the 2014 BSSP. Minister Suswono is likely to have stated that his desire was to rely on local cattle as Mr Adiwoso stated. Mr Adiwoso stated that Minister Suswono said he wanted “to remap supply – the supply of cattle, the industry itself”. The contemporaneous documents indicated that one of the issues that needed to be addressed was the movement of domestic cattle in the context of supply to markets. Mr Adiwoso’s evidence was generally consistent with the contemporaneous documents and what one would expect.

213 Di Krisnamurthi attended various meetings with other Ministers, with cabinet and with the President. It is clear from the contemporaneous documents, and consistent with what one would expect to happen in the circumstances which prevailed, that immediately after the Second Control Order was made, and in the weeks thereafter, the President and Ministers were concerned about the Second Control Order and the impact it would have on supply.

214 The Second Control Order had a duration of six months and, although it would have been realised relatively quickly by the Indonesian Government that the Second Control Order was unlikely to last six months, such an outcome remained possible until it was repealed. The Ministers sought to co-ordinate a response and their discussions in this respect included discussions about obtaining supply of beef from countries other than Australia. It is likely that discussions covered the 2014 BSSP and the fact that the program involved reducing dependency on international supplies of beef and increasing domestic production. The President, and others, were concerned to make sure that there was adequate supply, particularly for Ramadan. It was soon established that there were adequate supplies for Ramadan because of the numbers of cattle then being fattened in Indonesian feedlots. Concern would naturally have shifted to supply for the post-Ramadan period.

215 Mr Adiwoso, together with APFINDO’s Advisory Board and Executive Director, met with the Director General of Livestock and Minister Suswono about a month (T175.7) after the Second Control Order had been lifted: MFI 23 at [9], [10] and [11]. Minister Suswono is said to have stated that “we” could not rely 100% on Australia and needed to find other sources of beef. This is likely to have been said.

216 There is no question that the Indonesian Government explored importing live cattle from sources other than Australia: CBD803 at 34341 [9] (16 June 2011); CBD319 at 9225 [5] (23 June 2011); CBD323 at 9241 (24 June 2011); CBD324 (27 June 2011). That proposal was broadly considered, including by Commission IV (CBD820 at 34432 [11]), Minister Suswono (CBD316 at 9110; CBD321 at 9235) and the Indonesian parliament: CBD824 (23 June 2011).

217 As has been noted above, exploring the question of whether cattle could be sourced from countries other than Australia was mentioned in the Blueprint. The Second Control Order caused that possibility to be considered, and considered more intently, in the period immediately after the Second Control Order. An Exception Order is likely to have had no materially different effect. In any event, Brett Cattle’s case centres on the setting and enforcement of quotas, not the consideration of sourcing cattle from other countries, which could not have contributed to a reduction in cattle imports because it never eventuated.

Events from 12 June 2011 until Repeal of the Second Control Order

218 Minister Ludwig wrote a letter to Minister Suswono dated 12 June 2011, copied to the Minister for Trade, Dr Mari Pangestu: CBD781.1. This letter was hand delivered to Vice Minister Krisnamurthi and others by Deputy Secretary Glyde when he visited Indonesia on 12 and 13 June 2011, Minister Suswono having been unavailable to meet with Deputy Secretary Glyde: CBD316 at 9118. The letter stated (at 9126–7):

I am writing further to our phone call of 7 June 2011, to let you know of the Australian Government’s actions in response to issues of animal welfare relating to Australian cattle at a number of Indonesian abattoirs.

As you will be aware, there has been close consultation between our officials in Canberra and in Jakarta in the last week or so. I have asked that this close contact continue and be intensified.

I recognise that the Indonesian Government introduced regulations on animal welfare in 2009 and understand that it will take time to achieve their uniform implementation and compliance. However, I hope you will understand that the Australian Government needs to take action in response to the animal mistreatment which has recently been revealed. Therefore, until we are confident that acceptable animal welfare standards can be guaranteed, we have determined that the most appropriate course of action is to suspend exports of Australian livestock for slaughter to Indonesia. The suspension does not apply to the export of breeding cattle (which includes dairy cattle).

I recognise that this suspension will have an impact in Australia and Indonesia both at the commercial and consumer levels, and assure you I do not take this decision lightly. Indonesia is Australia’s largest market for live cattle, particularly from northern Australia, and Australia has been a longstanding and reliable supplier for this mutually beneficial trade. However, the Australian Government is committed to ensuring acceptable animal welfare standards are met.

The Government has carefully considered all options for addressing animal welfare concerns for cattle exported for slaughter and will develop a system that requires absolute supply chain assurance from exporters for every consignment. While we will work as quickly as possible to develop such a system, it may take some time to do so.

I am still working through the details of the system that is to be established …

I would like to assure you that the Australian Government is not singling out Indonesia …

The agreement by our governments to cooperate in developing a longer-term plan will help us to achieve the best possible outcome for animal welfare, our industries and the important relationship our countries share.

219 In the liability judgment at [218], Rares J stated:

Between 12 and 13 June 2011, Mr Glyde visited Indonesia and met with Vice-Minister for Agriculture, Bayu Krisnamurthi, who told Mr Glyde that the Indonesian public might think it unfair that trade to their country had been suspended pending a review, while for all other markets the review would occur before any decisions to suspend trade. Mr Glyde was informed on the visit by all the senior officials with whom he met that the Indonesian Government, including the President, had concerns about the effects of the Second Control Order on domestic supply and prices, especially with the approach of the month long Ramadan period.

220 DFAT Cable JA59856H was sent from Jakarta at 9.38 pm on 14 June 2011: CBD798. It included (at 34324):

On 14 June the Australian and Indonesian technical teams attended a briefing at the Ministry of Agriculture with Agriculture Minister Suswono. Suswono said he had been surprised by Australia’s “knee-jerk reaction”, including the decision to send a technical team to Indonesia (we note that Vice Minister Krisnamurthi - who had asked for quick action by the technical team - was not present at the meeting.) Suswono said that President Yudhoyono had seen the Four Corners footage. He had been shocked and ordered an investigation into practices in Indonesian abattoirs.

(Brett Cattle’s emphasis.)

221 On 14 June 2011, Minister Emerson’s adviser sent an email requesting a “quick brief” in relation to Indonesia’s beef supplies, setting out specific questions: CBD799. On 14 June 2011 an email responded to the request: at 34326. This included (at 34326):

* Is it possible for Indonesia to increase imports of boxed beef supplies? I understand they work on a quota system and was wanting to know whether or not this quota could (or would likely) be increased?

Indonesia is unlikely to increase the quote [sic] of boxed beef imports, particularly from Australia. The Ministry of Agriculture has said publicly it will not increase the quota. And Indonesia will not want to reward our suspension of the trade with increased quota, and could potentially come under criticism for doing so, including from the parliament (ref earlier conspiracy theories that Australia’s ban was a tactical bid to increase boxed beef imports). Most recent advice to us from industry and government is that quota will not increase beyond the current 72,000 tonnes quota.

* What is the current assessment as to whether or not Indonesia will have sufficient beef supplies to meet its Ramadan/post-R

The Indonesia[n] Government claims it has enough, based on estimates on cattle in feedlots and boxed beef imports. About 150,000 head in feedlots now. It may depend to a large extent on whether feedlotters hold onto cattle until closer to Ramadan, which is what they will want to do. View from industry is that post-Ramadan is the greater concern, when supplies will be running low and even if supply chains are opened, the cattle will take some time to fatten up (depending also how long the gap is before cattle start coming in again).

(Original italics and underlining; Brett Cattle’s emphasis in bold.)

222 Brett Cattle emphasised the passages in bold in the quote above, submitting that these supported the view that the Indonesian Government: (1) considered that the Second Control Order threatened Indonesia’s food security; and (2) strictly enforced quotas after the Second Control Order.

223 As to the first submission, it may be accepted that Indonesia was concerned about there being sufficient supply of beef, particularly post-Ramadan. The documentary evidence makes it clear that there was sufficient supply of beef for the Ramadan period – see, for example: CBD803 at 34340 [7]. It is also clear from the evidence referred to earlier that Indonesia wanted live cattle trade to reopen as quickly as possible. This is made clear by subsequent events, including the import permits issued immediately after the ban was lifted.

224 As to the second submission, a difficulty is that Indonesia issued 352,500 import permits for live cattle in 2011 after the Second Control Order was repealed. The observation in the extract about not increasing the quota is an observation concerned with the boxed beef quota, not the live cattle quota. As the extract shows, Indonesia considered (or considered it useful to state) that the live export ban might be a ploy by Australia to increase boxed beef exports. The observation is not probative of Indonesia’s enforcement of live cattle quotas in 2012 and 2013.

225 On 16 June 2011, Minister Emerson spoke with Minister Pangestu, summarised in a DFAT “Record of Conversation”: CBD803. The “main subject” was the “principles for future trade in cattle to Indonesia, and domestic response to suspension in Indonesia”: at 31339. Dr Emerson emphasised that the Australian Government was committed to reopening the live cattle trade to Indonesia: at 31339. He outlined the key principles under consideration to reopen the trade with Indonesia and emphasised that Australia was seeking to regulate Australian exports, not to regulate in Indonesia, nor accredit facilities in Indonesia and that these principles would apply to all markets, not just Indonesia: at 31339. Australia invited any feedback on the principles and sought views on taking the process forward: at 31339. Dr Emerson noted the possibility of Senator Ludwig visiting Jakarta in the near future: at 31339. The record included (at 34340):

5. On Indonesia’s own domestic regulatory arrangements, Dr Pangestu said there continued to be a link between the Ministries of Trade and Agriculture. There was likely to be a review of the regulations covering the importation of cattle and other livestock - the Coordinating Ministry for the Economy would be the lead. In time the Ministry of Trade would issue import licences, but for the time being this stayed with the Ministry of Agriculture …

8. On the interim suspension notice, Dr Emerson noted it was for six months but said the intention was to resume trade more quickly than that. There was no obligation to suspend trade for this entire period. Dr Pangestu said she had been very careful in her public comments to refer to a ‘suspension’ rather than a ‘ban’. Others in Indonesian were not being so careful with their words. There were some strong anti-Australian sentiments, with some asking why Indonesia should be so dependent upon Australia.

(Underlining omitted.)

226 The record also noted that Dr Pangestu had stated that there was a “push to revise the importation laws” and noted that a previous attempt to make amendments had been unsuccessful (CBD803 at 34341 [9]):

9. There was a push to revise the importation laws. Dr Pangestu explained that they had introduced a new law to allow the importation of beef from countries with disease zoning. The old law had required an importing country to be totally free of disease (foot and mouth) but the amendments had allowed for the importation from disease-free zones. The amendments had been challenged in the Constitutional Court so Indonesia was currently operating under the old laws. There were some in Indonesia suggesting the court challenge had taken place after lobbying from Australia. This was an example of the domestic sentiments at play. The government may now need to re-lobby for the regional zoning amendments. She understood the only totally disease-free markets (other than Australia) were the US, Canada and Mexico. Brazil and Argentina were not disease-free but had disease-free zones.

227 Brett Cattle emphasised the observation that there were “some strong anti-Australian sentiments” and that there “was a push to revise the importation laws”: MFI 24 at 12. There is no doubt that there were anti-Australian sentiments amongst some at the time. It is also clear, as has been mentioned, that members of the Indonesian Government were exploring the possibility of revising importation laws to facilitate importing live cattle from countries other than Australia: CBD803 at 34341 [9] (16 June 2011).

228 Minister Ludwig visited Indonesia from 19 to 21 June 2011: LJ[223]. The DAFF provided Minister Ludwig with a detailed briefing pack for his visit: CBD316. It commenced with a “Visit Overview” which included (at 9108–9):

Suspension of live cattle trade

…

Your visit to Indonesia provides an opportunity to meet ministerial counterparts and personally reiterate Australia’s commitment to the bilateral relationship with this key trading and strategic partner. The key objective of your visit is to outline Australia’s proposed principles for the resumption of the live cattle trade to Indonesia and seek Indonesia’s agreement to these principles. Joint agreement on a way forward should assist in returning the mutually beneficial bilateral agricultural and trading relationship to its normally robust status. It will be important to stress that Australia is not seeking to impose standards on Indonesia; rather we are regulating our exporters. Your visit will also help in preventing any escalation of current agricultural trade issues, or implementation of new trade restrictions, that Indonesia’s protectionist Minister of Agriculture, Suswono, may consider in retaliation to the suspension.

…

Your meeting with Suswono will be particularly important. Suswono has been critical of Australia’s lack of consultation prior to implementing the suspension and publicly questioned Australia’s motivation, suggesting the suspension was a strategic tactic by Australia to increase exports of boxed beef to Indonesia … As the responsible minister, Suswono is the key person you must convince of the principles on which to resume trade.

…

General

…

Indonesian President Yudhoyono’s administration is aiming to attain self-sufficiency for five key agricultural commodities: rice, corn, sugar, beef and soy. To achieve this goal, Indonesia is actively seeking greater foreign investment in its agricultural sector (including from Australia) as well as increased capacity building initiatives. The live cattle trade suspension has led to renewed calls by some Indonesian ministers and parliamentarians to push for self-sufficiency in beef production by 2014.

(Brett Cattle’s emphasis.)

229 The “Visit Overview” then turned to more general trade issues, before setting out the “Indonesian response to Australia’s temporary suspension of livestock exports for slaughter”: CBD316 at 9110. This included (at 9110):

Indonesian response to Australia’s temporary suspension of livestock exports for slaughter

President Susilo Bambang Yudhoyono:

President Yudhoyono has made public comment on Australia’s decision to suspend the live cattle trade, ordering an investigation into animal cruelty at the Indonesian abattoirs identified in the four corners footage. However, President Yudhoyono continues to push for Indonesian self sufficiency in beef by 2014.

Agriculture Minister Suswono:

Minister Suswono continues to use the media to voice the view that the suspension of the live cattle trade is a strategic trade tactic by Australia and could affect the broader bilateral trade and economic relationship. However, while highlighting the possibility of severe inflationary impacts that a ban on live cattle may have, Minister Suswono has been careful to reassure the Indonesian population that there will be no significant impact from a live cattle shortage before and during the Ramadan religious period.

Minister Suswono has also indicated that Indonesia is exploring alternative live cattle suppliers, such as India, and would facilitate trade from non-Foot and Mouth Disease (FMD) free countries by changing its country-based system to a zone-based system. The possibility of such a move has been challenged by some senior Indonesian agriculture ministry officials. Minister Suswono has stated that the Indonesian [G]overnment has no plans to increase beef import quotas to meet consumer demand.

Vice Minister for Agriculture Bayu Krisnamurthi:

During meetings in Jakarta on 13 June 2011, Deputy Secretary Glyde indicated to Vice Minister Krisnamurthi that Australia was keen to work with Indonesia to restart the trade as soon as possible. Vice Minister Krisnamurthi has subsequently been reported in the Jakarta press as stating that the live cattle trade will resume in two to three weeks. Minister Krisnamurthi has also made a number of comments questioning the WTO consistency of the Australia’s suspension of the live cattle trade.

Trade Minister Mari Pangestu:

Historically a friend to Australia, Trade Minister Pangestu has publicly noted that Australia’s suspension of the live cattle trade is temporary and has reiterated Minister Suswono’s position that there will be no significant impact from a live cattle shortage before and during the Ramadan religious period.

Coordinating Minister for Economic Affairs Hatta Rajasa:

Coordinating Minister Rajasa has suggested that Australia’s suspension of the live cattle trade provides an important opportunity to improve animal welfare standards in Indonesia and to push ahead with Indonesia’s self-sufficiency aspirations.

Parliamentary Commission IV:

Parliamentary Commission IV, the body responsible for Agriculture in Indonesia’s House of Representatives, has echoed Minister Suswono’s view that the suspension of the live cattle trade is a strategic trade tactic by Australia and could affect the broader bilateral trade and economic relationship, also highlighting the possibility of severe inflationary impacts that a ban on live cattle may have. Commission IV representatives have also been quick to reassure the Indonesian population that there will be no significant impact from a live cattle shortage before and during the Ramadan religious period and to push Australia’s suspension of the live cattle trade as an opportunity for Indonesia to become self-sufficient in beef by 2014.

(Brett Cattle’s emphasis.)

230 In the “Handling Note” concerning the Vice Minister for Trade, Minister Mahendra Siregar, it was stated (CBD316 at 9112):

Siregar recently provided a frank assessment to Ambassador Moriarty of the political mood in Indonesia following Australia’s decision to suspend the trade in live exports. During this discussion, Siregar indicated that the Ministry for Trade was focused on re-starting the live trade as soon as possible, and was working hard to keep the focus on technical and trade issues. However, he suggested that the way the issue had been handled had done real damage to the bilateral relationship, referring to the fact that President Yudhoyono had taken the lack of consultation very personally.

Siregar also made the point that the Indonesian Ministry for Agriculture saw the suspension of trade as a retaliatory measure for recent difficulties in the boxed beef and live animal trades.

(Brett Cattle’s emphasis.)

231 The “talking points” for each of the “Handling Notes” for meetings emphasised that the “Australian Government is very committed to recommencing the trade in live animals to Indonesia” and that the “main priority, for both the Australian Government and industry, is to work cooperatively with Indonesia to ensure the trade is reopened as quickly as possible, with appropriate animal welfare standards in place”: CBD316 at 9113 (Minister Siregar), at 9120 (Minister Suswono), at 9129 (Minister Natalegawa).

232 In an attachment concerning boxed beef, Brett Cattle emphasised the following (CBD316 at 9181):

Indonesian ministers and parliamentarians have reassured the Indonesian public that the suspension of exports of live cattle from Australia will not impact on the supply of beef over the next few months, particularly before and during the Ramadan religious period (1–31 August 2011). Indonesia had previously advised trading partners and importers that the volume of boxed beef imports permitted in 2011 would be restricted to 50,000 tonnes. More recently, there had been indications from some Indonesian officials that the volume of boxed beef imports permitted for 2011 would likely increase to 72,000 tonnes.

Indonesian Agriculture Minister Suswono has stated that the Indonesian Government has no plans to increase beef import quotas as a result of the live cattle trade suspension. Prior to the suspension, Australia was actively seeking an increase in total tonnage and additional import permits.

233 In an attachment concerning the Australia-Indonesia bilateral agricultural relationship more generally, Brett Cattle also emphasised the following amongst the “key points” (CBD316 at 9189):

Australia’s normally strong relationship with Indonesia has become strained as a result of Australia’s suspension of live cattle exports to Indonesia on 8 June 2011.

234 DFAT Cable JA59891H was sent on 21 June 2011, reporting on Minister Ludwig’s meetings with the Minister for Agriculture (Minister Suswono), the Minister for Trade (Dr Pangestu), the Vice Minister for Trade (Mahendra Siregar) and members of Parliament’s Commission IV on Agriculture: CBD820. The cable made clear that, in his meeting with Minister Pangestu, Vice Minister Siregar and other officials, Minister Ludwig emphasised that Australia wanted to reopen trade as quickly as possible and find ways to work with Indonesia to overcome difficulties together: at 34430 [6]. Brett Cattle emphasised various aspects of this communication. In relation to the meeting with Minister Suswono, the cable stated (at 34429):

2. On his call with Minister Suswono, Senator Ludwig said Australians and Indonesians alike had been deeply distressed by the scenes of the Four Corners program. The action of the Australian Government to suspend the trade was taken due to animal welfare concerns. He said he deeply regretted the disruption to the Indonesian economy … Minister Suswono said he understood the reasons why Australia took its action to suspend the trade but noted Indonesia had already adopted OIE animal welfare standards. He said he was surprised by Australia’s sudden decision to suspend the trade without first verifying the footage and consulting the Indonesian Government. He said Indonesia had launched an investigation to see whether the film was a fabrication or not. Senator Ludwig pointed out that a number of Australia ministers, himself included, contacted their counterparts in Indonesia prior of the announcement of the decision to suspend the trade.

(Brett Cattle’s emphasis.)

235 In relation to Minister Pangestu and Vice Minister Siregar, the cable stated (CBD820 at 34431):

7. Minister Pangestu clearly understood that ensuring food security for Indonesia meant working to improve supply chains. She said Indonesia required certainty of supply … Ensuring traceability through supply chains would take time and infrastructure was needed … Minister Pangestu did not want unnecessary collateral damage done to the bilateral relationship should beef price rises be linked to Australia’s decision to suspend the trade. Both sides needed to cooperate closely to prevent this from happening, and to be sensitive to each other’s domestic pressures in finding a solution. Vice Minister Siregar said the issue could be contained if a temporary solution could be found quickly, otherwise the issue would escalate domestically and bilaterally.

(Brett Cattle’s emphasis.)

236 In relation to meeting with Commission IV, the cable stated (CBD820 at 34432):

11. Senator Ludwig reiterated many of the same points in his meeting with the Head of Commission IV on Agriculture, Muhammad Romahurmuziy (United Development Party, PPP) and Vice Deputies Herman Khaeron (Democrat Party, PD) and Anna Mu’awanah (National Awakening Party, PKB): Australia wanted to put in place a supply chain that ensured the long term viability of the live cattle trade … Romahurmuziy [the Head of Commission IV] said although the ban had surprised the Parliament, many of the members of Parliament with farming interests had expressed their happiness at the suspension of the trade. The suspension of the trade had driven up beef prices, which profited the farmers, and assisted Indonesia in its goal to only have ten per cent of beef supply from foreign exports by 2014 (Parliament also had plans to propose a public private partnership to turn an Indonesian island into a quarantine station for all foreign cattle, which Romahurmuziy said would also assist Indonesian with its self-sufficiency goals). Indonesia would find it difficult to return to its old supply chains (Australia) if they had found alternative suppliers in the meantime. Commission IV members also told us the Parliament was drafting regulations on the certification of slaughterhouses as only ten percent were currently certified. Trade would be suspended to those abattoirs that were not up to standards. We also heard that Parliament was discussing changing from country-based to a zone-based animal health regulations (which meant Indonesia could import live cattle from India).

12. Romahurmuziy made three requests to Senator Ludwig: that the export suspension be lifted without condition as a sign of the good relationship between the two countries whilst Indonesia fixed its abattoir problems (Romahurmuziy later issued a veiled threat that unless Australia accepted the resumption of trade Parliament would ban Australian live cattle in the future and move to other countries for supply, using an island as a quarantine station); that the cattle weight on import be reduced from 350 kilograms to 250 kilograms; and that Australia limit the export of its frozen meat to 30 per cent of the live cattle trade. Senator Ludwig responded that the suspension would remain until Australia had the supply chain assurance in place. He also said the 350 kilogram weight limit had already presented a challenge to the industry. The bilateral trade should be based on a free, fair and open basis, based on the competitive advantage of each country. Asked when the suspension would be lifted, Senator Ludwig said this would occur as soon as he had a supply chain assurance.

(Brett Cattle’s emphasis.)

237 The cable ended with the author’s comments, including that the tone of the meetings was positive, given Indonesia’s “strong reaction to the suspension and the manner in which it was put in place”: CBD820 at [14] 34433–4. It noted that there was a “difference of opinion between the Ministry of Trade and Ministry of Agriculture on how to respond to the resumption of trade”, noting that price rises in beef favoured “smallholder farmers, a key constituency of Minister Suswono” (at 34433):

15. There is a clear difference of opinion between the Ministry of Trade and Ministry of Agriculture on how to respond to the resumption of trade. The driver for the Ministry of Trade is the looming price shock over increased beef consumption in the lead up to and during the Ramadan (starting 31 July). In contrast, price rises were not mentioned once by Minister Suswono, nor by any of his colleagues. In the situation of rising domestic beef prices smallholder farmers, a key constituency of Minister Suswono, earn increased revenue from beef sales.

238 The cable commented on the rumour that the suspension was payback for the imposition of boxed beef quotas, which Indonesia had implemented before the Second Control Order in pursuing its 2014 BSSP (CBD820 at 34433):

19. It was important to call on the Parliament as its members have been among the more vocal critics of Australia. We note the Parliament has been the source of a number of conspiracy theories; including that the suspension was an elaborate pay-back for the imposition of boxed beef quotas; that the suspension was about getting better access for Australian boxed beef; or even that it was an Australian plan to destabilise President Susilo Bambang Yudhoyono in the lead up to Ramadan. This gives some indication of the potential for Parliament to play a spoiling role, even if we are able to agree on a way forward with the executive.

20. … Senator Ludwig made it clear that Australia was able to move fast, but Minister Suswono does not want to be rushed …

(Brett Cattle’s emphasis.)

239 On 23 June 2011, Mr Wallner sent an email in relation to a meeting with industry on 22 June 2011 (see CBD319 at 9224). It included (CBD321 at 9235):

Almost predictably, the Ministry of Agriculture did not attend (they were invited). We now need to urgently repeat the show and tell to the Ag Min folks - we have been awaiting a translation of the proposal doc which we are still awaiting. The vibe from the industry is that Minister Suswono is thoroughly annoyed and the Ludwig visit did little to alleviate this (in fact made it worse because we spoke to Trade Ministry first). His mantra appears to be that we stopped the trade because of abattoirs and resumption of trade can happen when abattoirs are fixed - other elements of the supply chain are irrelevant. It will be a tough one to sell. Industry are frankly scared of Suswono’s power to control the situation through permit issuance (the next quarter is due to be issued now for shipments after July 1). Hence, most are lining up in support of Suswono and wanting a one-in-all-in approach to trade resumption. Diki Adiwoso (Greg Pankhurst’s business partner) indicated that being seen to “break ranks” in the current environment would be seen as disloyal and punished by with[h]olding import permit[s].

(Brett Cattle’s emphasis.)

240 The email went on to record that the Ministry of Agriculture was looking at getting “replacement trade up from US, Brazil or Mexico” (CBD321 at 9235).

241 DFAT cable JA59911H was sent on 23 June 2011 at 8.11 pm: CBD319. It confirmed that “[t]he Indonesian Government continues to look at alternative supplies of beef” (at 9225 [5]) and addressed in some detail the rumour that Brazil had been lobbying to have Law 18 amended to allow cattle imports from foot and mouth (FMD) free zones, but confirmed that no import permits had been issued to Brazil for the importation of live cattle as of 23 June 2011: at 9225–6 [5]–[8]. The cable also addressed the fact that the Ministry of Trade was to take over the issue of new import permits. This was said to be “driven by ongoing problems in the boxed beef sector”, “strongly opposed by the Ministry of Agriculture” and “highly sensitive”: at 9224 [2]. It continued (at 9224):

2. … At the same time, we have heard that the Ministry of Agriculture has already issued boxed beef permits for the remainder of the year (with an extra 32,000 tonnes, taking the total permits for the year to 72,000 tonnes. This is compared to 120 - 140,000 tonnes for 2010). Our contacts tell us that they expect the total number of permits issued for the live cattle trade will eventually total 500,000 head of cattle for the entire year (approximately 220,000 permits have already been issued so far this year).

242 The cable noted that the interests of the boxed beef industry were contrary to those of local live cattle importers, because there was a short-term windfall for local farmers who slaughtered their cattle at higher prices: CBD319 at 9226 [8]. The cable ended with the comment (at 9227):

16. HOM’s discussions with senior Indonesians since the visit by Senator Ludwig suggest there is underlying anger at the suspension but a realisation that changes need to be made to the industry. The sense that Australia should pay a trade or commercial price for the disruption is growing, even among people who were disturbed by the evidence of cruelty to animals.

243 On 23 June 2011, an officer from the Jakarta Embassy sent an email which confirmed that no import permits had been issued to Brazil, who continued to lobby for a change to Law 18: CBD824. It noted that an emergency parliamentary meeting had been held on 22 June 2011 to discuss possible changes to Law 18: at 34493. It also included (at 34493–4):

We do not know what the quotas will be for the next two quarters, but we’ve heard it will likely be a total of 500,000 head of cattle for the entire year.

…

Although there are arguments about the economic viability of sending cattle from Brazil (for a 25-day sea journey) it might be possible the Brazilian Government could subsidise this.

…

It is also worth noting that any legislative change to Law 18 could also allow boxed beef import allocations to be given to Brazil.

… The Ministry of Agriculture could choose not to approve permits for beef from Australia. For the first six months of the year there were 40,000 tonnes worth of permits allocated. We have heard that the Ministry of Agriculture has issued the boxed beef quotas for the remainder of the year (for six months). The allocation was an extra 32,000 tonnes for boxed beef (72,000 all up for the year, compared to approximately 120 - 140,000 to[n]nes from last year). Under current Indonesian law a company cannot import boxed beef from a country with foot and mouth disease (i.e. Brazil, India, Bangladesh). Ibu Gayartri, Director of Agriculture Permits Office, Ministry of Agriculture told us (Wallner) that they had not issued permits where Brazil was the country of origin.

244 Brett Cattle relied upon an email from Mr Ackerman (of Meat and Livestock Australia) sent on 24 June 2011 at 3.23 pm: CBD323. Amongst other things, it suggested that Minister Suswono was in no hurry to resume trade because the Australian Government would “come begging as the pressure from the farming community will become too great”: at 9241. It included (at 9241–2):

Political situation

The Jakarta MLA office has been advised by Ministry officials, sympathetic to the Australian situation, that the Indonesian Parliament is strong at present and nationalistic sentiments are driving decisions which are obtaining strong support by all voting members. These include opening the markets to other countries and emphasising that the decision by the Australian Government will cause all the problems to the Indonesian Government’s two objectives of beef self sufficiency and keeping prices to reasonable levels.

We have also been informed that while the Ministry of Agriculture and Parliament were offended by the lack of consultation and the decision to ban trade of live cattle on the footage alone without a verification visit to Indonesia, they are “hurt” by this decision. The strong relationship between the Indonesia and Australian Governments - and any thought that the relationship will pull us through - should not be taken lightly, as the decision by the Australian Government has gone to the heart of Indonesia.

Minister Suswono is also unhappy about the other meetings Minister Ludwig held during his visit. Apparently, the Minister of Trade requested the Australian technical team visit her officials in the Ministry. This has created a turf war, as Minister Suswono has been directed by the President to fix the issue, and so he should be seen to be leading the matter. The DAFF technical team met with the Ministry of Trade officials yesterday. Attending were officials from the Provinces and the Commerce Council, but a notable absence were Ministry of Agriculture officials. The Ministry of Trade informed the Embassy and DAFF technical team that as of July the Ministry of Trade would be responsible for permits. This is still not yet confirmed, as we are of the understanding the Ministry of Agriculture has not yet agreed to this.

Additional information regarding the Indonesian political situation is that Minister Suswono is well aware of the difficulties the Australian Government decision to ban exports to Indonesia is now placing on Australian Government, and so they are in no hurry to resume trade. Minister Suswono is sure that in time the Australian Government will come begging as the pressure from the farming community will become too great — at which time Indonesia will have the ability to negotiate what they want.

245 Brett Cattle also relied on DFAT Cable JA59918H, sent on 24 June 2011 at 8.25 pm: CBD322. It included (at 9239–40):

Indonesia media outlets are still covering the consequences of Australia’s suspension of live cattle exports but it is not receiving as much attention as a week ago …

2. … Citing Bureau data, local media reported Indonesia’s domestic stock consists of 14 million cattle, 1.1 million buffaloes and around 400,000 dairy cows. But another Agriculture Ministry official has been reported on Friday 24 June saying that the country should not target self-sufficiency until clearer data is available from a census being undertaken in June 2011.

3. Director-General at the Ministry of Agriculture, Prabowo, was reported on Wednesday 22 June, saying that the Indonesian Government should have banned cattle imports from Australia before Australian suspended its exports because Australian cattle contained a synthetic hormone (Trenbolone Acetate) that was hazardous to human health (comment: this was based on an unpublished doctoral thesis that has not yet been made available to Prabowo). Media quoted the PhD student as supporting the veracity of the hormone test result and a government official had indicated subsequent testing was negative.

4. Indonesian parliamentarians from Commission IV for Trade have also been reported saying they would consider placing a ban on Australian live cattle if the Australian Government did not resume trade soon.

…

7. A senior figure in the Indonesian media scene, Meidyatama Suryodiningrat, Editor of the Jakarta Post, told us (Bliss) on 22 June that his assessment was that the heat had gone out of the issue. While beef was a staple commodity, it was not a political commodity, unlike, for example, rice. Indonesians were generally bemused by our obsession with animal welfare standards, and the issue had only served to underline the stark differences between Australia and Indonesia in values, levels of development and issues of public concern. The fact that a senior DAFF official and then Australia’s Agriculture Minister had visited Jakarta had helped foster public perceptions that, despite the unusual decision by the Australian Government to suspend trade, we were working together to find a solution.

(Brett Cattle’s emphasis.)

246 On 27 June 2011, Mr Richard Maude (Senior Adviser, International) in the Office of the Prime Minister wrote an email which referred to negative sentiments towards Australia in the Ministry of Agriculture: CBD324. It included (at 9243):

Greg [Moriarty] said he does not believe a decision on import permits has been made (Sky reporting) but says this is imminent. He said there is a debate within the ag ministry, with some wanting to delay issuing permits to allow Mexican, US or Brazilian suppliers to get permits. He said if there is a delay, Australian companies could still apply for ad hoc permits, although there are those in the ag ministry who do not want Australia to have any permits at all.

(Brett Cattle’s emphasis.)

247 On 29 June 2011, a DAFF Briefing for Solomon Community Cabinet, Northern Territory, included (CBD328.1 at 9272, 9274):

Indonesia

State of relationship

Senator Ludwig’s 8 June announcement of the suspension of live cattle exports caught Indonesia off-guard, and the decision continues to play badly there for us. Senior Indonesian interlocutors, including those usually very supportive of the bilateral relationship remain annoyed by the decision and the manner in which it was communicated. There is a sense, including at the highest political levels, that Indonesia was not adequately consulted and its needs not properly considered …

Objective with Indonesia

* We are working with the Indonesian Government and Australian industry to resume the live cattle trade to Indonesia as quickly as possible.

…

Impact if trade doesn’t resume in short term

…

* The decision to suspend live exports has ramifications for a number of sensitive political issues in Indonesia, including food price inflation, and potential meat shortages during or following Ramadan. The loss of confidence in us as a reliable supplier could see Indonesia diversify its sources of live cattle imports, although we will retain a competitive advantage in the long run.

(Brett Cattle’s emphasis.)

248 A document from the Australian Minister of Trade’s Office dated 29 June 2011 included (CBD330 at 9284):

Indonesia and Live Cattle Permits

…

Current Situation

Industry has reported that Indonesia’s Agriculture Ministry has decided not to issue Q3 import permits for the live cattle trade (scheduled for Friday 1 July) as a result of the current suspension of live cattle exports from Australia (Indonesian has no alternative source markets at present). However, if the suspension is lifted or an alternative supplier country is found industry expects permits to be issued. Once trade is recommenced, it is hoped that import permits for feeder cattle will be issued in a timely manner. It could recommence on an ad-hoc basis, before moving back to the quarterly approach to issuing permits.

Remaining Permits

For the first six months of 2011 Indonesia allocated permits for 220,000 head of cattle. Based upon the advice provided by the Ministry for Agriculture in December 2010, up to 280,000 head of cattle can potentially be imported during the remainder of 2011.

(Brett Cattle’s emphasis.)

249 By 30 June 2011, field data collection for the 2011 cattle survey was completed: CBD413.1 at 20999. Preliminary census results were made available shortly thereafter: CBD869 at 34710 [10].

250 Permits for live cattle for the third quarter were due to be issued on 1 July 2011, but that was delayed by about a week as a result of suspension of live cattle exports from Australia: LJ[239]. The industry understood that, if the ban was lifted, then import permits would issue: CBD841 at 34638; CBD853 at 34674.

251 On 1 July 2011, a “Report of mission to observe the live cattle export supply chain in Indonesia – 12th to 24th June 2011” (comprised of three officers from DAFF and one from the Australian Veterinary Association) reported on the events from 12 to 24 June 2011: CBD333.1. Brett Cattle relied in particular on the following comment in the report (at 9299):

Indonesian [G]overnment was offended by Australia’s suspension of live export and it will take time. The Indonesian’s [sic] appear to have been offended by the lack of prior consultation, disbelief that a ban would be based on animal welfare considerations, suspicions that the suspension was payback for other reasons, possibly to do with restrictions by Indonesia on importation of boxed beef and live cattle over the previous 12 months.

252 DFAT Cable JA59947H was sent at 12.21 am on 2 July 2011: CBD859. It included (at 34685–6):

This cable covers a range of developments on 1 July. A separate cable covers HOM’s meeting with Agriculture Minister Suswono, conducted in the sidelines of a meeting with members of the Indonesian Chamber of Commerce and Industry (KADIN) and the Indonesian Employer’s Association (APINDO).

Australian Government engagement in the week commencing 4 July

2. Significant high level Government to Government engagement on the live cattle issue is planned for the week commencing 4 July. The key will be Mr Rudd’s visit on 8 July, which will enable meetings with key Ministers and decision makers. Planning for this visit continues. Embassy is also arranging the requested phone calls between relevant Australian and Indonesian ministers for that week.

3. The visit by DAFF Deputy Secretary Paul Morris on 3-6 July should enable close engagement with relevant Indonesian officials on standards and verification procedures.

…

Indonesian Government perspectives

7. The planned meeting between Coordinating Minister for the Economy, Hatta Rajasa, Trade Minister Mari Pangestu and Agriculture Minister Suswono to discuss Australia’s live cattle suspension is yet to occur - we will continue to seek information as to when it might be held.

8. In further confirmation of [redacted] concerns about the decision to suspend the trade. [Redacted] told us (Griffiths) that [redacted] could not understand why the cattle issue had been elevated to the national level. It was an issue confined to a limited number of abattoirs. To apply a total ban broadened the problem and showed a lack of trust in Indonesia. [redacted] saw it as a slap in the face ([redacted]). [Redacted] said the problem would likely be solved during Ramadan when demand increased. Australia should position itself accordingly.

9. According to contacts, the Agriculture Minister and Ministry remain upset by the ban. Ade Tunis, advisor on international relations in plant quarantine, Ministry of Agriculture, told us (Wallner) there was a high level of displeasure within the Ministry of Agriculture over the sudden suspension of the live animal trade and subsequent perceived mishandling of the issue. The Directors General all took the view that Australia was dictating terms and there was a feeling Indonesia’s sovereignty was being infringed. Minister Suswono had adopted a defiant attitude: Australia had closed the trade, it was up to them to open it again (comment: however see parallel reporting on HOM meeting with Suswono).

(Brett Cattle’s emphasis.)

253 DFAT Cable JA59948H was sent at 1.45 am on 2 July 2011: CBD860. It was titled “Indonesia: live cattle: meeting with Minister for Agriculture and industry” and included (at 34989–90):

On 1 July, at the invitation of the Indonesian Chamber of Commerce (KADIN), HOM briefed KADIN members, the Indonesian Employer’s Association (APINDO), and other key industry associations about Australia’s perspective on the suspension of the live cattle trade (reftel JA59938H refers). The Indonesian Minister for Agriculture, Suswono, was also invited to provide a briefing to industry on his perspective. The session was attended by approximately 60 representatives from key industry associations and media. HOM met privately with key players, including Minister Suswono; Chairman of the Indonesian Chamber of Commerce and Industry, Suryo Sulisto; Chairman of the Indonesian Employer’s Association, Sofian Wanandi; Juan Permata Adoe, Head of Farm Agribusiness Committee for KADIN (and CEO of PT Bina Mentari Tunggal, a large Indonesian feedlot); and Micky Hehuwat (KADIN’s Australian liaison). Embassy was also represented by Senior Trade Commissioner Doody and Second Secretary (Economic) Eadie.

2. During the briefing session, Minister Suswono said Indonesia was willing to move quickly to resume the live cattle trade. He placed strong emphasis on the work of a joint Australian-Indonesian expert team to agree to a set of minimum standards … Suswono said he was yet to receive a report from the expert team, but once he had received a list of abattoirs that met the agreed standards, trade could start. He also said that following agreement on minimum standards it would be up to Australia to resume the trade. He was not standing in the way of a resumption of the trade.

3. During the briefing session, HOM said Australia was keen to resume the trade as soon as possible with facilities that met the agreed standards set by the joint Australia-Indonesia expert team …

4. Industry representatives were supportive and were proactively working to improve standards to comply with OIE standards … All industry representatives urged Suswono to move to allow some trade to re-start before Ramadan. Suswono acknowledged the need to take some action to minimise price speculation.

5. In the private meetings held either side of the briefing session, Minister Suswono said he was willing to work with Australia to resume the live cattle trade (and that he had relayed this during Minister Ludwig’s visit). Apart from some comments made in jest about the sudden nature of Australia’s decision to suspend the trade, he seemed more positively disposed to finding a way to move forward. Wanandi pressed Suswono on the need to establish a timetable for progress. In response, Suswono said it was now up to the work of the expert team to develop minimum standards but that Indonesia was willing to move quickly. HOM reiterated that Australian industry was willing to work closely with the Indonesian Government and private sector to help small and medium companies reach the required standard. We said Australia was very much aware that Minister Suswono wanted small and medium companies to benefit quickly from the resumption of the trade, not only the bigger companies. Suswono said it was important to support small and medium companies. Separately, Wanandi and Adoe confirmed their understanding that Minister Suswono had essentially agreed to resume the trade through a smaller number of operators that met key standards. Most of those attending interpreted Suswono’s comments to mean he was not going to insist on some 25 or so companies being involved in the resumption of the trade. Sulisto advised us (HOM) that he had to push Suswono to agree to attend the session and Sulisto said it would be important to keep engaged with Suswono although he (Suswono) would find it hard to completely reneg on an undertaking given to the public.

Comment:

6. Suswono’s participation at the session, his conciliatory tone and willingness to engage industry on its concerns about inflation over Ramadan is a significant development …

7. This is an important development but we need to respond cautiously.

(Emphasis added.)

254 The results of the special cattle census were known by at least 4 July 2011 and indicated that there were 14.43 million cattle (16 million if buffalo were included): CBD869 at 34710 [10]. The results would assist Indonesia (and the Minister of Agriculture) in deciding quota numbers and assessing supply and demand: CBD876 at 34723 [6].

255 DFAT Cable JA59957H was sent at 7.04 pm on 5 July 2011: CBD876. It was titled “Indonesia: Live cattle: Calls on Mahendra Siregar and Diah Maulida”: at 34710. It stated that Indonesian Ministers discussed the live cattle issue on 4 July 2011, agreed to finalise regulations on the import of live cattle, and hoped these would be prepared in a day or two (at 34722–3):

On 5 July HOM spoke to Mahendra Siregar, Vice Minister for Trade, who advised that, further to a meeting between Trade Minister Mari Pangestu, Coordinating Minister for Economic Affairs, Hatta Rajasa, and Agriculture Minister Suswono on the evening on the evening of 4 July, Indonesia planned to proceed in issuing regulations covering standards for the import to Indonesia of live animals (Siregar suggested the regulations would not be specifically for live cattle). Siregar said he hoped the text of the regulations could be finalised in the next day or two, but this timing was not certain. The regulations were to be fully enforced by the beginning of 2012 and a trial period would commence from October this year …

3. We said Australia was ready to lift the suspension on live cattle exports quickly given Indonesia’s willingness to accept verification audits, allowing individual export companies to apply for export permits …

6. Maulida said it had been decided at the meeting of Ministers on the evening of 4 July that import licences should be issued very soon, though the timing was not yet fixed. Permits would not specify a country. The Minister for Agriculture needed to carefully calculate Indonesia’s beef needs in order to decide on quota for live cattle. Indonesia had sufficient supply up until Ramadan, but it needed to calculate carefully its post-Ramadan needs. Indonesia had new census data which should help determine supply and demand. We said that as soon as Indonesia issued its new regulations we were ready to respond positively by announcing that we were ready to grant export permits. We understood Coordinating Minister Hatta’s Rajasa’s concerns about the inflation and wanted to move quickly to start trade and help avoid negative inflationary impacts or speculation on cattle in Indonesia.

7. Maulida asked about the objective of Foreign Minister Rudd’s visit to Jakarta this week. We said Mr Rudd wanted to reassure Indonesia of Australia’s commitment to a strong bilateral relationship that should not be negatively affected by this one issue. Mr Rudd wanted to work together with Indonesian Ministers to progress an early resumption of the trade. Australian Ministers were consulting very closely on this issue and it was the wish of the Prime Minister, the Foreign Minister, the Trade Minister and the Agriculture Minister that this matter be resolved as quickly as possible.

(Emphasis added.)

256 DFAT Cable JA59958H was sent at 11.13 pm on 5 July 2011: CBD869. It was titled “Indonesia: DAFF delegation visit and live cattle update” and summarised the events of 4 and 5 July 2011: at 34710. It included (at 34710):

10. Prabowo also said that Indonesia had initial figures from its cattle census and had determined there were already 14.43 million cattle in Indonesia (16 million beasts if buffalo were included). Final figures would be available in November. Prabowo said, with what appeared to be a heavy dose of wry humour, that this meant Indonesia had already reached its 2014 self-sufficiency goal of 14.2 million head of cattle. Under self-sufficiency Indonesia would only import 10 per cent of its beef requirements (or 86,000 head of cattle and 31,200 tonnes of beef). Rachman later told us we didn’t need to worry about our imports, as Indonesia’s consumption was continuing to increase and it was important for Indonesia to be able to still import meat of the special quality provided by Australia. We said we understood the Indonesian Government’s goals but demand should be determined by the market.

257 On 5 July 2011, a memorandum was prepared for signature by Minister Ludwig, recommending that he agree to “resume livestock exports to Indonesia on the basis that the Secretary or delegate will approve exports in line with the mechanism created by the attached Australian Meat and Livestock Industry (Export of Live-Stock to the Republic of Indonesia) Order 2011 (No 2)” and that he sign the “enclosed Export Control Repeal Order 2011 lifting the current suspension of the export of livestock to Indonesia”: CBD879 at 34735. The memorandum noted (at 34736):

This approach would allow the approval of live-stock exports based on the satisfaction of the Secretary of the department that supply chain assurance principles are in place which will achieve internationally agreed animal welfare outcomes.

258 On 6 July 2011, Minister Suswono contacted the Australian Ambassador to discuss resumption of the live cattle trade: LJ[236]. He told the Ambassador that Indonesia was now ready to support the issue of import permits and invited Australia to lift its temporary suspension of the trade, which Indonesia would find acceptable: LJ[236]. DFAT Cable JA59959H was sent at 1.07 pm on 6 July 2011: CBD887. Amongst other things, it noted that Indonesia’s earlier preference for it to issue its new regulations on trade in live animals prior to any resumption of the trade appeared to have been overtaken: at 34759 [5].

Repeal of the Second Control Order

259 Minister Ludwig made a decision to repeal the Second Control Order on 6 July 2011, effective 7 July 2011: CBD888 at 34767–8. Minister Ludwig wrote to Minister Suswono on 7 July 2011, copied to Ministers Pangestu, Hatta Rajasa and Natalegawa, confirming the lifting of the temporary suspension and noting the advice received that the Ministry of Agriculture was in a position to issue import permits to facilitate the trade as soon as possible: CBD888 at 34762.

260 On 6 July 2011, the Secretary of DAFF made the Third AMLI Order: LJ[237].

Events in July and August 2011 after the Repeal of the Second Control Order

261 DFAT Cable JA59970H was sent at 11.11 pm on 7 July 2011: CBD335. It included (at 9323):

We understand that Prabowo signed import permits on 7 July but they have not yet been formally issued …

2. Further to his comments to the Australian press on 6 July that he would recommend a hefty cut in live cattle from Australia from next year, as well as reductions to imports of chilled boxed beef, Director-General for Livestock Prabowo Caturroso has repeated to us that the quota for cattle and beef imports should be reduced in line with Indonesia’s self-sufficiency blueprint. Prabowo had earlier advised us that, under its self-sufficiency policy, Indonesia would only import ten per cent of its beef requirements once it met self-sufficiency goals - and that it had already met those goals (or 86,000 head of cattle and 31,200 tonnes of beef, reftel JA59958H, paragraph 10 refers). However, during that meeting officials had laughed and admitted that Indonesia had not actually met self-sufficiency goals and, with rising demand, Indonesia would continue to need beef and cattle from Australia.

3. Agriculture Minister Suswono told press that the Indonesian Government had not made any agreement with Australia in order for the Australian Government to lift the ban on beef exports to Indonesia. He reiterated his disappointment over Australia’s initial decision to suspend the trade. He further said Indonesia already had its own rules for abattoirs in accordance with its own animal welfare rules and regulations. Vice Minister for Agriculture, Bayu Krisnamurthi, said the suspension had been a useful experience for Indonesia as it had become better aware that relying too much on the international market was risky for the country’s food security.

(Brett Cattle’s emphasis.)

262 On 8 July 2011, the Indonesian Government announced that it would issue import permits for the import of 180,000 head of cattle for the third quarter of 2011: CBD893; CBD910 at 34877.

263 A joint press conference was held in Indonesia on 8 July 2011 between Australian Foreign Minister, Kevin Rudd, and the Indonesian Coordinating Minister for Economic Affairs, Minister Hatta Rajasa: CBD910. A joint press conference was also held between Minister Rudd and Dr Marty Natalegawa, the Indonesian Minister of Foreign Affairs: CB911. Minister Hatta Rajasa concluded by observing that “Indonesia and Australia are friends, neighbours and strong partners”, that they “will solve any problems between the two countries” and that they “are determined to improve the relations between the two countries”: CBD910 at 34880.

264 By 12 July 2011, import permits for 85,000 of the total 180,000 cattle had been allocated: CBD908 at 34871; CBD914 at 34901. As at this time, 112,000 head of Australian cattle were in feedlots in Indonesia from a total of 150,000 in feedlots at the time of the Second Control Order (CBD917 at 34959 [4]), which was sufficient for what was required for Ramadan: CBD301 at 9068; CBD785 at 34224 [8]; CBD799 at 34326; CBD820 at 34431 [8]

265 DFAT Cable JA60026H was sent at 8.53 pm on 19 July 2011: CBD917. It noted that “Indonesian contacts have expressed relief that a potentially serious issue in the broader bilateral relationship has been diffused”: at 34958. It also included (at 34958):

This cable covers a range of developments 15 - 19 July … In other developments, we understand that Indonesia’s new regulations on live animal imports under Law 18 (2009) are in Minister Pangestu’s office awaiting her signature …

2. Over recent days HOM has spoken to a range of contacts at the President’s office, the Vice President’s office and in the Foreign Ministry about developments since the lifting of the live cattle suspension. The general mood among those we have spoken to was one of relief that a potentially serious issue in the broader bilateral relationship has been diffused. Faizasyah, Senior Advisor to President Susilo Bambang Yudhoyono, said he was very relieved that some progress to resume the trade had been made before the start of Ramadan. He said the Parliament would require careful monitoring and responses to promote self sufficiency should be expected. Faizasyah said the long term impact of the suspension was not clear yet, but there would be some who would harbour negative feelings towards Australia for some considerable time.

(Emphasis added.)

266 DFAT Cable JA708685L was sent at 9.01 pm on 3 August 2011: CBD931. It noted that boxed beef imports had improved, particularly in comparison to difficulties earlier in the year (at 35010):

6. We (Wallner) understand that Indonesia imported 2000 tonnes of boxed beef last week, which is a record amount for this year. Health Certificates for Australian boxed beef are currently being issued in large weekly volumes. The total for the week 25 to 31 July was 2,376 tonnes. Other recent weekly volumes have been in excess of 2,000 tonnes. At the height of the problems with boxed beef quota supply earlier this year [before the Second Control Order], volumes were down to less than 300 tonnes per week.

267 DFAT Cable JA60108H was sent at 9.58 pm on 8 August 2011, providing a “trade overview” in advance of Dr Emerson’s visit to Manado to participate in the 43rd ASEAN Economic Ministers’ Meeting: CBD934. It included (at 35021–2):

2. Despite significant concerns on the part of the Indonesian Government over the lack of consultation surrounding the decision to suspend the live cattle trade and the domestic consequences of that decision, Indonesia appears ready to move on with the bilateral trade and economic relationship, including with Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) negotiations. Recent discussions held during the visit of Minister Ferguson to Indonesia (further reporting cable to follow) were constructive and no concerns about the live cattle trade were raised.

3. The protectionist trend (reported in JA59393H) in trade and economic policy persists and was most recently reflected in rumoured changes to the banking sector. Parliamentarians are the most outspoken supporters of this type of economic nationalism, often reported in the media speaking out against trade liberalisation, and in favour of food self-sufficiency.

…

6. Indonesia may seek engagement on food security. The spike in food prices since the start of Ramadan in early August has been a key concern of the Indonesian Government, as it is every year at this time. This year, however, there is the prospect of blaming Australia at least in part for such prices rices (JA60026H refers) though there is, as yet, no particular sign of this. Moves have been made to stabilise the price of core food commodities, and Government programs have focused on the acceleration of rice distribution to the poor. Indonesia’s desire for food self-sufficiency has not waned. Indonesia has requested Australian support in its ongoing beef self sufficiency goals and is in the process of finalising its cattle census (which may or may not be credible).

(Original emphasis.)

268 Minister Hatta Rajasa wrote to Minister Rudd on 9 August 2011: CBD949. His letter stated at 37870:

I have the pleasure to refer to your recent visit to Jakarta and your letter of 8 July 2011. May I also thank you for the very productive meetings and fruitful discussions that you had with me, as well as with my colleagues, in the course of your visit.

I sincerely believe that your visit has paved the way for enhancing our existing economic cooperation that we are striving to accomplish. I am confident that we are in a good track to realizing the true potential that Indonesia and Australia can achieve.

The Government of Indonesia had approved the import permit that allows 180,000 head of cattle from Australia before the ban. It was merely pending as a result of it and I am similarly happy that the activity has resumed with the lifting of the ban.

I look forward to our continued economic relations.

269 On 10 August 2011, the first shipment of live cattle following the Second Control Order left Australia for Indonesia: SOAF 2 at [133].

270 DFAT Cable JA60213H was sent on 5 September 2011: CBD951. It included (at 37879):

The Ramadhan period is now over and meat supply has been adequate to meet demand to date, although market prices have been between 12% and 44% higher than the same time last year (average increase in prices 18% prime cuts, 12% trimmings, and 44% offals). Anecdotal reports from industry are that significant numbers of local cattle have been slaughtered in order to meet demand, supplementing Australian-sourced feedlot cattle that were already in the country prior to the June suspension of the live trade.

…

5. HOM spoke to Minister Suswono at the Minister’s ld Ul Fitr open house event on 1 September. HOM gave an update on export permit approvals and noted the impending visit by DAFF officials to Jakarta. Suswono received HOM warmly and acknowledged the strong and cooperative relationship with the embassy but did not comment substantively on the live cattle issue. HOM also spoke to Coordinating Minister for Economic Affairs, Hatta Rajasa, at his open house event on 1 September and noted progress on the live cattle issue. Rajasa said he was pleased to see the trade had resumed but made no other comment. During the course of calls to a large number of Ministerial open house events this week, no one raised the live cattle trade with HOM, suggesting this issue is not a significant irritant at this stage.

(Emphasis added; original bolding omitted.)

Indonesian Regulations in September 2011

271 In early September 2011, the Minister of Agriculture and the Minister of Trade made a number of new regulations. In broad terms, the regulations reflected the improved animal welfare standards to be met when importing cattle into Indonesia and introduced a new framework for quotas and permits for both “livestock” (live cattle) and “meat” (boxed beef). Whereas previously a permit needed to be obtained from the Ministry of Agriculture, a licence to import now had to be obtained from the Ministry of Trade. As noted earlier, this transfer of function was foreshadowed before the Second Control Order: CBD639 at 33418; CBD632 at 33376, 33379.

272 A further change introduced by the regulations was that quotas for the following year were to be determined at a “Coordination Meeting”, being a meeting between agencies which was organised by the Coordinating Ministry for Economic Affairs: CBD952 art 4 at 37888. The agencies included the Ministry of Trade and the Ministry of Agriculture.

273 On 7 September 2011, the Minister of Agriculture enacted Regulation 50 of 2011 concerning “Recommendation to Approve the Importation of Carcasses, Offal and/or the Products of these into Indonesian Territory”: CBD952 at 37880. It linked import and export of meat to self-sufficiency. Regulation 50 of 2011 required a business wishing to import meat to obtain a licence from the Minister of Trade: art 2 at 37887. The import licence would be issued after “gaining an RIA from the Minister of Agriculture”: art 2(2) at 37887. An RIA was defined in article 1(21) (at 37886):

The Recommendation for Import Approval, hereinafter referred to as the RIA, is a written statement issued by the Minister or the official appointed by him or her to the business operators who will import the carcasses, meat, offal and/or the products of these into Indonesian territory.

274 Article 3(1) provided (CBD952 at 37887):

The RIA referred to in Article 2 subsection (2) is issued by the Director General of Livestock and Animal Health in the name of the Minister of Agriculture in the form of a Decision of the Minister of Agriculture.

275 Article 21 required the application for an RIA to be submitted to the Director General of Livestock and Animal Health via the Head of the CPPVAL: CBD952 at 37901. The CPPVAL was the Centre for the Protection of Plant Varieties and Agricultural Licencing, being “a work unit responsible for licencing administration”: art 1(24) at 37887.

276 Article 4 required that importation of meat be done in accordance with a “national needs analysis” conducted through ministerial-level limited coordination meetings coordinated by the Coordinating Minister for Economic Affairs with input from the Minister of Agriculture and/or related Ministers: CBD952 at 37888.

277 Also on 7 September 2011, the Minister of Agriculture enacted Regulation 52 of 2011 on “Recommendation of the Approval of the Import and Export of Livestock into and out of the Indonesian Territory”: CBD954 at 37962; L&B 1 at 279 [114]. It also linked import and export of meat to self-sufficiency. Article 2 provided (at 37965):

(1)     The importation of feeders can be done to:

a.    meet the domestic need for beef cattle;

b.    meet the need for specialty segment meat; and

c.    increase value-adding and create employment.

(2)    The export of beef cattle can be done if:

a.    the domestic need for meat has been met; and

b.    the domestic population of beef cattle is stable.

278 Chapter II related to “Importation of Feeder Cattle”: CBD954 at 37965. Feeder cattle or “feeders” was defined in article 1(3) as “non-breeding stock with excellent qualities to be raised for a fixed period for meat production”: at 37964. Article 3 permitted the importation of feeder cattle in accordance with the form comprising Attachment I: at 37965. Article 4 required that importing as referred to in article 3 “must meet administrative and technical requirements”: at 37965. Article 5 set out the “Administrative requirements referred to in Article 4” and included the requirement for a “written declaration of willingness to breed local livestock at least 10% of the capacity of the pens”: at 37965–6. Article 6 contained the technical requirements, providing (at 37966):

Technical requirements as referred to in Article 4 cover:

a.    the status of animal health in the country of origin and in the location of the farm of origin; and

b.    a maximum weight of beef cattle per animal of 350 kg when arriving in the port of entry, no more than 30 months old, and must be fattened for at least 60 days after the quarantine period; or

c.    a maximum weight per buffalo of 400 kg when arriving in the port of entry, no more than 36 months old, and must be fattened for a minimum of 60 days after the quarantine period.

279 Article 40 revoked Regulation 7 of 2008, which contained the 350kg weight restriction: CBD954 at 37975; CBD515 at 31836.

280 Article 9 provided (CBD954 at 37967):

(1)    The importation of feeder cattle as referred to in Article 3 can be done by business operators after obtaining an import licence from the Minister of Trade.

(2)    The Minister of Trade grants an import licence as referred to in subsection (1) after the Minister of Agriculture issues the RIA.

281 Article 10 provided (CBD954 at 37967–8):

(1)    The issuance of the RIA as referred to in Article 9(2) is done by the Director General of Livestock and Animal Health on behalf of the Minister of Agriculture.

(2)    The RIA as referred to in subsection (1) is issued in the form of a Decision of the Minister of Agriculture signed by the Director General of Livestock and Animal Health on behalf of the Minister of Agriculture.

(3)    The RIA as referred to in subsection (2) contains at least:

a.    the RIA number;

b.    the name and address of the company, and the animal quarantine facility;

c.    the number and date of the application;

d.    the country of origin, total and classification of feeder cattle;

e.    the place of importation;

f.    the location of the slaughterhouse (RPH); and

g.    the date of issue and validity period of the RIA:

(4)    The Director General of Livestock and Animal Health issues the RIA as referred to in subsection (2) after the administrative requirements as referred to in Article 5 and the technical requirements as referred to in Article 6 have been met.

(5)    The validity period of the RIA of 90 (ninety) days is agreed to in the RIA application.

(6)    The division of periods of the RIA is done on a quarterly basis: January - March, April - June, July - September, October - December.

(7)    The planning for importing feeder cattle for the following year is done every year at the end of October.

282 A business had to apply for an RIA for feeder cattle to the Director General of Livestock and Animal Health through the Head of the CPPVAL: CBD954 art 13(1) at 37968. Article 14 provided (at 37968):

After receiving the written application as referred to in Article 13(1) the head of the CPPVAL must issue a reply of rejection or acceptance within 3 (three) working days.

283 The DGLS must determine the application and, if approved, the “RIA is issued by the Director General of Livestock and Animal Health in the name of the Minister of Agriculture”: CBD954 art 17(3) at 37969. The RIA was “sent to the Minister for Trade by the Head of the CPPVAL through the business operator”: art 17(4) at 37969–70. After receiving the RIA as referred to in article 17(3), “the Minister for Trade issues the licence to import feeder cattle”: art 17(5) at 37970.

284 The Minister for Trade made Regulation 24 of 2011 on 7 September 2011 on “Provisions for Importing and Exporting Animals and Animal Products”: CBD343.1 at 9614; L&B 1 at 280 [116]; L&B 2 at 571–4 [20]–[29]. Article 2(2) provided (CBD343.1 at 9619):

The import of Animals and Animal Products is regulated as stated in Appendix I and Appendix II, which are inseparable parts of this Ministerial Regulation.

285 Article 3 provided (CBD343.1 at 9620–1):

1)    The importing of animals as referred to in Article 2(2) can be done to:

a.    improve quality and genetic diversity;

b.    develop knowledge and technology;

c.    overcome a lack of semen, breeding stock and/or feeder cattle/beef cattle in the country; and/or

d.    meet the needs of research and development.

2)    The importing of animal products as referred to in Article 2(2) can only be done if the domestic production and supply of Animal Products does not yet meet the needs of community consumption at an affordable price.

3)    The exporting of animals as referred to in Article 2(3) can only be done if the domestic need for semen, breeding stock and/or feeder cattle has been met and the sustainability of local animals is guaranteed.

4)    National allocation for fresh Animals and Animal Products which can be imported as stated in Appendix II of this Ministerial Regulation is stipulated for every year based on the results of a Coordination Meeting at ministerial level with consideration of domestic production and consumption needs.

5)    The allocation for importing healthy animals and animal products as stated in Appendix II of this Ministerial Regulation for both RI-Animals and Animal Products is stipulated for each semester based on the results of a Coordination Meeting at Echelon 1 level, with consideration of the national allocation as referred to in subsection (4).

6)    The stipulation of import allocations for animals and animal products as referred in subsection (5) is based on the considerations of:

a.    Capacity of temporary animal quarantine facilities;

b.    Maximal Loading Capacity; and

c.    Assessment of past performance.

286 Article 3(4) requires that the “[n]ational allocation” is stipulated each year based on the results of a “Coordination Meeting” of relevant Ministers: CBD343.1 at 9620. Article 1(10) states that the “Coordination Meeting is a meeting between agencies which is organised by the Coordinating Ministry for Economic Affairs”: at 9619. Appendix II of the regulation includes live cattle and beef: at 9640. It follows that one of the tasks of the “Coordination Meeting” of relevant Ministers is to determine a national import allocation for live cattle and beef (the National Import Allocation): L&B 2 at 572 [22]–[23].

287 Article 3(5) contains a second step for determining import allocations to Registered Importers, namely a coordination meeting for “Echelon 1” officials held each semester: CBD343.1 at 9620. Under article 6, which deals with the issuing of Import Approvals, the year is divided into two semesters: 1 January to 30 June and 1 July to 31 December: at 9624. “Echelon” refers to the rank of officials in Indonesian ministries. Echelon 1 officials are senior officials. A Ministry’s Secretary General and Director Generals would usually be Echelon 1 officials: CBC23 at 573 [26(b)]. At the Echelon 1 coordination meeting held each semester, these officials must: (a) take into account the National Import Allocation; and (b) fix the allocation of animal imports for animals in Appendix II (which include cattle) to individual Registered Importers for that semester: CBC23 at 574 [27].

288 It might have been thought from the structure of article 3 that the Ministers’ meeting occurred before the Echelon 1 meeting. Dr Krisnamurthi gave the following evidence (although this was said to be evidence about events in 2010) (at T220.27–32):

[T]he system in Indonesia is that this quota has been discussed in technical level first – that is, on the Director and DG level of offices – and, after that, they will report to the ministers, and under the Coordinating Minister of Economic Affairs, ministers will deliberate and discuss on that quota and agrees or disagree with the number that [has] been proposed by technical staff.

289 Under article 3(6), in fixing the allocations, the Echelon 1 officials must consider three factors: “Capacity of temporary animal quarantine facilities”, “Maximal Loading Capacity”, and “Assessment of past performance”: CBD343.1 at 9621. These terms are not defined in the regulation, and the regulation does not have an explanatory memorandum (or elucidation) annexed to it. The reference to “past performance” is likely to be to the performance of Registered Importers, as the purpose of the meeting of Echelon 1 officials is to determine allocations to Registered Importers from the National Import Allocation: CBC23 at 574 [28]. The allocations made by the coordinating meeting of Echelon 1 officials are the import permits.

290 As noted earlier, the transfer to the Ministry of Trade of the responsibility for issuing import licences took effect on 1 January 2012: CBD959 at 38017; CBD1003 (January 2012).

291 DFAT Cable JA60270H was sent on 20 September 2011: CBD344. It included (at 9662–3):

Northern Territory Minister for Primary Industries, Kon Vatskalis, visited Jakarta 18–19 September to discuss the live cattle trade. He had meetings with the Ministry of Trade (Vice Minister Mahendra Siregar and Director General Deddy Saleh) and the Ministry of Agriculture (Assistant Minister Syukur and other officials) …

…

4. Deddy Saleh said that responsibility for issuing import permits for live cattle and boxed beef would be transferred to the Ministry of Trade from January 2012 under the new regulations. Decisions would not be left to the Ministry of Agriculture, as in the past. Allocation for next year would be discussed with the Ministry of Trade and the Coordinating Ministry for Economic Affairs. The allocation for next year would be discussed in October.

5. At the Ministry of Agriculture Vatskalis met Assistant Minister for Agricultural Investment, Syukur Iwantoro, the Director of the Animal Quarantine and Biosafety Centre from the Agricultural Ministry, Sujarwanto, and a host of other Agriculture Ministry officials. Vatskalis reiterated the strong partnership between Indonesia and Australia, particularly Northern Territory. He noted progress made since the lifting of the trade suspension. He also noted it would be important to ensure the trade continued, with Australia helping in a low-key way in areas such as training.

6. Syukur said Indonesia had been shocked by the Australian [G]overnment’s ban on live cattle exports …

7. Syukur said Indonesia did not want to halt livestock imports despite its policy of self-sufficiency. 10% of the market would remain open for the import of animals even once Indonesia was self-sufficient. Indonesia’s cattle census showed it had a 14.8 million strong domestic herd, which meant it was already self-sufficient — and yet Indonesia still needed imports. This was an ‘internal issue’ linked to parliament’s desire to stop imports. Syukur also advised that in January 2012 the Ministry of Trade would assume responsibility for issuing import permits. The Ministry of Agriculture would only make recommendations on animal welfare and quotas, with a view to self-sufficiency.

8. Syukur said Agriculture Minister Suswono was keen to encourage cooperation with Australia and the Northern Territory in areas other than live cattle.

(Emphasis added.)

292 A Brief for the Australian Delegation to the Australia-Indonesia Working Group Agriculture, Food and Forestry Cooperation (WGAFFC) on 27–29 October 2011 commented that “Australia’s relationship with Indonesia is wide-ranging, robust and remains overall in excellent shape, despite the impact of the live cattle issue”: CBD964 at 38031.

The Cattle Census Results – 1 November 2011

293 In November 2011 the census was finalised and results were published by the Central Statistics Agency: CBD413.1. The Foreword, signed by Dr Probowo, included (at 20995):

The 2010-2014 Beef and Buffalo Meat Self-Sufficiency Program is one of the five main programs of the Ministry of Agriculture of the Republic of Indonesia. Therefore, during the 2010-2014 period, the Directorate General of Livestock and Animal Health made various efforts to achieve beef and buffalo meat self-sufficiency by 2014. One of the main obstacles to achieving the beef and buffalo meat self-sufficiency program was the lack of basic data and information on populations based on age livestock breed, so the Directorate General of Livestock and Animal Health initiated a census of beef cattle, dairy cattle, and buffalo in 2011 in collaboration with the Central Statistics Agency. According to law number 16 of 1997 on statistics, sectoral statistics must be carried out by the Central Statistics Agency when these statistics can only be obtained by census and with population coverage on a national scale.

This book contains reports and analysis on the implementation of the 2011 beef cattle, dairy cattle, and buffalo data collection (PSPK2011) which was carried out using the census method. It is hoped that the publication of this book will dispel doubts from various sides regarding livestock population calculations which have so far only been based on registration (reporting) in districts/cities gradually forwarded to the provinces as national data which is mostly an estimate. The next hope is that by obtaining PSPK2011 results using the census method, it will make it easier to determine the policy direction for the Beef and Buffalo Self-Sufficiency Program (PSDSK) by 2014 because population calculations are no longer based on estimates.

(Emphasis added.)

294 The census concluded that there was a total of 14,824,373 beef cattle in Indonesia on 1 June 2011: CBD413.1 at 21008, 21014–5, 21020. There were 597,213 dairy cattle and 1,305,078 buffalo: at 21014–5.

295 Mr Adiwoso gave evidence that the census results were announced in October or November 2011: T174.22–3. In cross-examination, he thought the timing might have been September or October 2011: T201.23. His evidence was that he attended a meeting at which the Minister of Agriculture, the Deputy Minister of Agriculture and the head of the Bureau of Statistics of Indonesia were present: T174.25–7. He said he was told that the number of cattle in Indonesia was close to 14.7 million: T174.34. He said he was “sceptical” of the results announced: T174.37. The meeting to which Mr Adiwoso referred is likely to have occurred in November 2011. The preliminary (unfinalised) results were known to the Ministry of Agriculture and others by no later than 4 July 2011 and were then considered to be in the order of 14.43 million: CBD869 at 34710 [10]. Mr Adiwoso’s evidence is addressed further below.

Consideration in November 2011 of the Quota for 2012

296 Mr Wallner (Counsellor-Agriculture) sent an email on 16 November 2011 in which he reported on his meeting the previous day with Dr Probowo, during which Dr Probowo discussed a meeting with Echelon 1 officials representing the Coordinating Ministry for Economic Affairs, Ministry of Trade and Ministry of Agriculture to consider the national allocation or quota for live cattle and boxed beef imports for 2012: CBD974. The email included (at 38433):

Yesterday, I met with DG Prabowo and the issue of beef trade came up. He indicated that his next meeting at 0900 hrs yesterday was a trilateral meeting of Ag, Trade and Coord Ministries with 5 echelon one players involved to determine the national beef allocation (quota). We asked about likely cuts to quota due to national herd census results. He agreed that the results of the census of 14.82 million ekor [head] exceeded the self sufficiency target set for 2014 (14.2 mil[l]ion) but said that the problem was they were spread out all over the archipelago and costly to transport to population centres. He said that the quotas were likely to be reduced cf. [scil: compared to] this year. He also said that it would be difficult for them to agree.

(Emphasis added.)

297 Dr Krisnamurthi gave evidence in relation to the setting of the 2012 quota. His evidence included (T225.31–40):

MR WITHERS: Okay. And what decision was taken quota about the size of the quota for 2012?

DR KRISNAMURTHI: I think the – the key decisions is not mainly on the quotas, it’s mainly on the strategic approach by Indonesian [G]overnment, which is try to diversify our supply, and, of course, learning from the prior assessment that importations of live cattle come from country outside Australia is – is inefficient, is too expensive, and we are talking about Brazil, Mexico, United States, is much more expensive than – than Australia. Then we decide that diversification is not only countries but also product, so we decided to – to open up more on frozen meat.

(Objections underlined: MFI 23 at [19].)

298 It is not clear precisely when the decisions referred to in this evidence were taken, but the evidence is likely to relate to November or December 2011.

299 The Commonwealth sought a limitation under s 136 of the Evidence Act that this evidence be limited to Dr Krisnamurthi’s state of mind: MFI 23 at [19]. Evidence to similar effect, together with evidence that “we cannot be sure” that the export ban would not happen again, was given by Dr Krisnamurthi at T226.8–24, in respect of which the Commonwealth also sought a limitation under s 136: MFI 23 at [20]. There is no need to limit the use of this evidence under s 136 of the Evidence Act as there is no danger that a particular use of the evidence might be misleading. The same applies with respect to evidence at T227.16–21: MFI 23 at [21]. The parties agreed that an order should be made in relation to evidence at T298.37–45, limiting the evidence to proof of Dr Krisnamurthi’s state of mind: MFI 23 at [22].

300 If Dr Krisnamurthi’s evidence (extracted above) was intended to convey that there was a decision in 2011 to increase the quota of boxed beef for 2012 (compared to 2011), that is incorrect. The quota for 2011 was initially 50,000 tonnes, later increased to 99,000 tonnes and permits were granted for 120,000 tonnes, with 107,000 tonnes in fact being imported: CBD352 at 9682, 353 at 9684, 1045 at 38907; CBD958 at 38015; SOAF 2 at [43]. The quota for 2012 was initially 34,000 tonnes, later increased by 7,000 tonnes to 41,000 tonnes: SOAF 2 at [44], [46]. If Dr Krisnamurthi was intending to convey that he recalled a decision was made to reduce the live cattle quota for 2012 because a decision was made to “diversify” to more boxed meat, I do not accept that recollection as being an accurate reflection of what actually happened. This is hardly surprising given the time that has passed.

301 DFAT Cable JA60534H was sent on 22 November 2011: CBD346. It included (at 9668):

2. Antoni commented on a coordinating meeting held last week between echelon one officials representing the Coordinating Ministry for Economy, Ministry of Trade and Ministry of Agriculture. The meeting considered the national allocation (quota) for live cattle and boxed beef imports for 2012. Antoni reported that the meeting failed to reach consensus with the Ministry of Trade citing the need for a stable trade to maintain price stability, but the Ministry of Agriculture seeking to reduce imports in 2012 and the year after. The Ministry of Agriculture apparently sought to halve the quota to about 300,000 head for the live trade and reduce boxed beef imports to about one third of this year’s level, about 30,000 tonnes. The Ministry apparently pointed to the recent cattle census showing that Indonesia was “self-sufficient” in beef cattle and the reduced level of trade this year due to the live cattle trade suspension as proof that Indonesia could live with a lower level of imports next year. Antoni said the proposed import quotas were of concern for APFINDO members and noted that beef supply was only maintained through the trade ban by slaughtering more local cattle, including many heifers. He indicated that they had an appointment with Diah Maulida.

(Brett Cattle’s emphasis.)

302 On 25 November 2011, Ms Jo Evans (DAFF) sent an email reporting on the DAFF delegation meetings in Indonesia: CBD347. The email included (at 9670):

We also discussed the new arrangements for permits between MoA and MoT. The system is administratively heavy. MoT will issue a permit for 6 months. Importers are also required to apply to MoA to receive a “letter of recommendation” each quarter (3 months) which will effectively provide their ‘allocation’ in two cumulative 3-month allocations. The name of a specific abattoir will be included in the letter of recommendation, but will not appear on the import permit (we have taken this to mean that the allocation/number of cattle will be determined by the capacity of Indonesian Government approved abattoirs. Once the animals have been imported it appears they may be slaughtered at other locations. The main effect of this appears to be as a limit on the import quota rather than on distribution).

The overall national allocation on live cattle imports will be decided by the coordinating ministry of economic affairs based on recommendations from ag and trade. Ag has made relatively low suggestion for national quota based on the results of the cattle survey and anticipated consumer demand. They appear to have proposed 280,000 head for 2012. Officials at the Coordinating Ministry will consult trade then make a recommendation to Hatta Rajasa next Wednesday [30 November 2011].

In the meeting with Vice Trade Minister Krisnamurthi, he suggested allocation would be based on the number of abattoirs approved by the Ministry of Agriculture for food safety standards (currently 16) which may (significantly) limit numbers. This was consistent with what we intuited from our meeting with MoA. He made a number of observations that despite the current low level of imports the domestic market was stable (implication, low imports of cattle seems to work). He made another reference to the push to enable imports from other countries.

The 2010 Policy Paper

303 Brett Cattle placed emphasis in closing submission on a “Policy Paper”, published in December 2010, by the Directorate of Food and Agriculture of the Ministry of National Development Planning/National Development Planning Agency, titled “Strategies and Policies to Accelerate the Achievement of Beef Self-Sufficiency in 2014”: CBD291.1. The Policy Paper was “prepared to provide a bridge between the [Blueprint] … and operational strategies and policies which are focused and will serve as a leverage factor in realising meat self-sufficiency in 2014”: at 8908. It sought to “formulate breakthrough alternative policies” which were “hoped to accelerate the sufficiency of domestic meat”: at 8908. These alternative policies were to “complement existing policies”: at 8909. It observed that “a tendency for import volume to continue to increase” would “cause animal-based food independence and sovereignty, especially beef, to move further from reach, and cause Indonesia to fall into the food trap of exporting countries”: at 8918.

304 The Policy Paper observed that increased imports were “detrimental to the country’s economy and society, considering that such copious feed and meat import activities are a disincentive for domestic beef cattle farming activities”: CBD291.1 at 8918. It observed that “cattle breeding and farming …[is] mostly carried out by breeders on a limited scale and with low profit margins” and that “[f]armers have to face unequal competition, including pressures due to the invasion of cheap imported beef”: at 8919. The Policy Paper expressed the view that funding was “still inadequate” and that co-ordination between agencies was still weak: at 8919. It referred to the “the seriousness of the President of the Republic of Indonesia to realise beef self-sufficiency”: at 8919. The Policy Paper examined the reasons why earlier beef self-sufficiency programs had been unsuccessful: at 8920.

305 The Policy Paper noted that about 80% of meat consumers were in urban areas (CBD291.1 at 8920–21):

The majority of meat consumers, namely around 80%, are located in urban areas, where the amount of consumption per individual is quite large. Meanwhile, rural people consume beef in the form of meatballs, with a very low proportion of meat, namely less than 20%.

Most rural people consume a mixture of meatballs and some form of offal such as heart, so imports of offal from Australia to Indonesia are increasing.

306 It considered that “beef consumers are from the upper middle class who are not affected by price changes”: CBD291.1 at 8927. It noted that “[t]here is only one variable that influences the price of local beef, namely the increase in the price of imported beef”: at 8928; 8930.

307 The Policy Paper observed that “[e]fforts to achieve national meat self-sufficiency started with an approach to increase the domestic cattle population, which is supported by various main efforts to achieve a supply figure of 90% of national meat needs” and that “[s]ince the launch of the 2010 BSSP, efforts to achieve beef self-sufficiency have been undertaken by increasing local livestock production”: CBD291.1 at 8933. The Policy Paper stated (at 8933):

However, in reality the growth rate of local cattle is not encouraging, only at around 3.27%, due to the slaughter of productive females, which reaches 80% in slaughterhouses in several livestock enclaves. In 2010 local cattle production could only meet 66.28% of the total national consumption needs. If beef self-sufficiency is to be reached in 2014, then within 4 years local beef production must grow by around 33.72% or an average of 11% per year. This is very difficult to achieve without a Bridging Program, namely the temporary import of feeder cattle breeds.

308 The Policy Paper observed that “[l]ocal Indonesian cattle, consisting of Bali cattle, Madura cattle, PO cattle, Aceh cattle, and Pesisir Selatan cattle, are native Indonesian cattle that are currently found in the field and have a relatively low slaughter weight compared to Bos Taurus cattle”: CBD291.1 at 8930–1. However, it noted that the “Brahman cattle population is projected to increase at a higher percentage compared to local cattle, which averages only at 14.48%, and two other breeds, namely simmental and limousin, respectively at 6.75% and 15.71%”: at 8933. It observed that “the breeder cattle development program has become an inherent part of the 2014 BSSP acceleration program with various operational programs”: at 8934.

309 The Policy Paper observed that cattle farming was “mostly carried out by small-scale farmers” with two to three head of cattle, which were “important assets that can support the family’s annual needs, not their daily needs”: CBD291.1 at 8943. It stated that:

For this reason, a microfinance institution system is needed to act as a bridge (technical & financial) to support the family’s economy so that a farmer or a farmer’s wife can have another business that supports their farming business.

310 The Policy Paper sought to formulate operational strategies and policies that increase the chances of implementing the Blueprint: CBD291.1 at 8946. It stated (at 8946):

During the preparation of this policy paper for acceleration of beef self-sufficiency in 2014, strategic, concrete, sustainable steps, which stimulate increased beef availability and consumer affordability and independence for local breeders, while continuing to improve breeder welfare, were also specifically formulated.

311 It identified various threats, including the “influence of foreign cattle markets (exporting countries) on local cattle markets” and the fact that “prices of imported feeder and beef are cheaper than local beef”: CBD291.1 at 8948. It suggested “[i]mplementation of market policies by protecting local cattle prices, controlling imports of cattle and meat and interest rates”: at 8949. The Policy Paper stated that “imports cannot be stopped”, but cattle imports could be reduced if AI was increased significantly: at 8953. The Policy Paper examined the likely consequences of increases and decreases to beef and cattle import tariffs: at 8955–6.

312 The Policy Paper addressed the importance of increasing the domestic cattle population, noting that breeding was the “main key to success”: CBD291.1 at 8959. It observed (at 8962):

To support a spike in the cattle population and an increase in the scale of beef cattle ownership/businesses, the government must guarantee the availability of raw feed materials, beef cattle feed, and forage rations for beef cattle as mandated by Law no. 18 of 2009. National Feed Security means that farmers have access to feed sources (raw materials for animal feed) for the benefit of cattle breeding/fattening businesses to ensure livestock productivity meets the expected targets. The main goal of animal feed security is the national provision of feed, by ensuring the availability of raw materials, the quality of raw materials, and the manufacturing and distribution of feed ingredients.

313 The Policy Paper suggested the development of various measures with respect to feed: CBD291.1 at 8962–8. It examined the potential for other meats to substitute for increasing consumption of beef: at 8962–70. It examined means of reducing the slaughter rate of productive female cattle: at 8970–3. As mentioned, the strategies were expected to complement the Blueprint. The Policy Paper concluded by stating that it should be widely disseminated both at the Ministries/Institutional level and at the regional level.

The Revised 2010 Strategic Plan – 2 December 2011

314 On 2 December 2011, the Minister of Agriculture (Minister Suswono) made a regulation (Regulation 83.1 of 2011) about the Ministry of Agriculture’s 2010–2014 Strategic Plan (Revised Plan): CBD414.1. This made various changes to the 2010 Strategic Plan, including funding changes. These changes are discussed later in these reasons.

The Quota for 2012 Confirmed

315 The 2012 quota was announced 15 December 2011 for 283,000 head of live cattle and 34,000 tonnes of boxed beef: SOAF 2 at [44].

316 DFAT Cable JA60609H was sent on 15 December 2012, confirming that Indonesia’s quota for import of live cattle for 2012 had been set at 283,000 head and that the quota for boxed beef was set at 34,000 tons: CBD352. It included the following summary (at 9862):

[T]he Coordinating Ministry for Economic Affairs has confirmed that Indonesia’s quota for import of live cattle next year has been set at 283,000 head. The quota for boxed beef is 34,000 tons. Quota has been determined by the (questionable) results of the recent survey of Indonesia’s domestic cattle herd. It is likely that the quota will be revised upwards later next year.

317 The cable included (CBD352 at 9862):

Diah Maulida, Deputy Minister for Agriculture and Marine at the Coordinating Ministry for Economic Affairs has confirmed that Indonesia’s quota for imported live cattle next year has been set at 283,000 head. The quota for boxed beef is 34,000 tons. Last year the quota was set (also in December) at 500,000 head for live cattle and 50,000 tonnes for boxed beef. The final quota for boxed beef was revised up to 99,000 tonnes, with actual imports of 107,000 tonnes.

2. The Coordinating Ministry had earlier advised us that the live cattle quota for 2012 would … be determined by the results of Indonesia’s domestic cattle survey. According to MLA (Country Director, John Ackerman) the Ministry of Agriculture’s calculations for quota are based directly on the results of the cattle survey along with projected local consumption. The projected domestic demand in the calculations does not appear to factor in demand from westerners, the tourism industry or manufacturing. MLA also advised that Indonesia’s National Beef Council has questioned the results of the cattle survey published by the Indonesian Central Statistics Agency (BPS). The Council estimates that the real figure could be between 30 to 50 percent lower than the BPS statistic. The Ministry of Agriculture’s high estimates are likely to be driven by a desire to appear to be meeting the self sufficiency goals in the national blueprint. Estimates from Indonesian Industry put anticipated demand for imported cattle at 500–600,000 head for live cattle and 80–100,000 tonnes for boxed beef. As in the past, it is highly likely that the quota for both live cattle and boxed beef will be revised upwards in the first half of next year.

3. It is interesting to note the Ministry of Trade and the Coordinating Ministry for Economic Affairs did not use their newly acquired authority under new regulations to increase the import quota. This conciliatory gesture towards the Ministry of Agriculture might be a result of the Trade Ministry not wishing to leave itself open to further criticism, given the scrutiny is currently under over imports across the board. But Trade will have a close eye to food prices over coming months - with beef prices likely to rise quickly if supplies are insufficient.

(Emphasis added.)

318 On 20 December 2011, Mr Michael Finucan (of MLA) sent an email to DAFF, which included the view that the quota was set by reference to Indonesia’s view about its self-sufficiency status and capacity to supply 80% of demand from domestic supply: CBD995. It included (at 38570):

The Coordinating Ministry of Economic Affairs, the Ministry of Trade and the Ministry of Agriculture have discussed and announced the 2012 allocation for live cattle and boxed beef imports, being 283,000 head of cattle and 34,000 tonnes of boxed beef. This is obviously significantly lower than anyone expected, but officials have been adamant in reporting Indonesia is close to self-sufficiency and can supply 80% of the presumed demand.

The Indonesian industry is of the belief that the Ministry of Trade will be watching prices closely and if there is a fluctuation in price they will take charge and issue additional quota to stabilise prices. It has been rumoured that a review will be conducted every three months.

Live Cattle and Boxed Beef Imports in 2011

319 In 2011, the number of live cattle exports from Australia to Indonesia was 412,057: SOAF 2 at [42]. The number of live cattle exports was lower than the quota of 500,000 which had been announced for 2011 (on 28 December 2010) and lower than the number of permits which had been granted by the Indonesian Government: SOAF 2 at [32]. According to the agreed facts, in respect of 2011, the DGLS issued between 672,500 and 682,500 import permits:

for the first quarter, for 120,000 cattle: SOAF 2 at [34].

for the second quarter, for approximately 200,000 to 210,000 cattle: SOAF 2 at [35];

for the third quarter, for 180,000 cattle: SOAF 2 at [38]; and

for the fourth quarter, for 172,500 cattle: SOAF 2 at [40]

320 During the course of 2011 the quota for imports of boxed beef was increased to 99,000 tonnes, and around 107,000 tonnes were ultimately imported: CBD352.

Indonesian Domestic Production in 2011

321 In 2011, domestic production increased again to 485,333 tonnes: CBD467 at 25170 (Ministry of Agriculture Statistics, 2013). This was above the target in the 2010 Strategic Plan and the Revised Plan of 481,990 tonnes: CBD412.1 at 20753; CBD414.1 at 21703.

Ministerial Visit to Indonesia on 21 and 22 March 2012

322 Minister Emerson and Minister Ludwig visited Indonesia on 21 and 22 March 2012, with a delegation of senior business leaders, which included representatives from several cattle industry bodies: CBD1013. The Ministers were provided a detailed brief from DFAT on 19 March 2012. Whilst the brief referred to various “irritants” and issues between Australia and Indonesia, the brief did not suggest that Indonesia’s stance on live cattle or boxed beef imports was motivated by anything other than its pursuit of the 2014 BSSP: at 38699.

323 Australia was assisting Indonesia with its agricultural production measures and Indonesia was maintaining its “protectionist regulatory environment”: CBD1013 at 38699. The “Visit Overview” included (at 38699):

Your visit to Jakarta follows a period in which a number of bilateral trade irritants have surfaced: new footage of alleged animal mistreatment in Indonesian abattoirs; Indonesia’s announcement of regulatory amendments with the potential to stymie horticultural trade; amendments to mining regulations requiring foreign-owned companies to divest ownership of projects in Indonesia; and concerns raised by Trade Minister Wirjawan about Australia’s Illegal Logging Bill. All of these have attracted significant media attention and raised questions about the health of the bilateral relationship. At the same time it has also put a spotlight on the uncertainties for business of the increasingly protectionist regulatory environment in Indonesia.

…

Indonesia has high expectations about the level of assistance Australia is prepared to make in the economic and trade sphere, notably in agricultural production. They have been raised through our undertaking to provide capacity building under IA−CEPA; through promise of assistance following the trade suspension; and through the attendance of Australian investors at a Food Security Summit. The $21 million dollar IndoBeef project will go some way to meeting that expectation and we should make the most of it.

324 The Brief included a “Political Overview”, an “Economic Overview” and a “Bilateral Trade Overview”: CBD1013 at 38701–3. The Australian perspective as expressed in the Bilateral Trade Overview was that the decrease in “import permits for 2012 for boxed beef and live cattle [was] part of [Indonesia’s] goal for self-sufficiency in beef by 2014”: at 38703. It was recognised that “Indonesia’s resentment over the lack of consultation ahead of the 2011 live cattle export suspension continues to surface”, but no connection was drawn between that fact and Indonesia’s setting or enforcement of quotas (at 38703):

Despite its growth potential, the bilateral trade relationship is vulnerable to a range of irritants, each of which contributes to a solidifying theme of Indonesian nationalist sentiment and protectionism. Indonesia remains committed to introducing restrictions on horticulture imports through essential ports (particularly Jakarta’s Tanjung Priok), though it has delayed its implementation. A plan to impose a permit regime for horticulture is also being considered. Indonesia has significantly decreased the projected number of import permits for 2012 for boxed beef and live cattle as part of its goal for self-sufficiency in beef by 2014. Plans are also mooted to restrict the sale of imported boxed beef to hotels and restaurants, excluding them from the growing supermarket sector …

Indonesia’s resentment over the lack of consultation ahead of the 2011 live cattle export suspension continues to surface, notwithstanding Indonesia’s own failure to consult with its trading partners on regulatory changes. Newly released footage of animal mistreatment at three Indonesian abattoirs is a reminder that this issue is with us for some time to come, and we must continue to consult as a priority.

(Original bolding.)

325 The brief contained “Bilateral Meeting Briefs” in relation to the relevant proposed meetings with Indonesian Ministers and officials: CBD1013 at 38695. A theme of each of these briefs was resistance to a proposal to introduce a weight limit of 250kg apparently being considered by Commission IV. The brief concerning Minister Suswono noted that the core component of Indonesia’s food plan (self-sufficiency in five staple commodities by 2014) was “driven by economic nationalism and concern that farmers — who comprise 40 per cent of the population — will defy the government if their interests are not looked after”: at 38727. It included (at 38727):

Food security

The Indonesian Government is acutely aware that its food security challenges are significant and set to increase. However, the core component of its national food plan — achievement of self-sufficiency in five staple commodities (rice, soybeans, corn, sugar and beef) by 2014 — is a short-sighted and unrealistic policy that threatens food supply in both the short and long term. The policy is driven by economic nationalism and concern that farmers — who comprise 40 per cent of the population — will defy the government if their interests are not looked after. Prior to Australia’s live cattle trade suspension, Australian officials advocated to Indonesia security of supply over self-sufficiency. Following the suspension, Australia’s messages have instead focused on the importance of trade as a method of supplementing local production to enhance food security.

Indonesian parliamentarians, including Trade Minister Gita Wirjawan, have been openly critical of trade liberalisation as part of a realistic and cost-effective approach to food security, ie through ensuring adequate imports to supplement local food production; and instead favour protection for farmers and food self-sufficiency. An Indonesian interlocutor told Australian officials that he believed the self-sufficiency policy was based on politics rather than fact, but under current political circumstances and the particular power plays in the parliament, the policy would persist.

This self-sufficiency policy is driving many trade irritants, including regulations to restrict access for horticultural products to certain ports, and could be further enshrined in a Draft Food Law. The law would formalise policy principles on food security and trade, stipulating that food could only be imported if there was a domestic shortage which could not be met by domestic production, and food could only be exported if domestic consumption and food reserve requirements were met first.

Australia does not support self-sufficiency as a viable means of achieving food security and sees reform of markets and trade as an essential part of improving global food security. While domestic agricultural production will continue to form a significant part of most countries’ food supplies, food self-sufficiency is neither practical nor economically advantageous, nor without risks. Even efficient and surplus producers can suffer from droughts, disease outbreaks, crop failures and natural disasters.

326 The Brief included a paper on “Live Cattle and Boxed Beef Trade: Import Permit and Weight Restrictions”: CBD1013 at 38752. It referred to the recent reduction in level of imports, attributing this to Indonesia’s pursuit of the 2014 BSSP and without connecting it in any way with the Second Control Order. The Australian perspective was that “Indonesia has determined the level of imports for 2012 based on Government projections of domestic supply and demand”: at 38752. It included (at 38752):

Import permit restrictions

In support of its objectives to achieve self-sufficiency in beef by 2014, Indonesia has set the level of imports for live cattle in 2012 at 283,000 head, a significant reduction on the 2011 quota of 500,000 head.

Indonesian media reports suggest that permits for the first quarter of 2012 were set at 60 000 head. According to DAFF export statistics, between 1 January and 9 March 2012, 59,525 head of cattle were exported to Indonesia. Indonesian Ministry of Trade officials have informally told us the quota for permits in the second quarter of 2012 will be 125,000 head. Although the combined first and second quarter permits amount to 65 per cent of annual permits, this does not increase the annual quota of 283,000 head. This second quarter figure has also been advised to business associations and reported in the Indonesian media.

Indonesia has determined the level of imports for 2012 based on Government projections of domestic supply and demand. It is highly likely that — as in previous years — relevant Indonesian agencies will revise import permits higher in light of domestic price and supply considerations. While this would be a positive for Australian producers, the uncertainty surrounding the process for import permits imposes a significant constraint on Australian producers’ ability to plan for their supply to the Indonesian market. You should emphasise to your Indonesian counterparts that these ongoing uncertainties will force Australian producers to look at building new markets elsewhere, and could leave Indonesian consumers significantly worse off.

Alongside the import restrictions on live cattle, Indonesia has also imposed a lower quota on boxed beef imports, set at 34,000 tonnes for 2012. Actual imports of boxed beef in 2011 were 107,000 tonnes. We have not received any advice from Indonesian agencies on quarterly quotas.

Indonesian media has reported on anecdotal price rises for beef, with local feedlotters pointing to the trade restrictions impacting on supply. This may be the first indication that — as expected — prices would rise and the Indonesian Government would have to revise its import permit quotas considerably higher.

Proposed 250kg weight limit on live cattle imports

Indonesia’s Parliamentary Commission IV (Agriculture) has proposed to Government the introduction of a 250kg weight limit for imported live cattle. The enforcement of the current 350kg weight limit by Indonesian authorities in the past two years has had a significant negative impact on exports of live cattle from northern Australia. The proposal to further restrict imports will make the trade uneconomic for Australian exporters.

Consideration of Quota Increase – April to June 2012

327 In around early April 2012, the Ministry of Trade considered whether there should be an increase to the 2012 quota in light of rising prices. DFAT Cable JA60993H sent on 5 April 2012, was titled “Indonesia: Live cattle and horticulture: Call on Deddy Saleh”: CBD1017. It included the following summary (at 38800):

The Director General for Foreign Trade, [Deddy Saleh,] told us he would propose increasing the quota for live cattle imports in light of rising prices. But we note any increase would require tough negotiation with the Ministry of Agriculture and the Coordinating Ministry for Economic Affairs.

328 The cable referred to the rise in prices being the “key indicator for the Ministry of Trade that demand for beef was higher than available supply … and they could see that prices were now going up” (CBD1017 at 38800–1):

On 4 April we (DHOM, Lawson, Wallner - DAFF) called on Deddy Saleh, Director General for Foreign Trade at the Ministry of Trade to discuss agriculture and horticulture trade issues.

…

5. We (DHOM) advised Saleh that the Coordinating Minister for Economic Affairs, Hatta Rajasa, had asked his Assistant Minister (Diah Maulida) to take forward with the Australian Ambassador a coordinating meeting on the issue of import quotas, to ensure that Indonesia had sufficient supply of beef and to avoid negative impact on prices. Australia needed advance notice of any future increase in quota to ensure that exporters had adequate stocks ready to meet demand.

6. Saleh said he was aware of concern about the issue of potential beef shortages, and said the Indonesian associations NAMPA (National Meat Processor Association Indonesia) and APFINDO (Indonesian Feedlotters Association) had also requested meetings to discuss quota. The associations were concerned that beef shortages were imminent and had warned of price implications. Saleh said he planned to propose that the quota for cattle imports go up. The key indicator for the Ministry of Trade that demand for beef was higher than available supply was rising prices, and they could see that prices were now going up. We noted that as Indonesia grew more affluent, demand for beef would naturally rise as a consequence. Even with increased capacity in its beef productivity, Indonesia would still need quality imports. Saleh agreed and said Gita Wirjawan had made clear his desire to boost beef consumption in Indonesia. The national self-sufficiency blueprint stipulated that, even if Indonesia was self-sufficient, it would still require to access 10% of its beef consumption needs from imports.

(Bolding omitted.)

329 The cable ended with the following comments (CBD1017 at 38803):

12. Saleh’s remarks on his desire to see the cattle quota rise are encouraging, though he will need to negotiate with the Ministry of Agriculture as well as the Coordinating Ministry, where the final decision on quotas rests (the Ministry of Agriculture makes a recommendation only, but clearly still holds sway over decisions through its political clout). Indonesian industry representatives have told us the Ministry of Agriculture wants to hold the line on decreasing cattle imports in part by way of reprisal for last year’s trade suspension. The Ministry of Trade and Coordinating Ministry are clearly alert to the impact of beef shortages on prices for consumers and aware that prices are already rising. They will need to be able to point to rising demand to appeal to domestic constituents (including the Parliament) and demonstrate that any increase in quota appears to be consistent with the self-sufficiency blueprint. The Ministry of Agriculture has made clear that it will be inflexible and seek to stick to the official self-sufficiency blueprint projections.

(Brett Cattle’s emphasis.)

330 The first sentence emphasised by Brett Cattle above is one of very few references in the contemporaneous documents which record the view of some industry participants that the lower quotas were in part a “reprisal”. Whilst it may be that particular industry representatives considered that decreasing imports was in part a “reprisal” on the part of the Ministry of Agriculture, it is unlikely that decisions (ultimately made by the Coordinating Ministry from January 2012, after consultation) were made on that basis. In any event, Brett Cattle expressly did not advance the case that the quotas for the 2012 and 2013 years were by way of retaliation or retribution: T713.37–40.

331 As to the second sentence, it is clear that the Ministry of Agriculture advocated for implementing the 2014 BSSP and, if anything, favoured the interests of farmers which it perceived to lie with keeping beef prices high. As has been mentioned, Minister Suswono’s political interests lay with assisting farmers and the Ministry of Agriculture’s 2010 Strategic Plan involved increasing the income of farmers and the Farmer Terms of Trade. The Ministry of Agriculture had been charged with increasing farmer welfare. Many of its activities, such as “continu[ing] to fight for the provision of interest subsidies for farmers and livestock farmers” (CBD412.1 at 20678), were directed to achieving that objective.

332 DFAT Cable JA61009H, sent on 12 April 2012, recorded that continued consideration was being given to increasing the quota for 2012 and that the “Ministry of Agriculture had remained adamant that supply was sufficient, despite the growing lobbying and criticism from Indonesian importers and feedlotters”: CBD357 at 9693 [3].

333 DFAT Cable JA61043H, sent on 20 April 2012, referred to a recent meeting between the Ministry of Agriculture and non-farmer industry participants, during which the Ministry maintained the view that there was enough domestic supply to meet demand: CBD1018 at 38805. The cable referred to the establishment of a team to map domestic sources of supply and demand. The cable included (at 38805–6):

Indonesia’s Agriculture Minister Suswono, yesterday announced that the Ministry had established a small team of industry stakeholders to determine additional beef import quota. This initiative stemmed from a three hour meeting between industry representatives and Suswono on Tuesday 17 April. The team mentioned by Suswono is apparently a subgroup of the new national beef board - a sort of council comprising a member of the eight peak bodies representing all components of beef and cattle business in Indonesia. Suswono has tasked this team to report back in two weeks mapping both domestic sources of supply and demand. The meeting follows on from two government coordination meetings that were called last week to address industry complaints about beef shortages.

…

3. The Agriculture ministry has maintained a consistent line through all recent meetings, pointing to cattle census results from last year and expressing confidence that domestic cattle herds in East Java, Central Java, West Nusa Tenggara, Bali, South Sulawesi, and Lampung, are sufficient to produce enough local beef to meet demand. Industry problems, according to the Ministry, are therefore more a matter of distribution from remote provinces to the populous capital. The Trade and Coordinating Ministries appear to be more open to relieving the squeezed market and addressing industry noise through a revision of the national import quotas applied to live cattle and boxed beef (JA61009H refers). However, to date, no agreement has been reached and there is a growing feeling of frustration by other Ministries with Suswono’s intransigence. Notably, in yesterday’s announcement Suswono did refer to imports as a possible solution to the current supply problems.

334 On 1 May 2012, the Director of DFAT’s Indonesia Economic and East Timor Section sent an email which included (CBD1022 at 38815):

Live Cattle and Boxed Beef

…

Annual live cattle export quotas are becoming a more significant issue in Indonesia, with the view that the current 2012 quota of 283,000 head will be insufficient to fulfil Indonesian demand — Indonesian industry is agitating for more supply. Debate continues within the Indonesian bureaucracy on the merits of bringing forward the third quarter quota (JA60993H, JA61009H, JA61019H, and JA61043H refer).

Indonesia has moved to partially ban beef products from the US in response to the reported discovery of BSE in an American dairy cow (JA709778L refers). The suspension takes effect immediately and no end date is defined. Post cautions against any official comment given lingering resentment in Indonesia (see JA61002H) on the suspension on live cattle exports. Post notes that Indonesia is unlikely to want to see Australia rewarded through further monopolisation of the market.

(Brett Cattle’s emphasis.)

335 DFAT Cable JA61089H, sent on 4 May 2012, recorded that a decision had been made by the Coordinating Ministry to “bring forward 5,600 tonnes of boxed beef from the quota from the second half of the year, but said this would not alter [the] overall quota for the year”: CBD1023 at 38817. The cable made clear that the industry participants who were most concerned were those in the boxed beef industry and that “live cattle importers were less agitated”: at 38817 [2]. The cable noted that Diah Maulida, the Deputy Minister for Agriculture and Marine Affairs at the Coordinating Ministry for Economic Affairs, had confirmed that no decision had been made to increase the overall quota for boxed beef or live cattle, but that Minister Suswono had established a small team to re-assess supply and demand for the second half of the year with a view to reassessing the quota: at 38817 [3]. This team was to consult Indonesian stakeholders and “make its final report to the Coordinating Minister for Economic Affairs, Hatta Rajasa, who was very concerned about beef prices and the potential impact on food prices more broadly”: at 38817–8 [3].

336 On 18 May 2012, the Assistant Secretary of the Bilateral Trade Branch of the Trade and Market Access Division of DAFF reported in a Minute to the Secretary of DAFF his assessment that the quota for 2012 was set by reference to Indonesia’s move towards self-sufficiency and not as a response to the Second Control Order (CBD1031 at 38848):

The 2011 quota is significantly lower than the 2011 quota (which was 500,000 head). However, this is not a response to the temporary suspension of Australia’s live cattle exports. Rather, it reflects Indonesia’s move towards self-sufficiency in a number of' commodities, including beef.

337 A similar view was expressed in relation to the 2012 boxed beef quota (CBD1031 at 38849):

In support of its goal of self-sufficiency in beef, Indonesia has also imposed volume restrictions on imports of boxed beef. For 2012, Indonesia has imposed a limit of 34 000 tonnes of boxed beef (from all sources), with import permits issued on a six-monthly basis.

338 This Minute was prepared in relation to a mid-term meeting to be held with Australia’s Ambassador to Indonesia on 23 May 2012: CBD1031. The Minute also included (at 38843, 38845):

Bilateral agricultural relationship

3.     The overall relationship between Australia and Indonesia is strong and both countries place importance on the long-standing, mutually beneficial trade relationship.

-     However, in the agriculture sphere, the bilateral relationship has been challenging, with the suspension of the live cattle trade in June 2011 creating significant tension.

4.     Indonesia is pursuing a policy of self-sufficiency in a number of key agricultural commodities, including beef, by 2014, and is using import restrictions to assist in achieving this goal.

5.     Indonesia regularly implements regulations that affect agriculture imports. These measures have significant potential to disrupt trade of Australian agricultural exports to Indonesia.

-     2012 is proving to be particularly challenging thus far, with Indonesia implementing new or revised regulations placing import restrictions on live cattle, meat, horticulture and grains.

…

Quotas and import permits for live cattle and boxed beef

22.     While Indonesia has not indicated any connection between the new livestock regulatory framework and their permit allocation for live cattle or boxed beef, it appears that imports of live cattle and boxed beef to Indonesia in 2012 will be significantly less than in 2011.

-    For 2012, Indonesia has imposed a limit of 238 000 head of live cattle and 34 000 tonnes of boxed beef (from all sources).

23.     We understand that Indonesian agencies will continue to review price fluctuations and supply requirements throughout the year, as has occurred in previous years, and potentially revise import volumes as necessary. We would appreciate post continuing to provide regular updates on this issue, particularly as Ramadan approaches.

339 The Minute also referred to Indonesia’s introduction of new horticultural regulations which would “give effect to a quota system for horticulture products similar to the system currently in place for boxed beef and live cattle imports”: CBD1031 at 38845.

340 Brett Cattle emphasised various aspects of DFAT Cable JA61290H, sent on 26 June 2012, titled “Indonesia: beef quotas and import permits: no relief for beef”: CBD1033. It included the following summary (at 38859):

Officials have been unable to indicate any likely advance timing for the issue of import permits for the second half of the year even though permits for live cattle and boxed beef will expire on 30 June. The Ministry of Agriculture seems to be insisting that second half quotas for live cattle and boxed beef will be 98,000 head and 8,300 tonnes respectively, The Ministry of Trade is concerned that beef prices are already above peak Ramadan prices reached last year. Importer associations and business people have told us the supply situation was dire, but the politicised nature of the debate around beef self-sufficiency had left little stomach to lobby for change.

341 The cable included (CBD1033 at 38859–60):

2. The Ministry of Agriculture (MoA) seems to be stubbornly holding the line and insisting that second half year quotas for live cattle and boxed beef will be 98,000 head and 8,300 tonnes respectively. These volumes are significantly lower than the first half year when 185,000 head of live cattle was issued as import permits (of which approximately 90 per cent will be realised as imports by 30 June) and a total of 25,700 tonnes of boxed beef. This seems to fly in the fact of all price signals coming from the market and representations from a number of industry bodies. It is also at odds with views from both the Ministry of Trade (MoT) and the Coordinating Ministry for the Economy, who are looking for evidence to support the MoA assertion that domestic sources can meet the peak demand period ahead over Ramadan.

3. Deddy Saleh, Director General of Foreign Trade, MOT told us (Charge d’Affaires, DFAT Dunstone and DAFF Wallner) on 21 June that he thought the MoA position was “irrational” and pointed to his ministry’s market monitoring of prices which showed that, while prices for beef were not volatile, they were already above peak Ramadan prices reached last year. Accordingly, the MoT was proposing an incremental approach to increasing quota for the second half of the year where all residual quota was issued immediately, and periodic reviews determined the need for additional quota allocations later in the year. Saleh also said the supply potential forecast by the MoA’s census (14 million head of cattle) was probably right based upon the numbers of cattle estimated to be in Indonesia (making the assumption that the seven million farmers in Indonesia had, on average, two cattle each). He said, however, that smallholder farmers were not motivated to sell on price because they kept cattle as a savings mechanism, and sent animals to slaughter based upon social drivers such as a daughter’s wedding.

…

6. Sembiring said that beef had become intensely politicised and was now the flagship product for Suswono’s claim that progress had been made towards food self-sufficiency. Sembiring said that, of the five key food commodities identified in the self-sufficiency blueprint, only beef showed any evidence that production had increased (he was referring to last year’s cattle census). Hence, Suswono was reluctant to increase quotas, which would contradict the claim that Indonesia had already reached a domestic herd size needed for self-sufficiency.

342 DFAT Cable JA710000L, sent on 27 June 2012, reported that the “The Ministry of Trade and contacts from the Indonesian industry unofficially confirmed today that there will be no increases in beef and live cattle quotas in the near term”: CBD1034 at 38863. The cable indicated that Indonesia’s decisions in relation to the quota depended on information about the state of domestic supply. The cable included (at 38863):

Deddy Saleh, Director General of Foreign Trade, advised us (DHOM) that new import permits would be issued by the Ministry of Trade this week. Saleh said an internal coordination meeting held yesterday focused on what was needed to meet the demand for Ramadan. He indicated that 8,300 tonnes of boxed beef quota would be released this week (the residual amount from the 34,000 tonnes originally set for the year). He said the Government was not looking at increasing the overall quota and had not, at this stage, decided whether to bring any of the remaining quota for live cattle (of 98,000 head for the remaining two quarters) forward from the fourth quarter. Saleh said they were awaiting further information from various sources, including feedlots, as to the state of the domestic supply before finally making a decision on the numbers for the third quarter.

2. Representatives from both the Indonesian Cattle Feedlotters Association (APFINDO) and the Association for Meat Importers (ASPIDI) confirmed that yesterday’s coordination meeting made the decision to stay the course, with no additional quota allocated for the second half of the year. Dayan Antoni representing APFINDO told us (Wallner) they were seeking clarification today whether the 98,000 head will be released in a block now or split over the remaining two quarters. Thomas Sembiring, Executive Director, ASPIDI said the Ministry of Agriculture (MoA) felt “locked in” by earlier press announcements that local cattle supply was adequate for Ramadan and the subsequent Lebaran period. Sembiring also said that ASPIDI was part of a new Jakarta Beef Committee to formulate an action plan to counter the decision.

343 By 29 June 2012, the Ministry of Agriculture had rejected Commission IV’s demand that a 250kg weight limit be imposed on live cattle imports: CBD1036 at 38865.

President Yudhoyono’s Visit to Darwin – 2 to 4 July 2012

344 President Yudhoyono visited Darwin from 2 to 4 July 2012. On 29 June 2012, DFAT emailed a “HOM’s Leaders’ Meeting Briefing” to Australia’s Ambassador to Indonesia and others, in relation to his trip to Darwin: CBD1035; CBD1036.

345 The briefing document referred to the “rapidly growing shortfall between domestic demand, rising beef prices and the number of live cattle permits and the volume of both live cattle and boxed beef entering into the Indonesian market”: CBD1036 at 38865. It noted that the “Ministry of Agriculture maintains the domestic herd and current level of imports are sufficient for Indonesia’s domestic food requirements and has refused to increase the quota for the remainder of 2012”: at 38865. It stated: “Industry has told us the supply situation was dire, but the politicised nature of the debate around beef self-sufficiency had left little stomach to lobby for change”: at 38865. It also recorded that “the Indonesian beef industry estimates imports of 400 - 450,000 head of live cattle are necessary to meet domestic demand in 2012”: at 38866. A DFAT brief dated 9 July 2012 raised similar matters: CBD1045.

346 DFAT Cable JA710035L, sent on 10 July 2012, reported that the Ministry of Trade had signed off on import permits for 8,300 tonnes of boxed beef and the total residual quota of 98,000 head of live cattle for the rest of the year: CBD1046. The cable ended with a series of comments, including (at 38912):

7. The numbers issued under permits for boxed beef and live cattle are consistent with figures defined under the self-sufficiency blueprint (ten per cent of national demand) and reflect the Ministry of Agriculture’s conviction that domestic supply (including the 150,000 head of cattle already in feedlots) will see them through Ramadan. We have previously reported on the Ministry of Trade’s concerns about the rising trend in beef prices and concerns about how supply will be met in the post Ramadan period. We should not necessarily expect further issue of live cattle permits for the fourth quarter.

8. It is post’s opinion that, without upwards revision following Ramadan, Indonesia’s beef market will become critically undersupplied. This view is supported by many Indonesian official interlocutors. In particular, the boxed beef supply will be quickly expended. By comparison, the second half of last year through Ramadan saw about 77,000 tonnes of boxed beef enter Indonesia. While this volume was in part a response to the temporary trade suspension of live cattle, it is indicative of real demand. A reduced trade volume of only 8,300 tonnes for the same period this year, coinciding with reductions in live cattle, will likely mean that beef is off the menu by the end of the year.

(Brett Cattle’s emphasis.)

347 The reference in [8] to the volume of boxed beef in the second half of 2011 is a reference to the disruption in live cattle exports having meant that boxed beef imports had to be increased in the second half of 2011.

348 A DFAT document dated 16 July 2012 in relation to the “Live Cattle Trade” stated that the 2012 quota corresponded with the Blueprint and that it would be further reduced in 2013 (CBD1050 at 38921):

The quota has been reducing each year since the self-sufficiency policy was introduced, and the current quota for imports corresponds with the blueprint. The quota is supposedly equivalent to 17 per cent of national demand in 2012 and we understand this will be reduced to 10 per cent of national demand in 2013 (based on the figure of each Indonesian consuming 1.98 kilograms of beef per annum)

(Original emphasis omitted.)

349 The document stated (CBD1050 at 38920):

There is a strong push from the Indonesian Government for Australian investment in the Indonesian cattle industry: this is to boost Indonesia’s drive for self-sufficiency in beef and projects are focused around the provision of breeding technology or actual breeding cattle to boost the Indonesian cattle herd size

350 It stated (CBD1050 at 38921):

* The self-sufficiency blueprint, drafted in 2009 by the Ministry of Agriculture, outlines projected demand and supply figures, including anticipated import numbers for beef and cattle

◦     Indonesia’s cattle census published in October 2011 revealed there were 14.8 million head of cattle in Indonesia (16.1 million head including buffalo): this is widely acknowledged as likely being an unrealistic representation of the size of the domestic herd

◦    Indonesia’s self-sufficiency goal for 2014 was for 14.2 million head of cattle

…

* Embassy interlocutors within the Indonesian Government and industry are aware of a rapidly growing shortfall between domestic demand, rising beef prices and the number of live cattle permits and the volume of both live cattle and boxed beef entering into the Indonesian market

◦    The Ministry of Agriculture maintains the domestic herd and current level of imports are sufficient for Indonesia’s domestic food requirements and has refused to increase the quota for the remainder of 2012

◦    The Ministry of Trade have been tracking beef prices and have told us that the MoA’s position was ‘irrational’ – while prices were not volatile, they were already above peak Ramadan prices reached last year

◦    Industry has told us the supply situation was dire, but the politicised nature of the debate around beef self-sufficiency had left little stomach to lobby for change – the industry association planned to appeal to the Jakarta Provincial Governor to declare Jakarta a special trade zone with a larger import quota

◦    Post assesses that if no additional quota allocations are made, Indonesia will be critically under-supplied in the post-Ramadan period

* Wet market prices for prime cuts of meat (sirloin, tenderloin) are between 67 – 87 per cent more expensive than the period before Ramadan in 2011

351 DFAT Cable JA710105L, sent on 1 August 2012, confirmed that, “[f]ollowing substantial prices rises in the Indonesian market and pressure from industry figures, the Indonesian Ministry of Trade issued 7000 tonnes of boxed beef quota for the processing sector”, which would primarily be used to produce Bakso (meatballs): CBD1059 at 38953. The cable also stated (at 38953):

3. Separately, Jonny Liano, Executive Director of The Indonesian Association of Meat Producers and Feedlotters (APFINDO) told us (Wallner) in light of the increases in the boxed beef sector, he had secured a meeting with Agriculture Minister Suswono to push for an increase in the live cattle sector. He said that he would request an increased live quota based on the fact that the Indonesian [G]overnment had based their beef imports on a 60/40 (live trade/boxed beef) split, and this increase distorted the values. We will continue to follow up.

Revised Beef Self-Sufficiency Blueprint –October 2012

352 In October 2012, the Ministry of Agriculture published a further version of the Blueprint titled “Blueprint Meat Self-Sufficiency Program Cow and Buffalo 2014 with Modelling System Approach”: CBD460. Chapter I, containing an “Introduction”, observed that there had been earlier revisions (not in evidence) and that the “beef and buffalo meat self-sufficiency program is implemented with the main objective of improving the welfare of cattle / buffalo farmers by empowering farmers and optimizing the productivity and reproductivity of local cattle and buffalo”: at 24433.

353 DFAT Cable JA710448L, sent on 25 October 2012, reported that statements made by the Director General Livestock and Animal Health Services were indicative of further incremental reductions in quota levels for 2013: CBD1071. It stated that “[b]ased upon public statements, 2012 [sic – 2013] quota for live cattle may be in the order of 258,000 head and boxed beef of around 30,000 tonnes (from all sources)”: at 39086. The cable included (at 39086–7):

Definitive numbers for 2013 quota levels for boxed beef and live cattle are not yet available. These are set by means of a negotiation process between the Ministries of Trade, Agriculture and Coordination for Economic Affairs, taking account of demand, domestic supply and the blueprint for beef self sufficiency program 2014. This is a relatively new process having been implemented in December last year for this year’s quota allocation. At least three coordination meetings were held to reach consensus on agreed quota levels for 2012. The first coordination meeting to consider 2013 quotas has been flagged but not yet convened.

[The cable reported on statements made by Syukur Iwantoro, Director General of Livestock and Animal Health Services.]

4. There are two points to note in relation to Iwantoro’s statement. According to the Ministry of Agriculture:

-    Estimated consumption has risen from 484,000 t in 2012 to a predicted 535,000 t next year based upon a per capita rise in beef consumption from 1.9 kilograms per capita to 2.2 kilograms per capita.

-    Estimated supply from domestic sources has also increased, reducing the supply gap from 17 percent of national demand to 14 percent.

Comments:

5. There is little rigor to Ministry of Agriculture estimates as market price indicators continue to show sustained high prices, reflecting a very undersupplied market which is likely to be damping of beef consumption as consumers opt for lower priced alternative protein sources. The estimates represent a balancing act of pursing the blueprint to self-sufficiency on one hand and the reality of what MLA now says is one of the most expensive beef markets in the world.

6. Iwantoro’s public comments represent the Ministry of Agriculture’s negotiating position going into the first coordination meeting. Experience suggests that while Trade and Coordinating Ministries are likely to be more sensitive to price pressures and may seek to set higher levels of imports, the Ministry of Agriculture will hold firmly to their position backed by technical supply / demand data and the President’s self-sufficiency blueprint. The Ministry of Agriculture position has prevailed to date.

7. We will follow up with relevant Ministries to try to confirm estimated quota levels for 2013. We will also make representations again to the Ministry of Trade seeking them to honour their commitment of last year to issue import permits a month in advance.

Beef Cattle Statistics – November 2012

354 In November 2012, the Director General of Livestock in the Ministry of Agriculture published Livestock and Animal Health Statistics that estimated (as “preliminary figures”) that the beef cattle population for 2012 was 16.034 million (up from 14.824 million in 2011): CBD461 at 24636, 24709–10. Buffalo was 1.378 million, up from 1.305 million: at 24712.

Law No 18 of 2012

355 On 17 November 2012 (at 29491), the Indonesian Government enacted Law No 18 of 2012 (the 2012 Food Law): CBD492; L&B 1 at 267–71 [64]–[82]. This law provided that the “administration of food was to be carried out to fulfil basic needs which provide benefits in a fair, equitable and sustainable manner based on food sovereignty, food self-sufficiency and food security”: L&B 1 at 268 [70]; CBD492 art 3 at 29449. It required that food supply sources come from “domestic [f]ood [p]roduction”. Only if those food supplies were not sufficient, could food needs be met by importing food according to need: arts 14 and 36 at 29452 and 29457–8.

356 The 2012 Food Law obliged the Indonesian Government to stabilise their supply and price at producer and consumer levels, in order to protect the income and purchasing power of persons such as farmers (among others) and maintain the affordability of staple foods for consumers: CBD492 art 55(1) and (2) at 29462.

Indonesian Consideration of the Quota for 2013

357 DFAT Cable JA61715H, sent on 23 November 2012, stated that “Indonesian press continues to report on the shortage of beef and resulting high prices, with Coordinating Minister for Economic Affairs Hatta Rajasa announcing he has ordered a market intervention to bring down the price of beef, and an evaluation of Indonesia’s beef stock”: CBD1073 at 39090. It noted that the Ministry of Trade had confirmed that a recent coordinating meeting on the beef quota had discussed the shortages and that a decision had been made to set the quota this month. A separate meeting was required to establish the amount. The cable reported that the “Ministries of Trade and Agriculture continue to blame high prices on distribution issues rather than supply issues”: at 39090. The cable included (at 39090):

2. In remarks to press in the margins of the EAS meetings in Phnom Penh on 20 November, Rajasa told reporters he had directed his ministry to coordinate efforts to stabilise the price of beef, as well as to evaluate the overall stock of beef against consumption rates (see transcript attached). While he did not specifically address imports or quota, he noted that while self-sufficiency was the ultimate goal, the local beef market was still forming and that the government should monitor whether rising consumption, for example by the expanding middle class, was currently moving beyond local supply.

358 DFAT Cable JA61728H, sent on 29 November 2012, reported that the “Ministry of Agriculture has confirmed the 2013 beef quota at a total of 80,000 tonnes (238,000 head of cattle and 32,000 tonnes of boxed beef), a reduction from 85,000 tonnes in 2012”: CBD462 at 24859. It included (at 24859):

[T]he quota has attracted criticism from the Indonesian Meat Importers’ Association on the basis it will result in unaffordable beef prices. The Ministry of Agriculture continues to deflect blame for rising prices, with its Director-General for Livestock inaccurately blaming the rising price of Australian beef.

(Brett Cattle’s emphasis.)

359 The cable included (CBD462 at 24859–60):

Agriculture Minister Suswono has publicly announced the beef import quota for 2013, telling local press that the government had agreed to lower total beef imports to 80,000 tonnes from 85,000 tonnes in 2012. The Ministry of Agriculture would issue import licences from mid-December 2012, to allow adequate supply to enter the market in January 2013 in order to stabilise beef prices.

…

4. This announcement comes after continuing press about the high price of beef and public comment by various Ministers on the subject, including an earlier indication by Coordinating Minister for Economic Affairs, Hatta Rajasa, that the government would re-evaluate beef supply in order to stabilise prices (JA61715H refers). Following the quota’s announcement Trade Minister Gita Wirjawan is reported to have told press this was part of the government’s commitment to gradually reduce import cattle in its effort to achieve self-sufficiency, and that the imports under the 2013 quota would serve as a price stabiliser. Wirjawan noted the quota would also be re-evaluated periodically in line with the government’s policy on food self-sufficiency.

…

6. The Ministry of Agriculture continues to deflect blame, maintaining that the high beef prices are caused by factors other than declining quota …

360 DFAT Cable JA61739H, sent on 4 December 2012, observed (CBD1078 at 39284):

The government is concerned about the impact of rising beef prices and we understand discussions continue between Ministers as to whether to increase quota. But they will need to have a compelling case to bring Agriculture Minister Suswono around, for whom reduced imports is a political necessity.

361 The cable included (CBD1078 at 39285–6):

Beef Shortage - Indonesian Government Response

5. Indonesian Government ministers are increasingly concerned at the rising cost of beef and the potential effect on inflation. Only Agriculture Minister Suswono is still arguing against more imports, stating the need for self-sufficiency. Suswono’s priority is protection of the farmers’ short-term interests, in line with the politics of the PKS party, which has a disproportionate influence over agriculture policy in Indonesia. For Suswono, high beef prices for Indonesian middle-class consumers is a positive development because it means more profits for his constituents.

6. Iman Pambagyo, Director General for International Cooperation at the Ministry of Trade (please protect) told us (Lawson) that Gita Wirjawan and Hatta Rajasa were very worried about the rising beef price and had been using media and other outlets to put pressure on Minister Suswono to increase the quota. But Suswono was not concerned about rising prices, only about protecting domestic producers. He listened only to the PKS party and their lobbyists in the Indonesian Parliament. We are reliably informed that Gita Witjawan has said himself that he fully appreciates that there is a scarcity of beef in Indonesia and that imports should be increased, but he is not prepared to take Minister Suswono on directly over the quota issue.  

7. On Monday 26 November we (Lawson) met Edy Prio Pambudi, Deputy Coordinator for Macroeconomy and Finance at the Coordinating Ministry for Economic Affairs (also Lecturer at the University of Indonesia and adviser to Coordinating Minister Hatta Rajasa). Among other issues, we discussed the problems surrounding the shonage of beef and advised Pambudi about the difficulties surrounding the boxed beef detained at the port of Tanjung Priok. Pambudi told us on 28 November that he had spoken with Minister Rajasa and a range of others, including Customs. He said port authority charges would now be waived …

8. We met Pambudi again, at his request, on Sunday 2 December … He said on the question of quota that discussions were ongoing between Ministers as to whether to import more beef for December, and whether to increase the quota for next year. Hatta Rajasa was very worried about the potential impact of beef prices on inflation. Pambudi had organised for price data to be collected from all regional areas to help Hatta make a strong case about the impact of the beef shortage. A decision would be made soon on whether additional quota should be granted to ease the shortage, but the argument for an increase needed to be compelling, given the sensitive politics of self-sufficiency.

(Brett Cattle’s emphasis.)

362 An “Australian Delegation Brief” was prepared for the “Australia–Indonesia Working Group on Agriculture, Food and Forestry Cooperation (WGAFFC)” meeting in Perth from 5 to 7 December 2012: CBD1075. This was co-chaired by Ms Evans (DAFF) and Mrs Banun Harpini (Director General Quarantine, Indonesian Agricultural Quarantine Agency, Ministry of Agriculture): at 39097. The information included (at 39105):

Indonesia’s long-standing policy objective has been to foster food production in order to meet the demand of a growing population, and achieve self-sufficiency in the main staple foods (especially rice). Food security remains a sensitive issue as political stability has traditionally been linked to the Government’s ability to ensure an adequate and affordable supply of rice and other basic commodities.

363 Later, the following is stated (CBD1075 at 39132):

Indonesian Policy of “Self-Sufficiency”

After his re-election in 2009, President Yudhoyono stated that his new administration would aim to attain “self-sufficiency” in five key agricultural commodities: rice, corn, sugar, beef and soy by 2014.

Further, President Yudhoyono tasked Agriculture Minister Suswono with addressing a number of agricultural challenges, including food security, regional food “self-sufficiency”, increased agricultural productivity, stronger agricultural sectors, greater prosperity for farmers, more precisely targeted subsidies, a more favourable balance between agricultural imports and exports, increased production of livestock, intensified cooperation with other countries and the eradication of corruption.

Post advises that Indonesia is not meeting its targets for all five commodities. There is heightened sensitivity because Minister Suswono has declared success on beef “self-sufficiency”. The reality is that high prices are constraining demand and increasing the relative attractiveness of alternative protein sources (chicken, fish, soy, etc). The breeding herd has been slaughtered to meet demand, making the task of achieving “self-sufficiency” more difficult in future years.

The objective of “self-sufficiency” in food production should not be confused with food security. A mix of domestic production and imports is the best way to provide food security. Recent public protests in Indonesia highlight the need for greater availability of affordable red meat.

(Brett Cattle’s emphasis.)

364 A “Record of Meeting” dated 5 December 2012 was prepared: CBD1085. This included (at 39315):

5.5 IMPORT ARRANGEMENTS POST 1 JANUARY 2013

Indonesia outlined the process through which the Ministry of Agriculture issues letters of recommendation and the Ministry of Trade issues import permits under Regulation 95/2012. Indonesia confirmed that the 2013 beef import levels would be 80,000 tonnes, which consists of 32,000 tonnes of boxed beef and 267,000 head of feeder cattle (equivalent to 48,000 tonnes of beef). The quarterly allocation for live cattle will be divided:

* Q1 — 21 percent (56,610 head)

* Q2 — 45 percent (117,930 tonnes)

* Q3 — 17 percent (46,230 tonnes)

* Q4 — 17 percent (46,230 tonnes)

Indonesia noted that import permits for boxed beef would now be issued annually, however following the meeting Indonesia clarified that the allocation would be divided into two semesters with the first semester receiving 60 percent of the allocation and the rest of the allocation in the second semester.

Australia thanked Indonesia for early notice and encouraged Indonesia to continue to provide these details in advance so Australia can supply reliably.

Australia said that Australian public statements will welcome the announcements of the 2013 import allocation and state that Australia has a role in supplying Indonesia with quality beef. At a government to government level, however, Australia registered its concern that restrictions on imports are leading to higher price of beef and encouraged a more open approach by Indonesia. Australia noted that while media has suggested the Indonesian beef prices were the result of the Australian live cattle price, this was incorrect as live cattle prices have been decreasing.

Indonesia agreed that the increased beef prices in Indonesia is not due to Australian cattle prices and asserted that it is also not due to import restriction but the main reason is market supply mechanisms in Indonesia.

Indonesia noted that the annual import allocation is determined by Indonesia’s ministries of agriculture, trade, and industry and is coordinated by the Coordinating Ministry of the Economy. The Ministry of Agriculture is one party in a joint decision making process. Indonesia confirmed that the annual allocation level was set to fill the gap between its supply and domestic demand.

365 Consistently with what was stated in the “Record of Meeting” extracted above, DFAT Cable JA61745H, sent on 6 December 2012, reported that the Ministry of Trade had confirmed initial figures for the 2013 beef import quota had been set at 80,000 tonnes (being 32,000 tonnes of boxed beef and 267,000 head of feeder cattle): CBD1083 at 39307. The cable included (at 39307–8):

On 5 December Embassy (Lawson) met with Ery Novrizal Yunas, Deputy Director Imports, Ministry of Trade to discuss the 2013 beef quota and confirm the status of government discussions on the final quota.

2. Yunas confirmed initial figures for the 2013 quota had been agreed at 80,000 tonnes, with a breakdown of 267,000 head of cattle (representing 48,000 tonnes of beef through a calculation of 180 kg per head of cattle) and 32,000 tonnes of boxed beef … However Yunas told us these figures were still subject to discussion, with Trade Minister Wirjawan and Coordinating Minister for Economic Affairs Hatta Rajasa meeting that afternoon (5 December) to discuss possible revisions. This was confirmed in separate discussions on 5 December by Maudy Kiranayanti, Deputy Director Australia desk, Ministry of Trade, who told us (Lawson) that discussions on import quota allocation were ongoing.

3. Yunas noted he had been inundated with complaints by importers and other interested parties following the initial announcement of the 2013 quota … In Yunas’ opinion, 80,000 tonnes was not enough to satisfy domestic demand, and he “hoped” that Wirjawan and Rajasa would agree to raise the quota. However he acknowledged the politics of such an increase would be very difficult, particularly in the lead-up to the 2014 elections and in the context of Indonesia’s self-sufficiency drive. Yunas noted quotas set for horticulture were also creating problems in the market, compared to staples such as sugar and rice where quota was adequate.

…

6. Edy Prio Pambudi, Deputy Coordinator for Macroeconomy and Finance, Coordinating Ministry for Economic Affairs told us on 5 December that the data collected from the regions demonstrated that beef prices would contribute to 5 percent of inflation, which was significant. This was the reason action was required to address the shortage. He said that a final decision on quota for 2013 would not be reached until the end of next week, based on a recalculation of national demand.

7. Kiranayanti, Australia desk told us the Ministry of Trade was well aware of the shortage of beef, but said the difficulty lay in finding a diplomatic way of selling the message to the Indonesian people (ie farmers) that imports were needed. She said Vice Minister for Trade Bayu Krisnamurthi had told her that Indonesia needed to do three things to manage the beef shortage: 1. increase imports for processed meats, such as that used in meatballs (bakso); 2. work harder in genetics through the import of cattle semen; and 3. raise investment levels particularly in integrated slaughterhouses.

(Emphasis added; original bolding.)

366 A DFAT brief dated 7 December 2012 provided some analysis of the 2013 quota, expressing the view that some of the assumptions on which it was based were unrealistic: CBD1084 at 39311

367 DFAT Cable JA61770H, sent on 14 December 2012, reported on the possibility that the quota would be increased: CBD1087. The cable included (at 39331–2):

3. Trade Minister Gita Wirjawan announced to press early this week that beef supply was inadequate and that the annual import quota for 2013 should be increased from 80,000 to 100,000 tons. The Coordinating Ministry for Economic Affairs (Edi Pambudi/Lawson) advised that Coordinating Minister Hatta Rajasa will convene a meeting on Tuesday 18 December at which the issue of beef quota will be discussed. The questions of high prices and an increase in demand for beef in Indonesia will be taken into consideration and a decision might be made on whether the quota should be increased or remain at 80,000 tons for the time being. Pambudi said the inflationary effects of rising beef prices were of considerable concern. He also said that Gita Wirjawan would not have taken the decision lightly to suggest publicly that the quota should be increased. We note, however, that this is no guarantee that Hatta Rajasa will be prepared to endorse Wirjawan’s recommendation. Suswono publicly rebutted Wirjawan’s suggestion, saying the quota should remain at 80,000 tonnes.

368 The cable referred to a seminar which embassy officials had attended (CBD1087 at 39332):

5. We (Lawson) attended a seminar on beef supply and prices hosted by the Young Entrepreneurs Association (HIPMI - business association representing Small and Medium Enterprises) on 12 December. Meat importers and distributors who attended the seminar expressed strong concern about the scarcity and price of beef. The Ministry of Agriculture sent an official from the plant product area to address the audience. He made predictable points about self sufficiency and distribution problems. The Ministry of Trade did not send a speaker or representative. The President’s adviser on poverty reduction, HS Dillon, also attended.

6. Thomas Sembiring, Head of the Meat Importers Association (ASPIDI) attended and told us it was evident that beef supply was far too limited and that he had all the data to demonstrate this, but the problem was convincing the Ministry of Agriculture to give ground. He said Minister Suswono had insisted that his recommendation of 80,000 tons stay in place, and that the question of additional quota be raised again in three months time. He said Minister Suswono had fallen foul of the PKS party, and wanted to avoid accepting a quota increase that would further aggravate the relationship. Sembiring said that he was aware that some quota was left from 2012, but that this quota had already been committed under contract to hotels and restaurants, and to sell to other parties would mean breaking those contracts. Sembiring said Vice Minister for Trade Bayu Krisnamurthi had asked to see him to discuss beef supply (we will follow up). Sembiring and other meat importers have been lobbying the Ministry of Trade hard to increase the quota to a minimum of 100,000 tonnes and also sending messages to the press about the shortage of supply.

369 The cable also referred to discussions with the President’s Special Adviser on Food Security who observed that “Indonesia needed to look after consumers as well as farmers”, but that “35 percent of Indonesia’s working population were farmers and a large proportion of them were living under the poverty line” which meant “that politically it was very difficult to increase the import quota on beef and cattle, as the government needed to be seen to protect farmer’s interests” (CBD1087 at 39332–3):

7. On 6 December we called on Dr Jusuf, Special Adviser to the President on Food Security. We raised concerns about the effects on Indonesia’s food security of the scarcity of beef, noting the impact on consumers and on inflation of high prices. Jusuf acknowledged that prices were having an adverse affect on inflation, and also that Indonesia needed to look after consumers as well as farmers. He said Indonesia needed to attract investment in cattle breeding, along with other investments. We said that investments in breeding were important, but that cattle were slow-growing animals, and the Indonesian breeding herd needed time to grow, notably as it was currently reducing in size because the shortage of supply gave added incentive to farmers to slaughter cattle instead of allowing them to calve.

8. Jusuf said 35 percent of Indonesia’s working population were farmers and a large proportion of them were living under the poverty line. This dynamic meant that politically it was very difficult to increase the import quota on beef and cattle, as the government needed to be seen to protect farmer’s interests. But he again acknowledged that 100 percent of the population were consumers, and that the Government needed to look after their interests by keeping prices affordable. He said it would be important to change livelihoods so less of the population was dependent on agriculture for a living.

370 DFAT Cable JA710650H, sent on 21 December 2012, reported that “Indonesia beef import quotas are the subject of active internal debate, but no change to the allocations has been agreed”: CBD464 at 24937. It recorded that the “market in Indonesia and Jakarta in particular, remains very thinly supplied with beef which is producing record market prices”. It reported (at 24937):

There continues to be agitation by industry, Ministry of Trade and the Govenor of Jakarta to increase imports to supply the market demand. Industry and Ministry of Trade have publicly called for quota to be increased to 100,000 tonnes (up by 20 percent). A coordination meeting reported to be convened on 18 December to reassess the 2013 beef quotas did not take place (refer JA61770H). Officials from the Ministry of Trade remain hopeful of an increase, but non-committal about when or how any increase might be effected. At the same time, Vice Minister for Agriculture, Rusman Heriawan has publicly commented that the import quotas for 2013 don’t need to be increased. Heriawan said “we should remain steadfast with plan for the self-sufficiency for meat in 2014”. He further said that the meat supply for local consumption is enough and asserted that increasing prices at the end of year were a normal event. Heriawan outlined Ministry of Agriculture plans to reach self-sufficiency next year, including revitalizing 58 slaughterhouses and development of cold chain infrastructure.

2. For now, we should assume no change to 2013 quota levels previously announced of 32,000 tonnes boxed beef (all producer countries) and 267,000 head live cattle (Australia is currently sole supplier). It is likely that argument about the levels of beef imports will continue between the relevant Ministries in the face of ongoing high prices for beef.

371 Livestock statistics for 2012 put local beef production at 508,906 tonnes, an increase from 2011 (485,333 tonnes): CBD467 at 25170. From 2010 to 2012 domestic beef production had increased by 16.6%: Malcolm 1 at 823 [118]; see also Marx 1 at 703 [23].

372 The Indonesian Government implemented regulations in 2012 that imposed restrictions on horticulture imports to Indonesia and introduced a permitting system for horticulture products similar to that currently in place for beef imports: CBD1017 at 38802 (DFAT Cable, 5 April 2012); CBD1019 (DFAT Cable, 27 April 2012); CBD1020 (WTO Committee).

Live Cattle Imports in 2012

373 For the first quarter of 2012, the Ministry of Trade issued 60,000 permits for the import of live cattle: SOAF 2 at [45]. It issued 125,000 for the second quarter: CBD1031 at 38848. It appears that 98,000 permits were issued for the third and fourth quarters: CBD1033 at 38859–60; CBD1034 at 38863. In any event, at least 276,295 permits were issued given that was the number of live cattle imported by Indonesia. The quota for live cattle was not filled in 2012, with only 276,295 head of cattle being imported that year: SOAF 2 at [47].

Quota for 2013

374 Ultimately, the quota for 2013 appears to have been set at the announced levels of 267,000 head of cattle and 32,000 tonnes of boxed beef – see: SOAF 2 at [48].

Regulation 6 of 2013

375 In January 2013, the President Yudhoyono enacted Regulation 6 of 2013 on “Farmer Empowerment”: CBD1091. Amongst other matters, this regulation sought to empower small-scale farming operations. Article 2 provided (at 39374):

(1)    This Government Regulation regulates the provision of facilities in the context of empowering farmers whose type and number of livestock are below a certain business scale and do not require a permit.

(2)    The provision of facilities to farmers whose type and number of livestock are above a certain business scale and who are required to have a permit is regulated in a separate Government Regulation.

376 Article 3 provided (CBD1091 at 39376):

Provide facilities to farmers as referred to in Article 2 paragraph (1) including:

a.    access to sources of financing, capital, science and technology, and information;

b.    livestock services, animal health services, and technical assistance;

c.    avoid charging fees that give rise to high cost economies;

d.    foster partnerships to increase synergy between business actors;

e.    creating a conducive business climate and/or increase entrepreneurship;

f.    prioritise the utilisation of domestic livestock and animal health resources;

g.    facilitate the formation of livestock business development areas;

h.    facilitate the implementation of promotions and marketing; and/or

i.    price and animal product protection from abroad.

377 Chapter II addressed access to sources of finance and capital, science and technology and information for empowering farmers: CBD1091 at 39377. Article 4(1) stated that “[s]ources of financing and capital for empowering farmers can come from the Government and regional governments”: at 39377. Chapter X contained provisions directed to “Livestock and Animal Product Price Protection”: at 39390. Article 44(1) provided that livestock price protection is carried out through a range of activities including “determining the number of livestock, types of livestock, and classification of livestock that can be imported from abroad”: at 39390. Article 45 provided an equivalent regulation applicable to animal products (relevantly boxed beef): at 39391–2.

378 In summary, the regulation provided further empowerment of farmers, including through price protection from imports.

Quota Restrictions Begin to Ease to Increase Beef Supply – April 2013

379 DFAT Cable JA711041L, sent on 19 April 2013, reported on the possibility of quota restrictions easing: CBD1102. It included (at 39501–2):

On 18 April 2013 during his visit to Indonesia the Secretary of DAFF, Metcalfe, met with Agriculture Minister Suswono.

2. Agriculture Minister Suswono told DAFF Secretary that relevant Ministers had held a coordinating meeting on 17 April 2013 to discuss recent price increases and shortage of supply for beef and some horticultural products. Ministers had agreed that … no quota would be imposed on “prime cuts” of beef entering for the hotel and restaurant trade.

3. Separately, an Indonesian cattle importer and feedlot/abattoir operator (PJ Hasan, the owner of PT Tanjung Unngul Mandiri (TUM)) told us that he had attended a meeting on 18 April 2013 of beef and cattle importers with Trade Minister Wirjawan. The Minister had indicated that Indonesia is considering several options to increase the supply of beef. These options include:

* Additional beef quota of 23,000 or 34,000 tonnes for the third quarter of 2013 (60% for live cattle and 40% for beef). The would equate to around an additional 76,763 to 113,475 head of cattle and 9,200 to 13,600 tonnes of beef;

* Allowing imports for third quarter permits already issued to commence in the second quarter of 2013;

* Possibly allowing imports for fourth quarter permits already issued to commence in the second quarter of 2013; and

* No quota would be imposed on “prime cuts” of beef entering for the hotel and restaurant trade.

4. In addition, Hasan said Wirjawan had indicated that responsibility for the issuance of import permits would in future rest solely with the Ministry of Trade, ie the issuance of import permits would no longer require a letter of recommendation from the Ministry of Agriculture. The Ministry of Agriculture would remain responsible for improving the productivity of the domestic herd.

380 The first stage of the 2013 agricultural census – a “complete enumeration of agricultural households” – was conducted in May 2013: CBD471 at 25678. This census was part of the usual cycle of censuses carried out by Indonesia every 10 years: at 25693. As explained below, the preliminary results revealed lower domestic herd numbers than anticipated. The “population at breeder households” on 1 May 2013 was said to be 12,689,939: at 25884. The number of buffalo was said to be 1,109,520: at 25888. The number of dairy cattle was 437,984: at 25881.

381 The ABARES report on “Agricultural commodities” for the September Quarter 2013 included (CBD225 at 4920):

Indonesian beef imports and reference price mechanism

The Indonesian Government is aiming for 90 per cent self-sufficiency in beef production by 2014. This includes plans to reduce cattle and beef imports to 10 per cent of domestic beef consumption, from a peak of 39 per cent in 2010. Since 2010 Indonesia has pursued this goal by limiting imports through trade restrictions that have resulted in significant upward pressure on prices. Indonesian beef prices reached record highs in August 2013 around the Idul Fitri celebrations that mark the end of Ramadan.

…

Declining cattle herd

According to Indonesia’s 2013 agricultural census, the Indonesian cattle herd (buffalo, beef and dairy cattle) declined by 15 per cent from 16.7 million head in 2011 to 14.2 million head as at May 2013. The decline reflects the continual slaughter of cattle (including breeding stock) for meat, as producers liquidate their herds to take advantage of the high beef prices.

382 On 27 and 28 May 2013, several regulations were made which in broad terms were designed to accelerate beef imports in order to ease prices – see: CBD1135 at 39746 (Briefing on 22 August 2013); CBD1119 (DFAT Cable, 20 June 2013). The new regulations were designed to ease prices and supply pressures: CBD1135 at 39746. Coordinating Minister Hatta Rajasa told Embassy officials that the price of beef was “rocketing” and Indonesia “needs supply badly”: CBD1104 at 39507 (DFAT Cable, 27 May 2013). Differences of opinion between Ministries remained: at 39507. Minister Hatta Rajasa raised the idea of importing heavy weight cattle to alleviate supply issues but met “stiff resistance from Suswono”: at 39507.

383 DFAT Cable JA62226H, sent on 19 June 2013, reported a decline in cattle numbers since 2011 and that the Coordinating Minister was “keen to import cattle from Australia direct for slaughter”: CBD1118. The cable included (at 39679–80):

8. Maulida said Coordinating Minister for the Economy, Hatta Rajasa, was very keen to import fattened cattle from Australia direct for slaughter to meet immediate demand in the lead-up to Ramadan. However, Agriculture Minister Suswono was arguing against this. Maulida further noted that Suswono could sometimes listen to reason, but that Director General for Livestock Services (DGLS) Syukur Iwantoro, was equally if not more difficult to convince. Maulida asked whether cattle for direct slaughter would need to go through the normal supply chain and feedlot systems. We said they would need to go through supply chains complying with ESCAS. We noted that the price of cattle in Australia was currently very reasonable and offered to provide additional information to assist if necessary.

9. Maulida said the Indonesian [G]overnment had set aside 1 trillion Rupiah to facilitate cattle breeding projects. 800 billion had been given to DGLS to administer and 200 billion to the Ministry of Public Works. The idea was to buy land and offer it to investors. Indonesia businessman Indra Hassan was closely involved in current plans for cattle ranches in two locations in Nusa Tengara Timur (NTT) including Sumba. Kadin were to hold a meeting in NTT on 27 June in relation to the investment plans.

10. Maulida said the Goverment was already calculating how much more quota for live cattle and boxed beef would be needed for the rest of the year. She said a new cattle census had been undertaken which set the numbers far lower than they had been. Agriculture Ministry officials attending a seminar in Yogyakarta at which we (O’Brien) gave a presentation on food security also advised that a new census had been conducted and that it put Indonesia’s domestic herd at 12.5 million, down from 14 million in 2011. The census had been released by another agency might be made public in August. All Agriculture Ministry staff around the table said this was good news for Australia but agreed it would not be welcomed by Minister Suswono, because it would indicate that more imports were needed.

384 On 5 July 2013, Prime Minister Kevin Rudd and Indonesian President Yudhoyono – who attended the 3rd Annual Australia-Indonesia Leaders’ Meeting in Bogor – announced the establishment of a joint government/industry red meat and cattle forum: CB1198. The purpose of the forum was described in the following way (at 41139):

The forum, to be named the Indonesia-Australia Partnership on Food Security in the Red Meat and Cattle Sector, will provide a bilateral mechanism to bring together government officials from Indonesia and Australia, and the business and investment community, and relevant stakeholders associated with the red meat and cattle sector.

The purpose of the Partnership is to synergize Australian and Indonesian strengths and potentials in order to develop the Indonesian cattle sector and improve joint competitiveness and prospects for long term investment and trade between Indonesia and Australia as part of a globally competitive supply chain in red meat and cattle.

385 At the forum, the Prime Minister announced a $60 million agricultural cooperation investment fund (to be provided over 10 years, commencing in 2013): CBD1135 at 39737.

386 DFAT Cable JA62282H, sent on 17 July 2013, reported that a “high-level official at the Ministry of Trade has asked us whether Australia could supply ready-to-slaughter cattle greater than 350 kilograms” (CBD1123 at 39693):

A high-level official at the Ministry of Trade has asked us whether Australia could supply ready-to-slaughter cattle greater than 350 kilograms. Indonesia wanted to import a “couple of tens of thousand” head of cattle. This was to reduce the price of beef during the Ramadan period. We have answered questions on quarantine processes in Australia and about embarkation points for cattle boats from northern Australia. Grateful advice on the feasibility of supply for these numbers of cattle and for a feasible timetable for supply.

387 On 18 July 2013, the Minister of Trade made a directive concerning “Stabili[s]ation of the Beef Price”: CBD1125. It opened at 39699 with:

Considering:     a.     that a Coordinating Meeting that was held on 17 July 2013 in the Offices of the Economic Affairs Coordinating Ministry decided that to stabilize the price of beef throughout Indonesia it was necessary to increase the supply of cattle;

b.    that, based on the considerations in a. above, it is necessary to give opportunities to import cattle to businesses other than IT-Hewan and Produk Hewan;

c.    that, based on considerations outlined in points a. and b. above, it is necessary to enact a Decision of the Minister of Trade concerning the Stabilization of the Price of Beef;

388 On 18 July 2013, the Minister of Agriculture made a second amendment to Regulation 52 of 2011: CBD1127. A new article 40B permitted the import of ready-to-slaughter cattle: at 39711.

389 Around 25,000 permits for slaughter-ready cattle were issued in the following days: CBD1132 at 39724 (DFAT cable, 22 July 2013); CBD1133 at 39728 (DFAT cable, 25 July 2013). An additional 75,000 permits for slaughter-ready cattle were issued in September and early October 2013: CBD1176 (DFAT cable, 2 October 2013).

390 DFAT Cable JA711442L was sent on 20 July 2013, reporting that the Trade Minister, Gita Wirjawan, had “said that the Indonesian [G]overnment will remove import quotas for beef and live cattle to stabili[s]e domestic beef prices and curb inflation”: CBD1130 at 39719. The cable included (at 39719):

2. Gita is reported to have said that the government would set a parity or “normal” price for beef as a benchmark to assess the necessity for imports. Under this policy, meat and live imports will be allowed only when domestic beef prices rise by more than 15 percent from the parity price, a move that will still support the local livestock industry. “The price mechanism as a trigger to import or not to import is very important. But we should first determine the parity price, which should match our aspiration to curb inflation and maintain price stability”, according to Gita.

3. The Ministry of Trade is reportedly working on the policy framework which Gita said would be ready in the next two months.

4. Several Indonesian ministers and officials have indicated recently the government target beef price is around Rp 75,000 per kilogram. Current beef prices vary according to cut, product source and retail location but are generally in the range of Rp 100,000 to 120,000 with high-end cuts considerably more. It is unclear, at this stage, how the parity price referred to by Gita would equate to the government’s target beef price and how a single parity price could reflect growing price diversity across cuts and geographic locations.

391 DFAT Cable JA62395H was sent on 23 August 2013, reporting that “Indonesia announced a package of economic policies including a decision to move away from a quota based system to a price based system for managing beef and horticulture imports” and that “Indonesia’s Finance Minister, Chatib Basri, said that import quotas for beef and horticulture would be removed”: CBD1100 at 39494.

392 DFAT Cable JA711578L was sent on 27 August 2013 and reported on the economic difficulties faced by Indonesia: CBD1139. It included the following summary (at 39878):

On 23 August the Indonesian Government released an economic statement which contained a number of measures aimed at stimulating the economy, improving the terms of trade and reducing inflation. The statement was aimed at calming the volatility in the Jakarta Composite Index and the rapid depreciation of the Rupiah against the US dollar. Measures include: requiring biodiesel to constitute 10 per cent of diesel; removing mineral export quotas; removing beef import quotas; tax changes; and revising the negative investment list. Bank Indonesia also announced changes aimed at boosting the supply of foreign exchange and deepening the money market.

(Emphasis added.)

393 It also included (CBD1139 at 39878–9):

Economy

On 23 August the Indonesian Government reacted to the volatility in the Jakarta Composite Index (JCI) and the rapid depreciation of the Rupiah against the US dollar by releasing an economic statement which contained a number of measures aimed at stimulating the economy, improving the terms of trade and reducing inflation. Post (Thomas and Ross, Treasury) participated in a conference call with Finance Minister Chatib Basri, Financial Services Authority Chairman Muliaman Hadad and Vice Minister of Finance Mahendra Siregar who provided briefing on the Government’s economic statement to investors and stakeholders which Basri said was intended to improve sentiment and aid stability. Basri said that the volatility was being caused by two key factors. The first is the United States Federal Reserve signalling that it would commence tapering of its quantitative easing program while the negative reaction from the market to the record current account deficit in the second quarter of US$9.8 billion (reftel: JA711557L) is the second …

The Government expects the spike in inflation to be short-lived and inflation back to normal levels by September but has announced some measures targeting inflation including removing quotas on beef imports and using price mechanisms instead (reftel: JA62395H) and; new minimum wage settling processes to be introduced to ensure there is no repeat of the very large increases in 2013.

(Original bolding.)

The Quota System is Replaced by a Reference Price System

394 On 2 September 2013, the Minister of Trade and Minister of Agriculture each made further regulations which replaced the quota system with a reference price mechanism: CBD1143; CBD375.1.

395 DFAT Cable JA711601L was sent on 4 September 2013 and included the following summary (CBD1148 at 40657):

Indonesia has announced that quota mechanisms for beef will be replaced by a reference price mechanism based upon price for secondary cuts of beef. A new Trade Ministerial decree will regulate trade aspects for both beef and cattle and two new Agriculture Ministerial decrees will regulate meat products and live cattle imports respectively. The Ministry of Trade will replace the Ministry of Agriculture as the authority for determining import volumes issued to importers. These new arrangements will take effect from October this year.

396 By October 2013, import permits had been issued for 267,000 feeder cattle and 100,000 slaughter cattle: CBD1176 at 40862 (DFAT cable, 2 October 2013). In the final quarter of 2013, a further 204,447 cattle were imported: CBD1210 (MLA Market Information, 2013). The boxed beef trade also increased following the removal of quotas: CBD1192 at 41109.

397 Later in October 2013, President Yudhoyono outlined new targets for food production in 2014, “as his government continues to grapple with food price inflation and volatility”: CBD1180 at 40873. The target for beef was set at 462,000 tonnes for domestic production in 2014: at 40873. Local beef production remained high in 2013 (at 504,818 tonnes), although slightly below 2012 figures: CBD473 at 26129 (Ministry of Agriculture Statistics, 2015).

398 In 2013, a total of 448,950 head of live cattle were exported from Australia to Indonesia: SOAF 2 at [53].

Later Years

399 In 2014, a total of 715,806 cattle were exported from Australia to Indonesia: SOAF 2 at [54]. The Indonesian Government was reported to have permitted a higher number of imports in an attempt to keep food inflation in check by stabilising prices for commodities such as beef (CBD1187), but high prices continued: CBD1193 at 41111.

400 In 2015, a total of 616,342 head of live cattle were exported from Australia to Indonesia: SOAF 2 at [55].

401 In 2016, a total of 604,122 head of live cattle were exported from Australia to Indonesia: SOAF 2 at [56].

402 In 2017, a total of 496,035 head of live cattle were exported from Australia to Indonesia: SOAF 2 at [57].

403 Australia remained the sole importer of live cattle to Indonesia until 2017: SOAF 2 [58].

CONSIDERATION

Introduction

404 As noted earlier, having accepted that 88,000 more cattle would have been exported in the 2011 year, Brett Cattle’s case was that the making of the Second Control Order (rather than an Exceptions Order) was a material or contributing cause of the Indonesian Government’s decision to: (a) put in place live cattle import quotas for 2012 and 2013 at the levels that it did (283,000 and 267,000); and (b) apply the import quotas strictly (at least until mid-2013), rather than revising the quotas as needed to take into account demand and price stability: ACS[55].

405 Accordingly, Brett Cattle submitted that the focus of the case had narrowed to determining the real reasons for the decisions in setting the quotas for 2012 and 2013 (made at the end of the 2011 and 2012 years) and the decisions to apply or enforce those quotas strictly, until September 2013: T700.1–6.

406 Brett Cattle made its arguments on causation by reference to 10 contentions. It is convenient to say a little about the first nine of those contentions before addressing the tenth contention and causation more generally.

Brett Cattle’s Causation Arguments

First Contention

407 The first contention was that, before the Second Control Order, the annual number of imports of live cattle had for many years been gradually increasing and, for each of 2007, 2008, 2009 and 2010, had numbered over 500,000, head of cattle per year: ACS[57].

408 That proposition may be accepted, noting that it excludes the 2003 and 2004 years when cattle exports were decreasing. If one includes 2003 and 2004, the exports were as follows (CBG38; CBD478; SOAF 2 at [20]–[23], [25], [30]):

In 2003: a total of 375,830

In 2004: a total of 357,060

In 2005: a total of 347,267

In 2006: a total of 384,965

In 2007: a total of 503,536

In 2008: a total of 640,435

In 2009: a total of 751,143

In 2010: a total of 514,935

409 Brett Cattle submitted that the Court should find that the “reduction in the number of imports in 2010 was due to a realignment, in an otherwise consistent trend of increasing imports, which was caused by the Indonesian Government’s introduction of a 350kg weight limit on imported cattle”: ACS[57(c)].

410 The reduction in numbers was a result of Indonesia’s adoption and implementation of the 2014 BSSP. In implementing that beef self-sufficiency program, Indonesia began reducing numbers of imports from January 2010. From about March 2010, Indonesia began enforcing an existing regulation (Regulation 7 of 2008) which restricted cattle imports to cattle of a maximum weight of 350kg: CBD162 at 3452; CBD166 at 3469. The enforcement of existing regulations (and the introduction of new regulations) was a part of Indonesia’s beef self-sufficiency strategy, envisaged in the Blueprint, the Guide and the 2010 Strategic Plan.

411 The total number of cattle reduced by 31.4% between 2009 and 2010. Apart from an observation made by Mr Pankhurst, the evidence does not suggest that the reduction in numbers was “due to a realignment … which was caused by the Indonesian [G]overnment’s introduction of a 350kg weight limit”: ACS[57(c)] (emphasis added). Rather, the number of cattle was reduced because the 2014 BSSP contemplated reducing the numbers of imports and enforcing existing regulations, which included weight limits.

412 The weight restriction was deliberately enforced to add value in Indonesia by feeding cattle for between 90 to 120 days in Indonesian feedlots where they would be slaughtered at between 400kg to 500kg and possibly more: CBD155 at 3241 (400–450kg); T111.37–47 (Mr Pankhurst, 500kg); CBD780 at 34199 (400kg); CBD250 at 5878 (average of 480kg). Adding value in Indonesia was an important aspect of the beef self-sufficiency strategy which would increase income for farmers – see, for example: CBD410.1 at 17340, 17368 (“[f]attening will provide added value and create jobs” in businesses seen to be competitive because the cost of feed was relatively low), 17375; ACS[57(c)(ii)]; T219.30–45 (Dr Krisnamurthi).

413 Mr Pankhurst gave evidence that he understood there was a reduction in the number of imports in 2010 because the Indonesian Government considered that “importing less numbers of cattle and value-adding those cattle more in Indonesia would produce the same or more of the amount of meat that they needed which would have originally come from more cattle”: T126.18–38. It may be accepted that there is a relationship between the number of cattle and the weight restriction, particularly in terms of determining what was needed to satisfy demand. However, the evidence as a whole does not lead to the conclusion that the reduction in numbers was caused by the enforcement of the weight restriction, as opposed to being an independent component of the strategy to increase Indonesia’s domestic contribution to its consumption needs through various measures which included a reduction in numbers and enforcement of weight restrictions.

414 The Australian industry estimated that between 20 to 30% of imports in 2010 had been between 400 and 450kg (being what industry considered to be slaughter ready): CBD155 at 3241. If this fact is also considered in calculating how much beef was imported, then the reduction from 2009 to 2010 must be materially greater than 31.4%, because 31.4% only reflects the reduction in numbers and not the average weight reduction in 2010 compared to 2009.

Second Contention

415 The second contention on causation was that, in the years before the making of the Second Control Order, Indonesia’s population had been growing, and demand for beef in Indonesia was also growing: ACS[58].

416 Indonesia’s population grew each year from 2003 to 2013: CBD241; Smith 1 at Table 5.2; CBD414.1 at 21532. Mr Smith used consumption as a proxy for demand: T517.14-29; T583.24. Consumption increased from 2002 to 2004, before decreasing in 2005. Consumption grew in 2006, before dropping again in 2007. Consumption grew in 2008 and then in each year up to and including 2011: CBD234. It dropped again in 2012. Over the period 2003 to 2011, consumption may be said to have been following a growth trend.

Third Contention

417 Brett Cattle’s third contention was that, from at least 1999, the Indonesian Government had put in place policies directed to achieving self-sufficiency in the production of beef in Indonesia, but none of those policies had been successful in terms of achieving the goal of self-sufficiency in beef in the years before the Second Control Order: ACS[59].

418 The two earlier attempts at beef self-sufficiency had failed. However, in 2009, the Indonesian President had made a political commitment to achieving beef self-sufficiency. The reasons for the two earlier attempts failing were examined and they informed the strategy for the renewed attempt. Key aspects of the renewed push towards self-sufficiency included: increased funding; the use of organisational structures throughout government to the regional level; and the involvement of support from several Ministries apart from the Ministry of Agriculture.

419 It is not clear what Brett Cattle sought to imply by this contention. The 2014 BSSP was carefully planned and funded, and the Indonesian Government was committed to it.

Fourth, Fifth and Sixth Contentions

420 The fourth, fifth and sixth contentions were each directed at the Indonesian Government’s 2014 BSSP introduced before the Second Control Order. Brett Cattle contended (ACS[60]):

(a)    in 2010, the Indonesian [G]overnment announced the 2014 BSSP, which aimed to achieve self-sufficiency in beef production by 2014, which (under the policy) would be considered to be achieved if 90% of demand for beef in Indonesia could be met by the domestic (or local) cattle herd by 2014 (fourth contention);

(b)    in the period before the Second Control Order was made, the Indonesian [G]overnment considered that imports of live cattle from countries like Australia were necessary in order for Indonesia to achieve the goals of the 2014 BSSP, as imports provided a source of beef to meet the growing domestic demand for beef (and to keep the price of beef stable), which allowed the domestic herd to increase in size in parallel (fifth contention); and

(c)    given the role of imports in achieving self-sufficiency in beef, the 2014 BSSP Blue Print (and later policy documents published by the Indonesian [G]overnment prior to the making of the Second Control Order), did not refer to reducing or restricting imports of live cattle to Indonesia in the short term as a means of achieving self-sufficiency, but instead included programs directed to increasing the size and productivity of the domestic herd, in order to achieve a gradual and proportionate reduction in the reliance on imports over time (sixth contention).

(Original emphasis.)

421 The fourth proposition was not contentious: T823.27.

422 Brett Cattle submitted that the programs set out in the Blueprint were each directed at increasing the size and productivity of the local cattle herd in Indonesia and that there was no reference in any part of the Blueprint to the Indonesian Government seeking to achieve self-sufficiency in beef by reducing or restricting the number of imports of live cattle from Australia (or other countries): ACS[61]. Rather, Brett Cattle submitted, the Blueprint referred to the risk that if there was “a barrier to imports”, then “we will be forced to slaughter domestic cattle, which are already slow in growth, to meet demands”, and as a result “it will deplete the livestock population which may even lead to extinction”, referring to CBD410.1 at 17346.

423 As has been noted above, contrary to Brett Cattle’s submission, the Blueprint did envisage controlling imports as part of the strategy for achieving beef self-sufficiency: CBD410.1 at 17326, 17338, 17457. It recognised that imports had harmed local cattle farming businesses (at 17436) and Indonesia’s foreign exchange position (at 17326, 17436) and that regulations on imports needed to be developed, refined and enforced: at 17436, 17438, 17369–70. The Guide did likewise: at 8569–70, 8585–8. It is tolerably clear that both the Blueprint and the Guide contemplated that imports be reduced. That is exactly what occurred, starting in the very month in which the Blueprint and Guide were published, January 2010. Weight restrictions started to be enforced later.

424 Dr Krisnamurthi agreed that it was part of the design of the 2014 BSSP to decrease imports each year: T257.45–258.15. Dr Krisnamurthi agreed that the Blueprint contemplated that there needed to be regulations and policies to regulate and reduce imports (T255.8–12):

MS McLEOD: … So this blueprint anticipated there would need to be regulations and policies to reduce import numbers; correct?

DR KRISNAMURTHI: The number, we need to regulate and reduce, yes, but the number is very much depend on the situation.

425 The 2010 Strategic Plan noted that the Ministry of Trade was to: “Control the effectiveness of the implementation of regulations on the import of livestock and livestock products”: CBD412.1 at 20725. The 2010 Strategic Plan also observed that it was “fundamental” for the Ministry of Agriculture “to ensure that selling prices do not decrease”: at 20690. This was to ensure greater income for livestock farmers, which would decrease unless imports were reduced: at 20690.

426 A reduction in imports was a key part of the design of the 2014 BSSP, evidenced by the implementation of that aspect of the strategy beginning immediately in January 2010.

427 Brett Cattle also referred to the 2010 Policy Paper published in December 2010: CBD291.1. Brett Cattle submitted that the 2010 Policy Paper:

(a) stated that the increase in domestic beef consumption in Indonesia in the years leading up to 2010 (referred to in paragraph 415(a) above) had led to increased demand for beef and offal, and, to meet those needs, Indonesia had increased imports of beef and offal, because as at 2009 local cattle could only supply 49% of the national beef needs of Indonesia: at 8920;

(e) stated that beef, as a source of animal protein, was considered to be an “agent of development”, which could determine “the competitiveness of a country’s human resources”: at 8920;

(f) stated that local production of beef in the period 2005 to 2009 was “volatile”, which indicated that “availability of meat from local cattle was inconsistent”: at 8922;

(g) stated that local Indonesian cattle breeds had a relatively low slaughter weight, and took longer to reach a slaughter weight of 300 to 350kg, such that they were low in meat production compared to imported cattle: at 8930–1;

(h) stated that, accordingly, it was necessary to import beef “to meet excess demand so that the highest price (ceiling price) can be afforded by the public”: at 8924;  

(i) as with the Blueprint, contained no reference to the Indonesian Government seeking to achieve self-sufficiency in beef by reducing or restricting the number of imports of live cattle before 2014. Instead, according to Brett Cattle, the 2010 Policy Paper warned that “[a]n increase of 5% in cattle import tariffs in the short term could lead to livestock depletion”: at 8956.

428 The 2010 Policy Paper was published almost a year after the Blueprint, Guide and 2010 Strategic Plan. It was intended to provide additional measures which might “complement” the existing 2014 BSSP: CBD410.1 at 17369. It was not a revision of the Blueprint and did not suggest that the strategies being implemented should be abandoned. It identified various threats, including the “influence of foreign cattle markets (exporting countries) on local cattle markets” and the “prices of imported feeder and beef are cheaper than local beef”: CBD291.1 at 8948. It suggested “[i]mplementation of market policies by protecting local cattle prices, controlling imports of cattle and meat and interest rates”: at 8949.

429 The 2010 Policy Paper also stated that “beef consumers are from the upper middle class who are not affected by price changes”: CBD291.1 at 8927. It noted that “[t]here is only one variable that influences the price of local beef, namely the increase in the price of imported beef”: at 8928. Whilst it is true that the cost of beef to consumers was a consideration, it was recognised in the Policy Paper that 80% of consumers were from urban areas and that the “policy of restricting prices (through ceiling prices) will not be effective, because it will only be enjoyed by the rich”: at 8927. This was “not in line with the government’s efforts to increase the general public’s consumption of animal protein”: at 8928. On the other hand, higher beef prices (at an inevitable cost to mostly urban consumers) improved the incomes for small scale farmers, thereby transferring wealth from urban areas to rural areas in accordance with Indonesia’s broader policy objectives. The Blueprint and 2010 Strategic plan made clear that one of the principal objectives of the 2014 BSSP was the improvement of farmer welfare and an increase in farmer income.

430 None of that is to deny that imports of live cattle were necessary both to meet consumption needs (feeders) and to achieve a desired increase in Indonesia’s cattle population (breeders): T219.24–8. Consistently with the documentary evidence, Dr Krisnamurthi explained at T220.4–10:

We plan to import more breeding cattle because we need to increase the populations of Indonesian livestocks, and that is – we can only do that if we could import more on the breeder … cattle.

431 Even once self-sufficiency was obtained, imports of “feeders” would continue under the 2014 BSSP which contemplated 90% of demand being sourced locally.

432 Brett Cattle referred to Dr Krisnamurthi’s evidence at T228.6–37:

MR WITHERS: … Now, prior to the ban, when you were the Vice-Minister of Agriculture, had you ever considered reducing the importation quota as a means of pursuing self-sufficiency?

DR KRISNAMURTHI: The importations is a result of the self-sufficiency program. Then we need to see how well our farmers and our businesses improve and increase the production domestically. And after that, then we see how could we manage the importations. But I remember that the more realistic approach is that the increase of demand within Indonesian market come with the population growth, economic growth and so forth. That increase is provided by domestic production. So the more realistic way of approaching the import quota is to maintain the numbers. We don’t have to increase it. Then probably for some times, we cannot or will not reduce it, because again the situation in Indonesia, we see that the impact of our program is not so much successful.

MR WITHERS: … In an answer you just gave then, you referred to maintaining the numbers – our numbers, what numbers were you referring to?

DR KRISNAMURTHI: 500,000 head of live cattle.

MR WITHERS: I see. Right. And the source of those live cattle being?

DR KRISNAMURTHI: Indonesia have a policy, again back in 2011, is only to import from countries that are free from foot and mouth disease, because Indonesia is a free foot and mouth disease countries, and the most realistic and efficient source of – of importation is Australia.

(Brett Cattle’s emphasis.)

433 Brett Cattle submitted that this evidence demonstrated that the Indonesian Government had approached the pursuit of self-sufficiency in beef before the Second Control Order by maintaining the number of imported cattle, while increasing the “proportion of domestic cattle production in order to meet the increasing demand for beef in Indonesia – in other words, the goal was to achieve a proportionate decrease in imports by sustainably increasing domestic production to a point that the increase in demand for beef in Indonesia could be met using the domestic cattle herd” ACS[61(d)].

434 Dr Krisnamurthi gave the following evidence in relation to 2010 (at T220.12–22):

MR WITHERS: … Now, do you recall that there was a quota for the number of cattle that could be imported from Australia into Indonesia in 2010?

DR KRISNAMURTHI: Yes.

MR WITHERS: And do you recall the purpose of the quota?

DR KRISNAMURTHI: Yes, of course. To maintain and to control the number of importations. First, to make sure that the number is sufficient enough with the needs. And the second is, of course, not to be too – you know, not too much of importation so it could harm the price and the productions of domestic productions.

435 In relation to setting the quota in 2012 for 2013, Dr Krisnamurthi stated (at T227.46–228.4):

DR KRISNAMURTHI: We evaluate the situation in 2012. And in our system, every quarter we evaluate the quota, whether or not we should increase it or decrease it. And we see that the quota in 2012, I think – I believe it’s about 250, 260,000 head is sufficient because of the importation of non-live cattle. And so I remember the discussion that we should maintain that, and at the same time we also saying that we increase the effort on domestic production.

436 It might be observed in relation to this evidence that imports of non-live cattle (boxed beef) had also been significantly reduced, contrary to what Dr Krisnamurthi implied in this evidence and stated elsewhere: T225.31–40.

437 There was never a policy of maintaining the number of imports or that the number to be maintained was 500,000 in any of the years 2010 to 2013. Such a policy is not to be found in any contemporaneous document, and it is inconsistent with what occurred before the Second Control Order. The number of imports was immediately reduced once the Blueprint was published in January 2010. The reduction in imports was later followed by the enforcement of weight restrictions from March 2010: CBD162 at 3452; CBD166 at 3469. This was followed on 28 July 2010 with identification of a total number of imports for 2010 of 452,000: CBD553 at 32704. Quotas for 2011 and 2012 were set having regard to a variety of considerations, including cattle numbers, maintaining a sufficiently high price for beef and forecasted domestic supply and consumption. If there was a policy to maintain import numbers at a specific level from 2010, or at 500,000, it would have been articulated in the contemporaneous documents and such an unusual policy would have been referred to and explained. The contemporaneous documents contained numerous references to statements made by Dr Krisnamurthi and others during the relevant period and there was no mention of Indonesia having a policy of maintaining imports at 500,000. Dr Krisnamurthi’s evidence in this respect was contradicted by his evidence that the design of the program was for a fall in feeder cattle and boxed beef, and an increase in domestic production, with total imports reducing in each of 2011, 2012, 2103 and 2014: T257.45–258.11. Dr Krisnamurthi’s evidence is also contradicted by the Blueprint, the Guide, the 2010 Strategic Plan and the 2010 Policy Document.

438 Brett Cattle submitted that “before the Second Control Order, the Indonesian [G]overnment’s pursuit of self-sufficiency was not planned to involve any reduction or restriction of import quotas (at least in the short term), but rather quotas were expected to be maintained at the level of around 500,000 head of cattle per year, and the increasing demand for beef in Indonesia was hoped to be met through increased production from the domestic herd”: ACS[61(e)].

439 That submission is not supported by any contemporaneous documentary evidence, is contradicted by much contemporaneous documentary evidence and the events, and must be rejected.

440 It should also be noted that Brett Cattle’s contention that imports of 500,000 were needed to satisfy demand and keep prices stable and affordable was not made out.

Seventh Contention

441 Brett Cattle’s seventh contention in relation to causation was that “the policies that were in place regarding food security and self-sufficiency in Indonesia before the Second Control Order were designed to achieve a balance between the competing and overlapping considerations of, on the one hand, the need for the Indonesian [G]overnment to ensure that there was an adequate and affordable supply of essential food products for the growing population of Indonesia, and on the other hand, the desire to increase Indonesia’s self-sufficiency in the production of those essential food products (such as beef) in order to reduce Indonesia’s reliance on imports”: ACS[62].

442 The seventh contention is not incorrect, but it provides an incomplete account of the considerations which informed Indonesia’s food security and self-sufficiency policies and the objectives to which those policies were directed. In particular, beef self-sufficiency was aimed at broad reform and improvement of Indonesia’s agricultural sector which included millions of small-scale farmers with two to three cattle. It sought to improve farmers’ welfare and income, including by lowering imports with a view to improving farmers’ income through beef prices.

443 In the context of the seventh contention, Brett Cattle submitted that Dr Krisnamurthi “explained that the purpose of the Indonesian Government putting in place quotas for imports of live cattle was to ‘maintain and to control the number of importations’, in order to ‘make sure that the number is sufficient enough with the needs’ and to ensure ‘not too much importations so it could harm the price and the productions of domestic productions’”: ACS[62(b)], referring to T220.17–22.

444 Contrary to Brett Cattle’s submission, Dr Krisnamurthi’s evidence was not that imports should be “maintained” in order to ensure that imports did not “harm the price and the productions of domestic productions”: ACS[62(b)]. Dr Krisnamurthi’s evidence was:

MR WITHERS: And do you recall the purpose of the quota [in 2010]?

DR KRISNAMURTHI: Yes, of course. To maintain and to control the number of importations. First, to make sure that the number is sufficient enough with the needs. And the second is, of course, not to be too – you know, not too much of importation so it could harm the price and the productions of domestic productions.

445 The point Dr Krisnamurthi was making, consistently with the contemporaneous documents, was that imports brought beef prices down and this harmed domestic production and farmers. See also T236.27–37; T283.14–32.

Eighth Contention

446 Brett Cattle’s eighth contention was that the making of the Second Control Order came as a “shock” to members of the Indonesian Government, who perceived the banning of Australian live cattle exports to Indonesia as a threat to Indonesia’s food security: ACS[63].

447 The total ban was unexpected by, and “shocked”, at least some members of the Indonesian Government, including Minister Suswono and Dr Krisnamurthi, and probably many more, including the Minister of Trade, the Minister of Finance and the Minister of Industry and others (see for example: CBD344 at 9663 [6]). The contemporaneous documents also indicate that, speaking generally, Indonesia was offended by the total ban: CBD323 at 9241–2; CBD333.1 at 9299. Further, the Indonesian Government urgently had to address the total ban and was concerned about meeting its immediate beef needs, particularly if the total ban were to remain in place for an extended time: CBD299 at 9063; T223.42–224.2.

448 If an Exceptions Order had been made, this would also have involved a “a general prohibition of any exports of live cattle to Indonesia, but subject to [a] power to grant exceptions”: LJ[405]. An Exceptions Order would have been put in place “in an orderly way after seeking to gain the cooperation of the Indonesian Government and others”: LJ[405]. Whilst there may have been less, or even no, “shock” and offence, an Exceptions Order would also have caused significant disruption to Indonesia’s live cattle supply. The First Control Order had only prohibited exports to twelve abattoirs, causing significantly less disruption than the hypothetical Exceptions Order.

Ninth Contention

449 Brett Cattle’s ninth contention was that “even after the Second Control Order was lifted in July 2011, members of the Indonesian Government considered that there was an ongoing risk that the Australian Government could again ban the export of live cattle to Indonesia in the future, particularly given the lack of prior notice and consultation with the Indonesian Government before the Minister made the Second Control Order in June 2011”: ACS[67].

450 The existence of such a concern finds no significant support in the contemporaneous documents. Given the relative speed within which the Second Control Order was repealed, and the issues concerning welfare of animals were addressed, it is likely that any early concern about a future ban diminished rapidly. Indonesia knew that the live cattle trade was important to Australia and that Australia wanted that trade to continue. Indeed, Minister Suswono was reported as taking the view, when the Second Control Order was in force, that Australia would “come begging as the pressure from the farming community will become too great”: CBD323 at 9241.

451 Given the terms of the separate question, it is necessary to consider the concerns the Indonesian Government would have had if an Exceptions Order had been made instead. If such an order had been made instead of the Second Control Order, the Indonesian Government is likely to have been concerned that further Exceptions Orders would be made, causing disruption to trade.

Tenth Contention

452 Brett Cattle’s tenth, and main, contention was that “in response to what members of the Indonesian Government perceived as an ongoing threat to food security arising from the making of the Second Control Order, the Indonesian Government took immediate steps to decrease its reliance on Australian live cattle to meet its domestic demand for beef”: ACS[68].

453 Brett Cattle contended:

(a) One of the steps taken by the Indonesian Government to decrease its reliance on Australian live cattle was to significantly reduce the quota for live cattle imports in both 2012 and 2013 (as compared with previous years), and to enforce the quotas strictly: ACS[68].

(b) The Second Control Order was a material or contributing cause of the Indonesian Government’s decision to put in place the import quota for 2012 at the level it did because of the uncertainty that it had created regarding whether Australia would be a reliable source of beef imports for Indonesia in the future: ACS[68(c)].

(c) The Indonesian Government enforced the quota for 2012 strictly, as the number of imports in 2012 (i.e. 276,295 head of cattle) was lower than the annual quota for 2012 (i.e. 283,000 head of cattle), which demonstrates that the Indonesian Government was unwilling to release additional import permits beyond the total quota amount. This marked a change in the Indonesian Government’s approach, as in 2010 the Indonesian Government had announced that it would only issue 452,000 import permits, but by the end of 2010 there had been a total of 514,935 head of live cattle imported: ACS[68(d)].

(d) For 2013, as with 2012, the Indonesian Government maintained the levels of the import quota at historically low levels, because (in part) of the Indonesian Government’s belief that it was necessary to reduce reliance on imports of live cattle from Australia, due to the uncertainty in the reliability of that source of beef that had been generated by the making of the Second Control Order: ACS[68(e)].

(e) Further, in deciding to set the import quotas for 2012 and 2013 that it did, the Indonesian Government was not merely pursuing its existing self-sufficiency policy (as set out in the Blueprint and 2010 Strategic Plan), but rather – because of the uncertainty as to whether Australia could be considered a reliable source of beef for Indonesia in the future – the Indonesian Government decided to accelerate efforts to achieve self-sufficiency in beef: ACS[69].

454 Brett Cattle submitted that, in light of the ten contentions on causation, “the Court should accept that it is more probable than not that a material cause of the Indonesian Government’s decision to significantly reduce the quotas for imports of live cattle in 2012 and 2013 (as compared with previous years), and to enforce those quotas strictly, was the making of the Second Control Order, which the Indonesian Government considered posed a significant and immediate threat to Indonesia’s food security and triggered the Indonesian Government to take rapid steps to reduce Indonesia’s reliance on imports of live cattle from Australia”: ACS[74].

455 Given the centrality of these submissions to the question of causation, and the way in which the parties presented their arguments in oral closing submissions, these submissions are addressed next when considering whether, if the Second Control Order had not been made and an Exceptions Order had been made instead, more cattle would have been exported to Indonesia in 2012 and 2013 than were in fact exported.

Causation

Before the Second Control Order

456 In January 2010, the Indonesian Government implemented its third attempt at beef self-sufficiency. The 2014 BSSP was developed after examining the reasons for earlier failures and was carefully planned, widely promoted and well-funded. The President had made a political commitment to the 2014 BSSP. It was implemented by a number of Indonesian Ministries, led by the Ministry of Agriculture, and at all levels of government, with an operational structure from the “Central Level”, “Provincial Level”, “Regency/City Level” and “Sub-District Level”, which contemplated a “Technical Task Force in each sub-district area”: CBD410.1 at 17445–50.

457 From the outset, the program included at least the following:

substantial State backed resources to support farmers and encourage domestic farming;

restricting imports, including by the use of tariff and non-tariff barriers;

enforcing existing regulations and developing new regulations to restrict imports;

maintaining beef prices at a level sufficient to achieve the desired increase in the incomes and welfare of farmers, and the desired increased in the Farners Terms of Trade, including by restricting imports, whilst also seeking to ensure that beef prices remained affordable to consumers and stable.

458 In preparing the Blueprint, it was recognised as essential – a “pre-requisite for success” – that a detailed census be carried out: CBD410.1 at 17457. A census was required to determine whether the 2014 BSSP, as it stood when introduced, required modification and to accurately forecast Indonesia’s capacity to supply beef from domestic sources: at 17457. When introduced, the Blueprint assumed that Indonesia had 12.61 million cattle: at 17401. It planned to achieve a beef self-sufficiency ratio of 70.2% in 2010; 75.5% in 2011; 80.5% in 2012, 85.3% in 2013 and 90% in 2014: at 17357.

459 From January 2010, Indonesia seriously pursued beef self-sufficiency by seeking to increase domestic production and decrease imports of live cattle both by number and by weight. Live cattle exports reduced from 751,143 in 2009 to 514,935 in 2010: SOAF 2 at [25], [30]. The full picture is not provided by the difference between those two numbers, because it is likely that significantly more slaughter cattle were exported in 2009 than in the first two months of 2010.

460 About 20 to 30% of the cattle exported in 2009 were slaughter cattle: CBD166 at 3474. The 350kg weight restriction began to be strictly enforced in March 2010: CBD162 at 3452; CBD166 at 3469. In January and February 2010, exports totalled 94,930: CBG38. It is unlikely that the percentage of these that were slaughter ready was greater than the 20 to 30% ratio which had existed in 2009. Accordingly, the decline between 2009 and 2010 in terms of weight is likely to be materially larger than the 31.4% decline in numbers.

461 On 28 July 2010, the DGLS stated that the total import permits to be issued for the 2010 year would be 452,000: CBD553 at 32704. Ultimately, 514,935 live cattle were imported: SOAF 2 at [30]. Australian industry was seriously affected by Indonesia’s pursuit of its self-sufficiency policy in 2010, to the point that the issue was seen as “critical” and was raised with the Australian Government and the Australian Government was pursuing the issue with Indonesian officials: CBD556 at 32709; CBD559.

462 In late 2010, the quota for 2011 was set at 500,000: SOAF 2 at [32]. Ultimately, 412,057 live cattle were exported: SOAF 2 at [42]. Rares J held that an additional 88,000 would have been exported in 2011 were it not for the Second Control Order, with the result that around 500,000 cattle in total would have been exported in 2010: LJ[462].

463 There had already been a 31.4% decline in total live cattle exports in 2010 compared to 2009. From 1 January 2011 to 31 May 2011, exports to Indonesia totalled 203,505 cattle. In the same period in 2010, exports totalled 249,166, representing a further decline of 18.3% compared to the same five months of 2010: SOAF 2 at [28]; CBG38. The total decline between 2009 and 2010, and the further decline in the first five months of 2011 compared to the same period in 2010, were consistent with Indonesia’s pursuit of its 2014 BSSP. The low number of exports in the first five months of 2011 was necessarily unaffected by the Second Control Order which had not yet occurred. If exports had continued throughout 2011 at the same average rate as the first five months of 2011, exports would have totalled 488,412.

The Second Control Order and the 2011 Year

464 It was at this point in early June 2011, that the Second Control Order was made. When it was made, 220,163 cattle had been exported to Indonesia: SOAF 2 at [36].

465 Whilst Brett Cattle no longer contends that more than 88,000 additional cattle would have been exported in 2011 after the Second Control Order, it is instructive to look at Mr Smith’s conclusions.

466 According to Mr Smith, somewhere between 531,526 and 619,380 head of cattle would have been exported in 2011 were it not for the Second Control Order: Smith 1 at Table 4.2. Mr Smith’s view was that more cattle would have been exported in 2011 than in 2010. If Mr Smith’s numbers were correct:

(a) exports in 2011 after the Second Control Order would have been somewhere between 311,363 (531,526 – 220,163) and 399,217 (619,380 – 220,163);

(b) the decline in exports from January 2010 to early June 2011 would have come to an end if the Second Control Order had not been made and exports would have begun to increase;

(c) at the upper end of Mr Smith’s range (the case on which Brett Cattle opened), more cattle would have been exported in the last six months of 2011 than average monthly exports in 2009, when exports peaked.

467 The facts do not provide a serious basis for concluding that exports would have begun to increase were it not for the Second Control Order. To the contrary, it is more likely that Indonesia would have continued to reduce its imports of cattle (and boxed beef). First (and of itself sufficient), the Indonesian Government would have continued to pursue its 2014 BSSP. The President had made a public commitment to the policy. It was being pursued with vigour. It was organised and funded. Domestic production was increasing. It was in the interests of Indonesia’s large farming population. And it would have been politically impossible to bring the program to an end or not continue to pursue it as it had been pursued. The evidence indicated that Indonesian farmers reacted negatively to increased imports and particularly to price decreases caused by increased imports.

468 Secondly, it was not established that increased demand required an increase in live cattle imports in 2011 or 2012. Indonesia’s production share of consumption (its beef self-sufficiency ratio) rose from about 53.1% in 2010, to 70.8% in 2011, to 76.8% in 2012 and to 77.3% in 2013: CBD234; Smith 1 at Table 5.2. It was central to the 2014 BSSP that domestic production increase and imports decrease. This is what occurred in 2010 after the 2014 BSSP was introduced in January 2010: CBD234.

469 Whilst monthly data is not available for domestic production, it is extremely likely that this is also what occurred in the first five months of 2011 before the Second Control Order was made.

470 Both of Mr Smith’s alternatives assume that, in the absence of the Second Control Order, Indonesia’s beef self-sufficiency ratio would have been less than that in fact achieved. This assumption is central to his conclusions. I do not accept that these assumptions reflect what would have occurred in the Exceptions Order Scenario. The increase in Indonesia’ beef self-sufficiency ratio in 2010 and 2011 was a result of deliberate government intervention directed at increasing that ratio in the pursuit of food security and the objective of increasing farmer income and welfare. Whilst price stability was desired and prices needed to be affordable for urban and other consumers, it was a “fundamental” component of the strategy that beef prices be kept at a level sufficient to meet the objective of increasing farmer income: CBD412.1 at 20690. The strategy was designed to increase the welfare of Indonesia’s large, and comparatively poor, rural farming population. One method of maintaining sufficiently high beef prices was to restrict imports.

471 The President had made a political commitment to the beef self-sufficiency program and charged Minister Suswono with achieving that self-sufficiency, improving farmer welfare and modernising Indonesia’s agricultural sector. Whilst the Ministry of Agriculture took the lead role in 2010, it was to obtain assistance, including financial assistance, from many other Ministries (CBD410.1 at 17393) and the program involved all levels of government. The 2014 BSSP was vigorously pursued over the course of 2010 and in the first five months of 2011. As at 7 June 2011, the 2014 BSSP was going to continue to be pursued.

472 It should be noted that Mr Smith’s assumptions about how Indonesia would have pursued its beef self-sufficiency program if the Second Control Order had not been made involved assuming that an Exceptions Order “would have resulted in the same number of live cattle exports as a scenario in which there was no disruption”: Joint Report [16]; T595.23–7. That is, Mr Smith assumed that an Exceptions Order would have had no effect on cattle exports, which (on his calculations) would have started to increase. That proposition cannot be accepted given that the Exceptions Order would have involved “a general prohibition of any exports of live cattle to Indonesia, but subject to [a] power to grant exceptions”: LJ[405].

473 The Second Control Order was made on 7 June 2011. The special cattle census was being carried out at this time. The preliminary results of the census were known by at least 4 July 2011 and indicated that there were 14.43 million cattle (16 million if buffalo were included): CBD869 at 34710 [10]. This number exceeded the target number for Indonesia achieving beef self-sufficiency according to the Blueprint: CBD869 at 34710. The “results of this [census] data collection were used as a basis for recalculating local supply capabilities published in a revised edition of the 2014 PSDSK Blueprint”: CBD468 at 25315. The results were also used in preparing the Revised Plan (which revised the 2010 Strategic Plan) issued on 2 December 2010. As is explained further below, the results were central in setting the quota for 2012.

Brett Cattle’s Submissions about the Role of the Special Census

474 Brett Cattle submitted that “the Court should reject the contention that the sole cause of the Indonesian [G]overnment’s decision to reduce the quota for 2012 [was] the results of the 2011 cattle census”: ACS[71]. For the reasons given below, the census was an important consideration in setting the quota for 2012. That conclusion does not of itself deny the possibility that the Second Control Order was also a material cause in setting the quota in either 2012 or 2013.

475 In support of its submissions seeking to diminish the causal significance of the census to the setting of the 2012 quota, Brett Cattle referred to Dr Krisnamurthi’s evidence to the effect that the census results were only one matter which would inform, or be a “reference” point, for the quota: T250.41–5; see also T255.17. In re-examination, Dr Krisnamurthi confirmed that the census data was “one” of the reference points in setting the quota for 2012, but not the only reference point: T295.14–28. Dr Krisnamurthi explained (T295.36–40):

Because we also have to see the development of the price in the market, as well as the input from the industries, the input from the supermarket, the retail industries, and so forth. So we try to look at the whole meat business as a whole, as a comprehensive thing. The population number is one of the aspects, but we need also to look at other aspect.

476 There is no doubt that the census was only one matter which needed to be taken into account in setting the quota at the end of 2011 for the 2012 year. However, it must have been a matter which was of central importance because it informed Indonesia’s expectations about what it could and would produce domestically. The Blueprint assumed 12.61 million cattle in 2009 and forecast the most likely position to be 14,231,700 cattle in 2014 (when beef self-sufficiency would be achieved): CBD410.1 at 17401–2. By 4 July 2011, the preliminary results indicated that the Indonesian cattle population on 1 June 2011 numbered 14.43 million, excluding buffalo: CBD869 at 34710 [10].

477 Whilst it would no doubt depend on a number of other considerations, the census results would have been (and the evidence indicates that they were) interpreted as indicating that imports could be reduced. The census results were not finalised until November 2011: CBD413.1.

478 Brett Cattle referred to the evidence of Mr Adiwoso in respect of the census results. He gave evidence that APFINDO had done its own sampling exercise and that APFINDO “believed the numbers were closer [to] between seven to eight million head of cattle”: T174.39–41. When asked by his counsel whether he conveyed that information to the Indonesian Government he stated that he provided it “to the Ministers and also the Bureau of Statistics”: T174.43–6. Apart from Mr Adiwoso’s evidence, there is nothing contemporaneous which suggests that the cattle population was anywhere near as low as seven or eight million.

479 Assuming APFINDO’s “sampling” was conveyed to the Indonesian Government more broadly, it is unlikely to have been taken seriously. First, APFINDO represented “the feedlot industry which is imported cattle from Australia” (T160.9–12, 37), whose interests lay in importing as many cattle as possible and understating the size of the domestic herd. Second, a “sample” carried out by a body with vested interests would not have been treated as more reliable than a well-funded, specially organised, government census which had been designed to provide accurate information, was regarded in the Blueprint as a “pre-requisite for success”, and which would be used in formulating policies and strategies of critical importance to Indonesia’s economy and society (noting the large number of small-scale livestock farmers in Indonesia). Third, the number suggested by APFINDO of seven or eight million could not have been taken seriously given the information available to the Indonesian Government.

480 Brett Cattle also referred to Professor Malcolm’s evidence that “estimating national herds are very, very difficult in any country, and here, we had a mixture of census, annual surveys and another type of census, and none of those numbers would - you would treat as correct”: T616.32–5.

481 This evidence was referring to various censuses, surveys and statistics in various years. Professor Malcolm also stated, “My honest view is that none of the figures are accurate”: T641.21. He considered, in substance, that agricultural economists would not consider that any of the various results contained in the various censuses or statistics would reflect the true position, but that he could not speak for policymakers: T641.31–44.

482 The contemporaneous documents do not suggest that the Indonesian Government considered the results of the census carried out in June 2011 to be anything other than accurate. Indeed, contemporaneous communications suggest that the Ministry of Agriculture considered the results to be sufficiently accurate to inform its decision-making and recommendations. Having taken the position in January 2010 that the special census was an essential pre-requisite to the success of the 2014 BSSP, and having carried out the census at significant expense, it is unlikely that the Indonesian Government would have ignored the results of the census or treated it as other than reflecting a sufficiently accurate factual basis upon which to make further decisions implementing its 2014 BSSP.

483 It might be noted that the census itself was published in terms which suggested confidence in its results, including (CBD413.1 at 20995):

It is hoped that the publication of this book [the census results] will dispel doubts from various sides regarding livestock population calculations which have so far only been based on registration (reporting) in districts/cities gradually forwarded to the provinces as national data which is mostly an estimate. The next hope is that by obtaining PSPK2011 results using the census method, it will make it easier to determine the policy direction for the Beef and Buffalo Self-Sufficiency Program (PSDSK) by 2014 because population calculations are no longer based on estimates.

484 In June 2012, Indonesia’s Director General of Foreign Trade was reported as stating to embassy officials that the Ministry of Agriculture’s domestic supply forecast based on the census (14 million cattle) was probably correct assuming seven million farmers with an average of two cattle each: CBD1033 at 38859–60.

The Contention that the 2014 BSSP Was Accelerated or Pursued More Vigorously

485 Brett Cattle expressly did not contend that the quotas for the 2012 and 2013 year were by way of retaliation or retribution: T713.37–40. The appropriateness of this concession is supported by the fact that, shortly after the Second Control Order was repealed in early July 2011, Indonesia issued 180,000 import permits in respect of the third quarter: SOAF 2 at [38]. It issued a further 172,500 import permits in respect of the fourth quarter: SOAF 2 at [40]. All other things being equal, and recognising that grudges are capable of being held for long periods of time, retaliatory action might have been more likely to occur closer to the offending event rather than some 18 months or 2½ years later. That is particularly so where Australia and Indonesia had a long and strong relationship, and both Australia and Indonesia made substantial efforts to repair the tensions caused by the making of the Second Control Order.

486 It should be noted, in particular, that Australia was significantly engaged after the Second Control Order in assisting Indonesia with improving its domestic production capabilities to enhance its beef self-sufficiency program, including through financial assistance.

487 As mentioned, Brett Cattle’s tenth contention on causation was that, in response to what members of the Indonesian Government perceived as an ongoing threat to food security arising from the making of the Second Control Order, the Indonesian Government took immediate steps to decrease its reliance on Australian live cattle to meet its domestic demand for beef, by reducing the quotas and enforcing them strictly: ACS[68]. Brett Cattle contended that the Second Control Order was seen as “present[ing an] immediate risk to Indonesia’s food security and that’s why the [Indonesian G]overnment felt the need to take this important action to decrease reliance on imports”: T717.16–8. Brett Cattle submitted that the Second Control Order reinforced Indonesia’s view that the 2014 BSSP should be pursued and caused it to pursue the program more vigorously and faster than it otherwise would have: T712.7–13; ACS[69].

488 Brett Cattle referred to four matters relevant to this contention.

489 First, Brett Cattle submitted that “there was no reference in either the [Blueprint] or [the 2010 Strategic Plan] of any plan to achieve self-sufficiency in beef by reducing or restricting imports of live cattle from Australia in the short term, but rather the 2014 BSSP was premised on continued imports from Australia being necessary in order for Indonesia to achieve self-sufficiency in beef”: ACS[69(a)].

490 Second, Brett Cattle referred to Dr Krisnamurthi’s evidence. Dr Krisnamurthi stated that there were discussions at cabinet meetings following the making of the Second Control Order. Asked about the discussions, he stated (ACS[60(b)(i)]; T224.17–20):

It’s on general issues, how to make sure that, first, the price stabilisation of food can be maintained. And second is, of course, our effort for self-sufficiency need to be more promoted and enlarged, and try to have an extra effort for that.

491 Brett Cattle referred also to Dr Krisnamurthi’s evidence concerning the Minister of Agriculture (Minister Suswono) after the announcement of the Second Control Order (ACS[60(b)(ii)]; T224.31–4):

The Minister of Agriculture says, of course, promote the self-sufficiency program. And that is our main goal, and we do that. And after that, we coordinate and try to increase the production of domestic productions and to strengthen the self-sufficiency program.

492 Third, Brett Cattle referred to contemporaneous records from the time immediately after the announcement of the Second Control Order, in which other Indonesian Government officials expressed the view that it would be necessary for Indonesia to accelerate its efforts to achieve self-sufficiency in beef: ACS[60(b)(iii)]. It referred to a cable sent on 8 June 2011, reporting that “Coordinating Minister for Economic Affairs, Hatta Rajasa, told TV reporters that the suspension was an opportunity for Indonesia to become more self-sufficient”: CBD301 at 9068. Brett Cattle also referred to a briefing note given to Minister Ludwig in respect of his visit to Indonesia from 19 to 21 June 2011 in which it was stated that “[t]he live cattle trade suspension has led to renewed calls by some Indonesian ministers and parliamentarians to push for self-sufficiency in beef production by 2014”: CBD316 at 9109.

493 Fourth, Brett Cattle referred to changes made by the Revised Plan to the 2010 Strategic Plan, particularly the increase in funding: ACS[60(d)].

The Quotas for 2012

Lack of Reference to Restricting Imports

494 As to Brett Cattle’s first submission, as is made clear in the discussion above, whilst it is true that the “2014 BSSP was premised on continued imports from Australia being necessary”, it was also premised on imports reducing. The Blueprint, the 2010 Strategic Plan and the Guide each contemplated that imports would be restricted and reduced through tariff and non-tariff measures and through existing and new regulations.

Dr Krisnamurthi’s Evidence and the Contemporaneous Records

495 As to Brett Cattle’s second and third submissions, neither Dr Krisnamurthi’s evidence nor the contemporaneous records lead to the conclusion that the 2014 BSSP was accelerated or pursued in a way which led to a reduction in the quotas for 2012 or 2013 or a stricter enforcement of those quotas.

496 The first point to emphasise is that Brett Cattle’s submissions in this respect focus more upon the reaction immediately after the Second Control Order than the more pertinent time being the end of 2011 when the 2012 quota was set or the end of 2012 when the 2013 quota was set.

497 In relation to the briefing note given to Minister Ludwig in respect of his visit to Indonesia between 19 and 21 June 2011, the sentence relied upon by Brett Cattle should be read in context (CBD316 at 9109, relevant sentence underlined):

Indonesian President Yudhoyono’s administration is aiming to attain self-sufficiency for five key agricultural commodities: rice, corn, sugar, beef and soy. To achieve this goal, Indonesia is actively seeking greater foreign investment in its agricultural sector (including from Australia) as well as increased capacity building initiatives. The live cattle trade suspension has led to renewed calls by some Indonesian ministers and parliamentarians to push for self-sufficiency in beef production by 2014.

Minister Suswono has been tasked with overcoming a number of agricultural challenges, including food security, regional food self sufficiency, increased agricultural productivity, stronger agricultural sectors, greater prosperity for farmers, more precisely targeted subsidies, a more favo[u]rable balance between agricultural imports and exports, increased production of livestock, intensified cooperation with other countries and the eradication of corruption.

Although Indonesia needs inputs in the form of agricultural imports to achieve its self-sufficiency goals, Suswono is pursuing a highly political agenda to appease domestic interests which compete with imported product. Suswono is also influenced by Indonesia’s conservative Prosperous Justice Party (PKS) of which he is a member. The PKS’s support base has traditionally been made up of smallholders and farmers. Suswono has significant influence, harbours protectionist views and his agenda includes aiming for increased food security with a reduced reliance on Australia, which is perceived as monopolising the agricultural market.

498 No doubt, immediately after the Second Control Order was made, members of the Indonesian Government referred to Indonesia’s self-sufficiency policy and stated that Australia’s ban on exports to Indonesia was a reason why Indonesia should become self-sufficient in beef production. However, that had been Indonesia’s aim for many years and the push towards self-sufficiency had been accelerated in early 2010, including by the President’s political commitment to the 2014 BSSP (CBD410.1 at 17392) and Presidential Instruction No 1 of 2010 to accelerate the 2010 National Development Priorities: CBD531.1; CBD533. It is likely that Minister Suswono used the Second Control Order in promoting the pursuit of the 2014 BSSP. In the hypothetical Exceptions Order Scenario, Minister Suswono could be expected also to have referred to the Exceptions Order as indicative of the wisdom of pursuing self-sufficiency.

499 As to the aspects of Dr Krisnamurthi’s evidence referred to earlier, this evidence appears also to relate to the time immediately after the Second Control Order.

500 As has been mentioned, once the Second Control Order was lifted, the immediate step taken was to issue large numbers of import permits for the third and fourth quarters of 2011. By the time Indonesia came to decide on the 2012 quota, in late 2011, Indonesia had the formal results of its cattle census, issued on 1 November 2011: CBD413.1. By late 2011, tensions between Australia and Indonesia in respect of the live cattle trade had eased from the levels seen in the weeks immediately after the Second Control Order. That is not to say that no resentments or tension remained, but the situation was quite different with good relations essentially restored. At that time, the Indonesian Government would not have considered the prospect of another ban as realistic. Indonesia knew that the live cattle trade was important to Australia and that Australia wanted that trade to continue. Given the events which had just transpired, and the resolution of them in a way which significantly improved animal welfare in Indonesia, the prospect of a further ban was minimal.

501 By the time of the decision on the 2012 quota, well after the immediate reaction to the Second Control Order recorded in the two documents relied upon by Brett Cattle referred to above, the contemporaneous records indicate that Indonesia’s consideration of the quota was being conducted by reference to its views about its domestic production capacity, informed by the census. The Counsellor-Agriculture from the Australian Embassy met with the Director General of Livestock (Dr Probowo) on 15 November 2011 and “asked about likely cuts to quota due to national herd census results”: CBD974. Dr Probowo was reported to have (at 38433):

agreed that the results of the census of 14.82 million … exceeded the self sufficiency target set for 2014 (14.2 mil[l]ion) but said that the problem was they were spread out all over the archipelago and costly to transport to population centres. He said that the quotas were likely to be reduced cf. [that is, compared to] this year.

502 The overall “national allocation” on live cattle imports for 2012 was to be decided by the Coordinating Ministry of Economic Affairs based on recommendations from the Ministry of Agriculture and Ministry of Trade: CBD347 (25 November 2011). This appears to have been so even though the formal change in responsibility was not to occur until January 2012: CBD347 at 9671. That is likely because transitional arrangements were in place or because of the impending change in formal responsibility.

503 As of 25 November 2011, the Ministry of Agriculture proposed 280,000 head and this was to be discussed by officials at the Coordinating Ministry with the Ministry of Trade before making a recommendation to Minister Hatta Rajasa, the Coordinating Minister on 30 November 2011: CBD347 at 9671. Dr Krisnamurthi was reported to have observed “that despite the current low level of imports the domestic market was stable (implication, low cattle imports seem to work)”: at 9671. This tends to suggest that Indonesia was content that its domestic production was coping with lower imports. Dr Krisnamurthi was also reported to have “suggested allocation would be based on the number of abattoirs approved by the Ministry of Agriculture for food safety standards (currently 16) which may (significantly) limit numbers”: at 9671. To the extent that is accurate as a consideration for setting the quota for 2012, the same position in that respect is likely to have existed in the Exceptions Order Scenario.

504 Immediately after the quota was set, Mr Ackerman (MLA) was recorded as having conveyed that “the Ministry of Agriculture’s calculations for quota are based directly on the results of the cattle survey along with projected local consumption”: CBD352 at 9682 [2].

505 Mr Ackerman was apparently critical of the methodology used in calculating the quota and considered that the “Ministry of Agriculture’s high estimates [of cattle numbers] are likely to be driven by a desire to appear to be meeting the self sufficiency goals in the national blueprint”: CBD352 at 9682 [2]. However, this does not gainsay that Indonesia set its quota by reference to its views about domestic supply as informed by the census results, which it accepted. On 20 December 2011, Mr Michael Finucan (MLA) sent an email to DAFF which stated that “officials have been adamant in reporting Indonesia is close to self-sufficiency and can supply 80% of the presumed demand”: CBD995 at 38570.

506 As of 19 March 2012, the Australian perspective was that the significant decrease in “import permits for 2012 for boxed beef and live cattle [was] part of [Indonesia’s] goal for self-sufficiency in beef by 2014”: CBD1013 at 38703. It was recognised that “Indonesia’s resentment over the lack of consultation ahead of the 2011 live cattle export suspension continues to surface”, but no connection was drawn between that fact and Indonesia’s setting or enforcement of quotas: at 38703. Rather, the Australian perception was that “Indonesia has determined the level of imports for 2012 based on Government projections of domestic supply and demand”: at 38752.

507 On 18 May 2012, the Assistant Secretary of the Bilateral Trade Branch of the Trade and Market Access Division of DAFF reported in a Minute to the Secretary of DAFF (CBD1031 at 38848):

The 2011 [sic: 2012] quota [at 283,000] is significantly lower than the 2011 quota (which was 500,000 head). However, this is not a response to the temporary suspension of Australia’s live cattle exports. Rather, it reflects Indonesia’s move towards self-sufficiency in a number of commodities, including beef.

508 The perspective of the Australian Embassy in Jakarta was that the quota was consistent with the Blueprint: CBD1046 at 38912.

509 Likewise, DFAT’s perspective was that the quota was consistent with the Blueprint. In a document dated 16 July 2012, it was said (CBD1050 at 38921):

The quota has been reducing each year since the self-sufficiency policy was introduced, and the current quota for imports corresponds with the blueprint. The quota is supposedly equivalent to 17 per cent of national demand in 2012 and we understand this will be reduced to 10 per cent of national demand in 2013 (based on the figure of each Indonesian consuming 1.98 kilograms of beef per annum).

510 It remains to mention some other aspects of Dr Krisnamurthi’s evidence relied upon by Brett Cattle.

511 Dr Krisnamurthi gave evidence that he was a part of the discussions at meetings where the proposed quotas for live cattle imports were discussed – see, for example: T225–7. Brett Cattle relied in particular on the following aspect of his evidence (T225.31–40):

MR WITHERS: Okay. And what decision was taken about the size of the quota for 2012?

DR KRISNAMURTHI: I think the – the key decisions is not mainly on the quotas, it’s mainly on the strategic approach by Indonesian [G]overnment, which is try to diversify our supply, and, of course, learning from the prior assessment that importations of live cattle come from country outside Australia is – is inefficient, is too expensive, and we are talking about Brazil, Mexico, United States, is much more expensive than – than Australia. Then we decide that diversification is not only countries but also product, so we decided to – to open up more on frozen meat.

512 Brett Cattle also referred to the following evidence given by Dr Krisnamurthi (T226.13–24):

MR WITHERS: … [T]here was a significant drop in the quota as between 2010 and 2012, do you recall the reasons for that?

DR KRISNAMURTHI: Yes, the reason is try to diversify the supply, not only for the sources in terms of countries, but also the type of product.

MR WITHERS: I see. And why was there a need to diversify?

DR KRISNAMURTHI: Yes. Again, we need to manage the uncertainty. We – we realise that we cannot 100 per cent depend on – on the supply from Australia, and we cannot be sure that the kind of policy, like the banning of the export, cannot be happen again.

513 Dr Krisnamurthi’s evidence set out above appears to imply that it was known (or became clear) that Indonesia could not import live cattle from the countries then being considered because of the inefficiencies and expense and, therefore, the decision was made to “open up more on frozen meat”: T225.34–40. That evidence is directly contradicted by the decision taken, which was to decrease the quota for both live cattle and boxed beef. Dr Krisnamurthi’s recollection on this topic, if his evidence is to be understood in the way mentioned, could not have been correct.

514 Further, it is improbable that the key decision was “not mainly on the quotas”: T225.34–40. That was the very purpose of the meetings and setting the quota was the result of the meeting. I do not accept that the “uncertainty” about what Australia might do in the future affected the level of the quotas set for either the 2012 or 2013 year. Indonesia did not import live cattle from other countries and is unlikely to have been able to do so in the short term. According to Dr Krisnamurthi, it was known that this was uneconomical: T225.34–40; T291.40–292.2. Indonesia did not in fact diversify its supply away from Australian live cattle and, indeed, it decreased its quota of boxed beef. I do not accept Dr Krisnamurthi’s account as accurate. That his recollection is inaccurate is unsurprising given the passage of time. In the absence of there being any actual diversification, the more likely explanation for the decreased quota, for both live cattle and boxed beef, is that those responsible for the decision considered the balance of Indonesia’s needs could be met from domestic sources consistently with what was suggested by the census results.

Brett Cattle’s Reliance on the Revised 2010 Strategic Plan

515 As to the Revised Plan, issued on 2 December 2011, Brett Cattle made two essential points, the first relating to changes to the “Foreword” and the second related to the fact that funding was increased: ACS[69(c)]; CBD414.1 at 21498.

516 The Foreword referred to the Revised Plan and the four main targets and included (CBD414.1 at 21498):

In connection with changes in the organisational structure and work procedures of the Ministry of Agriculture as stated in Minister of Agriculture Regulation [61 of 2010], changes in the global and domestic strategic environment; refocusing future programs / activities to achieve the four success targets; improving output / outcomes with more measurable and SMART (Specific, Measurable, Achievable, Relevant, Timely) indicators, as well as the Presidential Directive and the cattle census of 2011, the 2010-2014 agricultural development plans and implementation have undergone many adjustments. For this reason, the Ministry of Agriculture considered it necessary to revise the Ministry of Agriculture’s 2010-2014 Strategic Plan.

(Brett Cattle’s emphasis.)

517 Brett Cattle emphasised the reference to “changes in the global and domestic strategic environment”, submitting that this was an “obvious” reference to the Second Control Order and surrounding events and compared that to what it described as the “fleeting” reference to the cattle census: T726.1–5. The reference to the cattle census is clear and direct and no more “fleeting” than the reference Brett Cattle emphasised.

518 The reference to the changed strategic environment, when read in the context of the Revised Plan as a whole, is unlikely to be a reference to the Second Control Order and surrounding events. Beef self-sufficiency is not the predominant focus of the Revised Plan. It is only one of the 12 programs with which it deals. The reference in the Foreword to the global and domestic strategic environment is more likely to be a reference to the fact that there had been changes in the domestic and global strategic environment since 2010, relevant to the many agricultural products addressed in the Revised Plan. These changes were one reason for revising the strategy which had been put in place on 28 January 2010 some few months after President Yudhoyono’s second cabinet was sworn in shortly after 20 October 2009. For example, as at December 2011, the Indonesian Ministry of Agriculture was at various stages of implementing two sets of regulations that would impose significant non-tariff restrictions on horticulture imports: CBD1020 at 38810; 1013 at 38699, 38755. These were “likely to curtail severely imports of horticultural goods to Indonesia and impose significant costs and impediments on the horticulture trade”: at 38810.

519 The 2010 Strategic Plan summarised the Ministry of Agriculture’s “APBN [the National Budget] Financing Needs” in Table 5.1 (CBD412.1 at 20722). Table 5.1 addressed 12 funding areas. Item 4 in Table 5.1 dealt with two matters: beef self-sufficiency and “increasing the supply of safe, healthy, whole and halal animal foods”. Table 5.1 contains a summary of total funding needs and must be read with Appendix 50: at 20793. Within Appendix 50, Item 6 addresses the “Program for Achieving Beef Self-Sufficiency and Increasing the Provision of Safe, Healthy, Whole and Halal Animal Foods”: at 20816. Table 5.1 in the Revised Plan comprises, in modified form, what was Appendix 50 to the 2010 Strategic Plan and Item 6 in the Revised Plan comprises, in modified form, what was Item 6 in Appendix 50 to the 2010 Strategic Plan: CBD414.1 at 21611.

520 When Item 6 in Appendix 50 (in the 2010 Strategic Plan) is compared with Item 6 in Table 5.1 (in the Revised Plan), it is clear that more funding was allocated to the “Program for Achieving Beef Self-Sufficiency and Increasing the Provision of Safe, Healthy, Whole and Halal Animal Foods” at 8,596.31 billion rupiah (2,598.88 + 2,858.77 + 3,138.66) for the 2012 to 2014 years (in the Revised Plan), compared to 6,571.20 billion rupiah for the 2010 to 2014 years (in the 2010 Strategic Plan): CBD414.1 at 21626. Brett Cattle correctly submitted that funding for Item 6 in Table 5.1 had been increased.

521 Brett Cattle submitted that the increase in funding demonstrated an accelerated pursuit of the beef self-sufficiency program and submitted that the Second Control Order materially contributed to a decision to accelerate the program.

522 The Commonwealth referred to Dr Krisnamurthi’s evidence that, when the Blueprint was announced in January 2010 (the same month as the 2010 Strategic Plan), some of the program was without budget and was to be provided later through a budget adjustment: T836.24–837.6. His evidence included (T261.32–47):

DR KRISNAMURTHI: Then the budget decision has been made within November or December, the Indonesian budget decision, including for the Minister of Agriculture, including for the DG for Livestock or Animal Husbandry. Then when the blueprint is announced, some of the program is without budget. There’s no budget yet. So we propose for a budget adjustment. And that’s happening March, April. And probably we will make the decision in July 2011 to make sure that the budget for the activities within the blueprint can be provided by the government.

MS McLEOD: So the changes to the budget in 2010 – or, sorry ---

DR KRISNAMURTHI: ’11.

MS McLEOD: --- 2011 were because of the need to secure funding for the programs set out in this blueprint.

DR KRISNAMURTHI: Yes.

523 The Commonwealth also submitted that the budget allocation (a reference to Item 6 in Table 5.1 in the Revised Plan) was “a rolled-up line item” so that there was “no way to tell what the extra funds were allocated to”: T837.11–22.

524 The 2010 Strategic Plan had been issued almost two years before the Revised Plan. The Blueprint and the 2010 Strategic Plan were issued only a few months after the President’s re-election and the formation of the new cabinet. The Blueprint had been based on “still inaccurate data on cattle population and meat production”: CBD410.1 at 17400. Some of the strategies in the Blueprint were unfunded and could not have been included in the 2010 Strategic Plan: T261.32–47 (Dr Krisnamurthi). As has been noted earlier, the Blueprint recorded that “Government funds that have been allocated to achieve the BSSP will continue to be increased”: CBD410.1 at 17387. In those circumstances, it is to be expected that the funding increased in the Revised Plan.

525 Further, there were significant changes and increases across the entire 12 items addressed in Appendix 50 of the 2010 Strategic Plan and Table 5.1 of the Revised Plan.

526 In total, the budgets in the Revised Plan increased by 18,282.97 billion rupiah for the 2012 to 2014 years: CBD412.1 at 20834; CBD414.1 at 21642. There were increases comparable to, or larger than, the increase in respect of Item 6 in other areas of the budget. For example, Item 3 was the “Program to increase the production, productivity and quality of food crops to achieve self-sufficiency and sustainable self-sufficiency”’. In the 2010 Strategic Plan total funding for the 2012 to 2014 years was 4,677.21 billion rupiah: CBD412.1 at 20800. The funding for Item 3 in the Revised Plan was 12,355.97 billion rupiah: CBD414.1 at 21616. The shifting budgetary allocations in other agricultural areas, particularly the increases, is what one would expect to see, and suggests that the Revised Plan was introduced in the ordinary course, consistently with what one would expect.

527 Although Brett Cattle was right to identify an increase in expenditure in Item 6 of the 12 items in Table 5.1 (previously Appendix 50), consistently with what one would expect, it is important to recognise that Item 6 addresses more than beef self-sufficiency: CBD414.1 at 21626. The funding in Item 6 related both to the 2014 BSSP and “increasing the supply of safe, healthy, whole and halal animal foods”: at 21626. Thus, it addresses “meat production” and “livestock” generally, in addition to making specific mention of beef, buffalo, chicken, milk and eggs: at 21626.

528 The bulk of the additional funding in Item 6 of the Revised Plan, compared to the 2010 Strategic Plan, was directed to an increase in the quantity and quality of livestock semen and breeding stock, being Item 6.1: CBD414.1 at 21626. Item 6.1 is not solely concerned with beef cattle, although Item 6.1(4) related specifically and only to female cows and buffalo. Table 3.6 (in both the 2010 Strategic Plan and the Revised Plan) makes clear that the “7 superior livestock commodities” were beef, buffalo, goat/lamb, pork, chicken, duck and dairy cows: CBD412.1 at 20671; CBD414.1 at 21559. It is clear from the two pages which follow Table 3.6 (and the balance of the 2010 Strategic Plan and Revised Plan) – for example, the policy of “increasing the availability and quality of sperm and semen” – that the funding in Item 6.1 relates to all livestock, not only cattle: at 21559–60. Similar observations may be made about the balance of the sub-items within Item 6 which explain the total funding referred to in Item 6. There is no doubt that beef self-sufficiency was an important target of the increased funding, but it was by no means the sole target.

529 Brett Cattle also referred to the increase in production targets and self-sufficiency ratio targets in the Revised Plan.

530 The Revised Plan set an average annual increase of 7.49% for beef, compared to 7.30% in the 2010 Strategic Plan: CBD414.1 at 21559; CBD412.1 at 20671 (although the Revised Plan also gives other rates such as 7.13% at 21548, 21550, 21570, 21656 and 7.4% at 21586, the former of which appears to refer to beef and buffalo combined).

531 The Revised Plan increased the target beef self-sufficiency ratio for 2012, 2013 and 2014 compared to the 2010 Strategic Plan. The Revised Plan set targets for domestic beef production at 82.5% for 2012, 86.2% for 2013 and 90.3% for 2014: CBD414.1 at 21626; CBD414 at 21328; MFI 16. The corresponding targets in the 2010 Strategic Plan were 80.5%, 85.29% and 90%: CBD412.1 at 20816.

532 The Commonwealth submitted that the revised domestic production targets were more likely to be a response to the cattle census: T838. This submission should be accepted. One would expect the domestic production ratios to be increased in the Revised Plan in light of the new data which had been obtained in the census. There would be no rational basis not to change those figures given the Blueprint had assumed only 12.61 million cattle, while later information after a thorough census had revealed a higher cattle population. The census was expressly mentioned in the Foreword to the Revised Plan. This conclusion is further supported by the fact that, as one would expect given the higher cattle numbers, the Revised Plan increased the target ratio for domestic beef contribution to national meat production from 19.8% (2012), 20.6% (2013) and 21.1% (2014) to 21.4%, 22.5% and 23.5%: CBD414.1 at 21626; CBD412.1 at 20816.

533 That the domestic production target was revised because of the census is also supported by a later publication, the Ministry of Agriculture’s 2014 Performance Report which stated (CBD468 at 25315):

Efforts to increase domestic meat production through the Beef and Buffalo Meat Self-Sufficiency Program (PSDSK) began in 2010 with the publication of the 2014 PSDSK Blueprint. Based on the results of the 2011 Beef Cattle, Dairy Cattle and Buffalo Data Collection (PSPK2011) conducted by Indonesia Statistics, the cattle and buffalo population figures were much higher compared to the previous Blueprint target figures. So the results of this data collection were used as a basis for recalculating local supply capabilities as outlined in the revised edition of the 2014 PSDSK Blueprint. In the supply and demand for beef/buffalo meat, as outlined in the revised edition of the Blueprint, there was a gradual reduction in the portion of cattle and beef imports which came into effect in 2012, namely from 19.5% to 17.5% (local 82.5%), in 2013 from 14.7% to 13.8% (local 86.2%), and in 2014 from 10% to 9.7% (local 90.3%).

534 The Second Control Order did not play any material role in the revisions contained in the Revised Plan. Further, the Second Control Order did not materially intensify, or accelerate, Indonesia’s pursuit of its beef self-sufficiency program over and above what Indonesia would have done in any event in the Exceptions Order Scenario.

Strict Enforcement of the 2012 Quota

535 As noted earlier, Brett Cattle submitted that the quota for 2012 was strictly enforced. This proposition should be accepted in that fewer cattle (276,295) were imported than the quota which had been set (283,000).

536 Brett Cattle submitted that “[t]his marks a change in the Indonesian Government’s approach, as in 2010 the Indonesian Government had announced that it would only issue 452,000 import permits, but by the end of 2010 there had been a total of 514,935 head of live cattle imported”: ACS[68(d)].

537 The circumstances in 2010 were quite different to 2012. In 2010, there was no quota system, and no quota was set at the end of 2010 for the 2011 year. On 28 July 2010, the Indonesian Government informed importers that import permits would only be issued to import 452,000 head of live cattle into Indonesia in 2010. This was not a formal quota. Further, this occurred in the context of the recent introduction of the 2014 BSSP and its strategies which included enforcement of existing, and development of new, import regulations. The quota for the 2012 year was the first quota ever set. It was set in compliance with new regulations, something which had been anticipated by the 2014 BSSP which contemplated the introduction of regulations and the control of imports, including through tariff and non-tariff barriers.

538 Accordingly, “strict enforcement” of the quota could not be said to have marked a change to any existing approach to the treatment by Indonesia of formal quotas set by the Coordinating Minister after consultation. On the other hand, it may be accepted that Indonesia had, in 2010, permitted imports beyond the level of 452,000 which had been communicated by the Director General of Livestock in a letter dated 28 July 2010. This does not bear the significance for which Brett Cattle contends.

539 As the facts set out above demonstrate, Indonesia considered increasing the 2012 quota during the 2012 year – see, for example: CBD1017. This involved discussions between Ministries and it is tolerably clear that, in 2012, the Ministry of Trade and the Ministry of Agriculture had differing views as to whether quotas should be varied: CBD1017 at [6]. At that time, the “key indicator for the Ministry of Trade that demand for beef was higher than available supply was rising prices, and they could see that prices were now going up”. For its part, the Ministry of Agriculture wanted to adhere to the self-sufficiency projections: CBD1017 at [12]. The “Ministry of Agriculture … remained adamant that supply was sufficient” having regard to the census results: CBD357 at 9693 [3]; CBD1018 at 38805 [3].

540 The differences in opinion of the Indonesian Ministries at this time were resolved by bringing forward 5,600 tonnes of boxed beef from the boxed beef quota for the second half of the year, without altering the overall boxed beef quota: CBD1023 at 38817. No change was made to the live cattle quota: at 38817. Indonesia’s continued consideration of whether the quota should be altered was conducted by reference to a re-examination of domestic supply conducted by a team led by the Ministry of Agriculture: at 38817 [3]. The Ministry of Agriculture maintained the view that supply was sufficient, and that beef self-sufficiency had been achieved or was close – see, for example: at 38818 [6].

541 The Ministry of Agriculture was not the final decision-maker on such issues, albeit its contribution to the decision and influence was evidently significant. Ultimately, increases in quotas were a difficult political decision given the government considered it needed to be seen to be protecting the interests of farmers: CBD1078 at 39285 [6]; CBD1087 at 39333 [8] (an observation made in relation to the quota for 2013, but equally applicable to 2012). In 2012, it was reported “that beef had become intensely politicised and was now the flagship product for [Minister] Suswono’s claim that progress had been made towards food self-sufficiency” because “of the five key food commodities identified in the self-sufficiency blueprint, only beef showed any evidence that production had increased”, referring to the census: CBD1033 at 39332 [6].

542 The evidence does not establish that the 2012 quota was adhered to or was strictly enforced for reasons associated with the Second Control Order. Rather, the evidence indicates that the quota was adhered to because that was the number of cattle which the Indonesian Government considered should be imported consistently with its 2014 BSSP as it then stood.

543 The level of Indonesia’s adherence to the quota it set for 2012 would not have been different in the Exceptions Order Scenario.

Conclusions in respect of the 2012 Year

544 The quota for 2012 was set primarily by reference to the 2014 BSSP (which had been introduced in January 2010), as modified (including by the Revised Plan), and Indonesia’s view about its likely domestic supply capacity for the 2012 year, informed by the census results. The live cattle quota was reviewed throughout the year and the decision taken that it need not be altered.

545 The Second Control Order did not materially intensify or accelerate Indonesia’s pursuit of its beef self-sufficiency program (that is, the 2014 BSSP as it stood from time to time). Nor did it relevantly alter the level at which the 2012 quota was set or the degree to which it was enforced.

546 Further, it is difficult to see that Indonesia would have acted differently in the Exceptions Order Scenario, even if the Second Control Order did play some small material causal role in the setting or enforcement of the 2012 quota (which it did not). The Second Control Order came as a shock to Indonesia and reinforced the view it already held that it was in Indonesia’s interests to pursue beef self-sufficiency. Indonesia’s reaction to the First Control Order was not as marked, but this only banned exports to 12 identified abattoirs. It does not follow from this fact that Indonesia would not have reacted negatively to an Exceptions Order. An Exceptions Order would have been implemented “in an orderly way after seeking to gain the cooperation of the Indonesian Government and others”: LJ[405]. Such an order would have involved a total ban with the power to grant exceptions. This would have been significantly more disruptive, and involved a greater threat to Indonesia’s immediate beef supply, than the First Control Order. Consultation before implementation would have resulted in the Exceptions Order not coming as a shock, and the fact of consultation would have lessened or eliminated the offence taken, but there is no good reason to think that such an order would have had any meaningfully different consequence in terms of Indonesia setting and enforcing quotas than the consequence in respect of those matters in the Second Control Order Scenario. Brett Cattle expressly did not contend that the quotas for the 2012 and 2013 years were by way of retaliation or retribution: T713.37–40. It might also be observed that Brett Cattle did not seek to establish through detailed evidence of any of the witnesses how or why the reaction would have been materially different with respect to quota levels and enforcement in the hypothetical Exceptions Order Scenario compared to the Second Control Order Scenario. The Court does not draw any adverse inference about this, recognising it is always difficult to establish what would have occurred in hypothetical circumstances and also recognising, in the applicant’s favour, that it has been placed in the position it has by conduct of the Commonwealth which has been held to be wrongful.

547 The hypothetical Exceptions Order is likely also to have reinforced the view Indonesia already held that it was in its interests to pursue beef self-sufficiency with the vigour it had been pursued since January 2010.

548 The central matter that changes in the Exceptions Order Scenario is that, instead of a total ban, there would have been a total ban with the power to permit exports by way of exception. All of the other matters remain the same. Four Corners would have aired its program in a context where Indonesia was vigorously pursuing a reduction in imports. Exports to Indonesia would have been seriously affected by a total ban with the power to grant exceptions. Indonesia would have had to take action by way of improvements to animal welfare to resume the usual trade relations and to seek to avoid similar situations occurring in future. Australia would have introduced an ESCAS, albeit somewhat earlier than it did. In the Exceptions Order Scenario, there would have been a risk of further or similar interruptions in the future, particularly if the level of improvement in Indonesia’s abattoirs was not achieved as quickly or as well as it was in the Second Control Order Scenario. Indeed, further animal welfare issues were filmed and raised in early 2012 at four facilities in two locations in Jakarta – see: CBD1013 at 38753; CBD1022 at 38815; CBD1031 at 38847–8; CBD1036 at 38867. The response to these may have been different if the Second Control Order and its consequences had not occurred. There may have been more animal welfare issues raised if the Second Control Order had not been made because it is likely that, in the Exceptions Order Scenario, the actions taken to address the issues raised would have occurred differently and potentially at a slower rate than the relevant issues were in fact addressed. The hypothetical Exceptions Order may have been in place for longer than the Second Control Order which was repealed after about a month.

549 These issues do not need to be pursued at length because, as has been mentioned, the Second Control Order did not materially contribute to the level of the 2012 quota or the degree to which that quota was enforced.

Conclusions in respect of the 2013 Year

550 Brett Cattle did not submit that material events occurred between the time the 2012 quota was set and the time the 2013 quota was set which could found a conclusion that, although the 2012 quota might not have been affected by the Second Control Order, the 2013 quota was so affected. Rather, the arguments referred to earlier were, in substance, advanced also in relation to the 2013 year.

551 The contemporaneous documents referred to above indicate that the quota for the 2013 year was set by reference to Indonesia’s considered view about its capacity to supply beef from domestic sources, informed by its view as to its cattle population.

552 Again, there was a difference in view between Ministries: CBD1078 at [8]. On 4 December 2012, an Australian Embassy cable reported (CBD1078 at 39285 [5]):

Indonesian Government ministers are increasingly concerned at the rising cost of beef and the potential effect on inflation. Only Agriculture Minister Suswono is still arguing against more imports, stating the need for self-sufficiency. Suswono’s priority is protection of the farmers’ short-term interests, in line with the politics of the PKS party, which has a disproportionate influence over agriculture policy in Indonesia. For Suswono, high beef prices for Indonesian middle-class consumers is a positive development because it means more profits for his constituents.

553 On 6 December 2012, an Australian Embassy cable reported (CBD1083 at 39308 [7]):

Kiranayanti, [the Deputy Director of the] Australia desk [at the Indonesian Ministry of Trade] told us the Ministry of Trade was well aware of the shortage of beef, but said the difficulty lay in finding a diplomatic way of selling the message to the Indonesian people (ie farmers) that imports were needed. She said Vice Minister for Trade Bayu Krisnamurthi had told her that Indonesia needed to do three things to manage the beef shortage: 1. increase imports for processed meats, such as that used in meatballs (bakso); 2. work harder in genetics through the import of cattle semen; and 3. raise investment levels particularly in integrated slaughterhouses.

554 Dr Krisnamurthi became the Indonesian Vice Minister of Trade on 19 October 2011: SOAF 2 at [7(b)]. Dr Krisnamurthi did not suggest that the Second Control Order was a consideration in respect of the 2013 quota. He was asked “what factors were relevant to the determination of what the quota should be” for 2013: T227.43–4. He responded at T227.46–228.4:

We evaluate the situation in 2012. And in our system, every quarter we evaluate the quota, whether or not we should increase it or decrease it. And we see that the quota in 2012, I think – I believe it’s about 250, 260,000 head is sufficient because of the importation of non-live cattle. And so I remember the discussion that we should maintain that, and at the same time we also saying that we increase the effort on domestic production.

555 On 14 December 2012, an Australian Embassy cable reported (CBD1087 at 39333 [8]):

Jusuf [the Special Adviser to the President on Food Security] said 35 percent of Indonesia’s working population were farmers and a large proportion of them were living under the poverty line. This dynamic meant that politically it was very difficult to increase the import quota on beef and cattle, as the government needed to be seen to protect farmer’s interests. But he again acknowledged that 100 percent of the population were consumers, and that the Government needed to look after their interests by keeping prices affordable. He said it would be important to change livelihoods so less of the population was dependent on agriculture for a living.

556 None of this suggests any material contribution by the Second Control Order to the decision to set the quota at the level it was set for 2013. Rather, the quota decision reflected Indonesia’s pursuit of the 2014 BSSP in the context of Indonesia’s political, social and economic environment. It is clear from the facts set out earlier that the 2013 quota was not enforced for a substantial part of 2013. The evidence does not lead to a conclusion that the 2013 quota was strictly enforced in the first part of 2013 as a result of the Second Control Order.

557 Further, for the reasons given in relation to the 2012 year, it is difficult to see that Indonesia would have acted differently in the Exceptions Order Scenario, even if the Second Control Order did play some small material causal role in the setting or enforcement of the 2013 quota (which it did not). As with the 2012 year, Brett Cattle did not seek to establish through detailed evidence of any of the witnesses how or why the reaction would have been different with respect to quota levels and enforcement in the hypothetical Exceptions Order Scenario compared to the Second Control Order Scenario.

Quantification

558 Given that the Second Control Order did not materially contribute to the levels of the 2012 and 2013 quotas, or the strictness of enforcement of those quotas, it follows that no additional cattle would have been exported in those years in the Exceptions Order Scenario.

CONCLUSION

559 For these reasons, no additional cattle would have been exported to Indonesia in 2012 and 2013 in the Exceptions Order Scenario. Both parties asked the Court not to make substantive orders in relation to the separate question until after these reasons for judgment became available. That is the appropriate course.

Associate:

Dated:    5 June 2025