Indonesia Has to Import More US Beef. Will It Make Your Steak Any Cheaper?

Do you know the difference between a strip steak and a steak sandwich? US beef companies sure hope so. Beef, chicken, and agricultural producers in the United States and New Zealand recently won an international trade dispute against Indonesia over the country's highly restrictive food import regulations. Indonesian officials, eager to grow the country's homegrown agricultural industries, have long favored strict import regulations on foods like beef and chicken, arguing that the rules existed for health and halal reasons.

But a decision by the World Trade Organization (WTO) last week shot down those rules and opened the door for an influx of US and NZ food products. So what's it mean for the average eater? Let's get to the, ahem, "meat and potatoes" of the decision.

The WTO ruling is about meat and potatoes, but it's also about so much more. The decision reverses regulations put in place by former President Susilo Bambang Yudhoyono's administration that required all beef imports to come from 100 percent halal slaughterhouses, limited the cuts importers could bring into the country, and required importers to purchase specific amounts of domestic beef before applying for an import license.

The measures were put in place as an attempt to bolster Indonesia's often-ailing agriculture sector. Agriculture employs as much as 41 percent of the country's workforce, but big ticket commodities likes palm oil are much bigger drivers of the sector's growth than, say, soybeans or chillies—two vegetables that have experienced rapid inflation rates in recent years.

But the US and NZ successfully argued before the WTO that these rules were unfair and illegal barriers to trade. "BAD trade deals" are now a big issue in the US under President Donald Trump, a man who recently told a meeting of Asian leaders that he would no longer stand for "unfair trade practices." So expect more cases like this to happen under the Trump administration.

But what's it mean for Indonesian consumers? In some instances, US agricultural products are so cheap that they effectively push the local growers out of the market. Indonesians eat A LOT of soy—the vital component in tempe and tahu—but it typically imports as much as 60 percent of its soybeans, mostly from the US. Why are US soybeans so cheap? Industrial farming methods is one answer, but huge farm subsidies likely play a more important role. The US government spent $35.6 billion USD on soybean subsidies alone between 1995 and 2016.

The US also, to a much lesser extent, subsidize its meat industries. So does this mean Indonesia is about to be flooded with cheap cuts of US and NZ beef? Not necessarily, said Thomas Sembiring, an executive director at Meat Importers Association (Aspidi). The reason why? Imports are still expensive.

The beef market is especially complicated and prone to corruption—remember the PKS beef scandal? Not only does corruption often play a role in keeping the price of imports high, the cost of all that travel, of refrigeration and fuel, adds up too. And Indonesia already imports a lot of beef, but it's mostly from India, where prices per-kilogram are much lower.

Then there's the speculators, Thomas told VICE.

“When imports were restricted, problems arose,” Thomas said to VICE, referring to the era under SBY. “When the demand exceeds the supply, people started speculating. During the restriction era, the number of importers increased, and many started selling their quotas.”

The deregulation will likely affect the premium beef market most of all, he explained. NZ, for example, offers a wide range of different cuts, but all of them cost more than locally produced beef—as much as millions of rupiah per-kilogram.

“With that sort of price range and quality, imported beef will only make it into the premium market, and will not be sold at supermarkets or traditional markets,” Thomas told VICE. “It’s the kind of meat demanded by five-star hotels and elite restaurants. Their numbers are low. It’s only the upper class that can afford it.”

OK, but will these prime cuts of beef be more affordable then? Not really, said Hariyadi Sukamdani, the head of Indonesia’s Hotel and Restaurant Association.

“Even if the price goes down, it won’t be too significant,” Hariyadi said.

Then there's the fact that, really, no one actually knows how imports will affect the market. Ahmad Heri Firdaus, a researcher at the Institute for Development of Economics and Finance (INDEF), told VICE that there just isn't enough data out there to determine what kinds of meat imports are actually needed and where.

"Some products are meant for mass consumption while some are only demanded by hotels and restaurants," he said. "So the question is whether our regulation will help meeting these needs. If we only needed upscale premium beef, then put a tighter restriction on other products."

Basically, if Indonesia needs more quality cuts of beef at a lower price, then set up regulations that support that import industry only. If it needs more cheap meat, then handle the new US and NZ beef that way, Ahmad said. But also support local cattle farmers at the same time, he added.

"If local production is inadequate, then the imports will help, but it our local producers actually provide enough, then those imported products will hurt them," Ahmad said.

So what's it all mean? Well, if you already know your strip steak from your rib eye then you might be paying the same price you to today, but for a (possibly) tastier cut of meat. But if you don't know the difference, then don't worry—the price of your hamburger likely won't change one bit.