EU risks Indonesian anger with trade tariffs

The European Union is imposing duties on imports of subsidised Indonesian biodiesel to level the playing field with EU-based suppliers. 

Brussels now faces retaliatory tariffs by Indonesia on EU farming exports.

Malaysia and Indonesia produce 85 per cent of the world’s palm oil.

The European Commission imposed temporary tariffs on the subsidised goods ranging from 8 to 18 per cent, warning that it could impose permanent duties by the end of this year.

The EU’s executive branch said it “found that Indonesian biodiesel producers benefit from grants, tax benefits and access to raw materials below market prices”. 

“This inflicts a threat of economic damage to EU producers,” the commission added.

It said its probe focused on possible subsidies for biodiesel production, whether it involved environmentally damaging palm oil or less commonly used raw materials.

The probe reported that the European biodiesel market was valued at about €9 billion per year, with imports from Indonesia worth an estimated €400 million.

Trade disputes between Europe and Indonesia have grown as a result of a separate EU decision this year restricting the types of biofuels from palm oil that can count towards the renewable energy targets. In Indonesia, palm oil is the main raw material used in the production of biodiesel.

Palm oil drives deforestation, with huge swathes of Malaysia and Indonesian rainforest cleared for plantations.

The Indonesian trade minister Enggartiasto Lukita said last week he had told Indonesia’s dairy importers to look for new suppliers outside Europe and threatened to increase EU dairy duties, which currently range from 5 to 10 per cent.

Indonesia President Joko Widodo has asked palm oil stakeholders to push up the domestic use, despite its environmental cost. 

According to the WWF, every hour an area of rainforest the size of 300 football fields is cleared for palm oil to be grown on.

Indonesia is now the world’s third-highest greenhouse gas emitter because cleared vegetation is often burned.

A third of all Indonesian mammal species are now estimated to be critically endangered as a result of deforestation, largely for palm oil.

The Sumatran rhino, sun bear, pygmy elephant, proboscis monkey, clouded leopard, Sumatran tigers and orangutan are all threatened. Around 1,000 of the gentle “man of the forest” are thought to have died every year as a result of palm-oil production in the last 20 years, with some of the giant apes found buried alive.

 

Sumatra’s tigers are dying out because of palm-oil production. Picture credit: Wikimedia