While the global markets, economists, investors and analysts are busy closely watching the developments of the trade war between the United States and China, there is another potential trade war that is brewing the European Union and the commodity giant Indonesia.
Indonesia is the largest pr5oducer of the most widely used vegetable oil of the world. And according to Enggartiasto Lukita, the trade minister for the Asian nation, the country is looking to increase the tariffs on import of dairy products from the EU to between 8 and 18 per cent. He said that this action by the Indonesia n government is being contemplated as a retaliatory measure to the planning by the EU to impose an anti-subsidy tax palm biodiesel imported form Indonesia at the same rates.
“The EU can impose something on us as long as the parameter is fair, but if the parameter is not fair, then that is an act of protectionism and trade war,” Lukita told reporters in Jakarta on Friday. “We can’t just be quiet when there is unfairness.”
Earlier this year, the clash between the EU and Indonesia – the two trading partners, had increased following the decision of the European Commission to impose stricter limits on the use of palm oil in biofuels starting June this year. The Commission said that this measure was taken to conserve the forests of Indonesia where palm oil is mostly produced.
A warning that this decision by the EU could result in an all out trade war with the European Union, had earlier been issued by Indonesia, as well as second largest producer of palm – Malaysia. Both the countries have accused the EU of unfairly discriminating against palm oil which is jeopardizing the fight against poverty being undertaken in the two countries.
Currently, import duty of between 5 per cent and 10 per cent is levied by Indonesia on dairy products from the EU. The country has warned that it would also not be deterred from increasing the rate of import duties beyond matching the EU rates of tariff and could push it up to between 20 per cent and 25 per cent.
Lukita said that instead of the EU, Indonesia could even look to replace EU dairy imports with supplies from other countries such as Australia, New Zealand, the United States and India. According to data from the European Commission, Indonesia imports the third largest quantity of skim milk powder from the EU. The only other countries that import more are Algeria and China. While Indonesia is the 31st largest trading partner of the EU, EU is the third-largest trading partner of Indonesia.
(Adapted from AlJazeera.com)