European Union representatives to Indonesia on Thursday challenged a plan to impose duties on European dairy goods in retaliation for the bloc's duties on palm biodiesel, warning such action would violate World Trade Organization rules.
Indonesia's Trade Minister Enggartiasto Lukita said on Aug. 9 he was recommending to an inter-ministerial team a 20%-25% tariff on EU dairy products as the appropriate response to the EU's plan to impose 8% to 18% countervailing duty on biodiesel from Indonesia.
The EU biodiesel market is worth an estimated 9 billion euros ($10 billion) a year, with imports from Indonesia worth about 400 million euros, the European Commission said last month.
Indonesia's total dairy and egg imports in 2018 were worth $1 billion, trade ministry data showed, with most dairy imports coming from Australia, New Zealand, the United States and Europe.
"What the WTO does not allow, absolutely forbidden by the WTO regulation, is retaliation, which is what's suggested in this case of dairy products," the EU's head of trade for Indonesia, Raffaele Quarto, told a briefing.
"In addition to that, if you see declaration of Indonesian importers that use dairy products from the EU, they pointed out it will damage the Indonesian economy to have this kind of measure," Quarto said.
Charles-Michel Geurts, the head of the EU delegations to Indonesia, also noted problems with shipments of European spirits into Indonesia in the past six months amid suspicion this was linked to the biodiesel issue.
European spirit makers this year said they faced difficulties exporting drinks to Indonesia. An Indonesian trade ministry official said there were delays in granting import licences for spirits from Europe, but denied this was related to the dispute over palm oil.
"We are both members of WTO, we have rules of the game between partners," said Geurts.
Indonesia's director general of foreign trade at the trade ministry and the ministry's spokesman declined to comment on Thursday.
The EU countervailing duties are another blow for Indonesia, the world's biggest palm oil producer, after the bloc said that palm oil should not be included as a renewable transport fuel due to deforestation to make way for plantations.
Indonesia and Malaysia, the world's second biggest palm oil producer, have repeatedly said the European measures against the edible oil industry are discriminatory.