Retaliation on EU and USA Palm Oil Import Policy

The threat of trade retaliation / counterattack of trade becomes the last resort on EU and USA palm oil policy

Currently, palm oil exports to Europe (EU) and the United States (USA) face the threat of trade protection that requires serious attention from the government. The palm resolution issued by the European Parliament in early April 2017 threatened the palm oil embargo associated with issues such as deforestation, forest fires, GHG emissions and peat.

The issue of deforestation is actually a normal phenomenon in every country including in Europe and North America from the past until now. Global deforestation in the period 1600-1983, the extent of deforestation in the subtropics especially in Europe and North America reached 653 million hectares (Elaine Matthews, 1983). While the period 1990-2008 reached 239 million hectares (European Commission, 2013). Issues of forest fires also occur in every country. In the period 2010-2015 the area of ​​forest and land fires in Russia and Europe reaches about 2.6 million hectares annually (European Commission, 2016). While in the USA reaches about 2.2 million hectares (USA-NOAA, National Centers for Environmental Information, 2016). While in Indonesia only about 64 thousand hectares per year. GHG emissions issue of GHG USA (IEA, 2016) reached 5.2 giga ton CO2, and EU-28 amounted to 3.2 giga tons of CO2. While Indonesia’s GHG emissions are only 0.43 giga ton CO2 or only 8 percent of USA emissions and 13 percent of EU-28 emissions. Similarly, the issue of Peat, based on data from Wetland International (2010) and Research Report VTT 5 (26) that the area of ​​European peatland has been lost by 10.7 million hectares or about 21 percent of the original peat area. Peat in the European region is mined and burned to produce energy. In other words, the link between palm oil and deforestation issues, forest fires, GHG emissions and peat is only the reason for the protection of palm oil trade to Europe.

Likewise for the export of palm oil to the United States. The threat of protection faced by Indonesian palm is very strong. End of August 2017 and then, the United States plans to apply anti-dumping policy in the form of Anti Dumping Import Duty (BMAD) of 40-70 percent on palm biodiesel from Indonesia. The allegation is the practice of dumping palm biodiesel. Though the data prove different things. In the year 2016 for example the average price of biodiesel in Indonesia is Rp 8.183 per liter. If the calculated tax / levy of biodiesel exports and transportation costs (c.i.f) to the US port (landed price) then the price of Indonesian palm biodiesel is about Rp 9,410 per liter. While the retail price of soybean biodiesel (B100) in the United States market in 2016 averaged Rp 10,534 per liter.

In contrast, biodiesel of US soybean oil is subsidized by biodiesel. According to the study of The Global Subsidies Initiative, reveals that the United States during 2006-2016 gave subsidies of soy biodiesel that is about 61-72 percent of the retail price of soybean biodiesel. If there is no subsidy, the retail price of biodiesel in 2016 (B100) in the US market is around Rp 17,000 per liter.

Facing the increasingly massive protective policies of the EU and USA countries, the Indonesian government does not let it go. According to Law no. 7/2014 on Trade (article 67, 68) the government is required to take the necessary action if Indonesian exports are treated unfairly for any reason. Therefore, the government needs to be early in protesting the EU and USA policy plan.

So far, commodities / products imported by Indonesia from EU and USA include dairy products, soybeans, wheat, perfume, chemicals, electronic equipment, military equipment, aircraft, automotive, IT equipment and others. Indonesia’s trade balance with the EU has so far benefited Indonesia (surplus). By 2015, according to BPS data, Indonesia’s trade balance with the European Union has a surplus of USD 3.6 Billion. Similarly, Indonesia and the United States recorded a surplus of USD 8.6 billion (BPS, 2017).

The form of the Indonesian government’s reaction can certainly be a soft diplomacy reaction to hard diplomacy acts (trade war) such as the threat of trade retaliation. In the principle of bilateral trade actually holds the principle of win-win solution that benefits both sides in a sustainable manner. The settlement of trade issues between the two win-lose countries will hurt both countries. Therefore, as much as possible the threat of protection of palm oil to the EU and USA can be done by establishing communication or trade diplomacy that produces a win-win condition.

Of course soft diplomacy that produces a win-win solution is not always easy to obtain. Therefore, retaliation or retaliation of trade becomes the last resort. EU and USA products that are implicitly an embodied carbon emission product compared to Indonesian products can be the reason for retaliation of trade with EU and USA.

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