The United States Accusation of Biodiesel Dumping and Subsidies

The United States accused palm oil biodiesel is being dumped or obtaining subsidies from the Government, which is not supported by any facts. On the contrary, the United States actually gives a large subsidy to soybean biodiesel production around 61-72 percent of the retail price of biodiesel

At the end of August 2017, the United States plans to impose an anti-dumping policy in the form of Anti Dumping Import Duty (BMAD) on palm oil biodiesel from Indonesia. The amount of BMAD rates planned to take effect from October 2017, ranges from 40-70 percent. If the protective policy is eventually implemented, it will threaten palm biodiesel exports to Uncle Sam’s country.

The plan to implement the BMAD on palm oil biodiesel imports is based on accusations of dumping on palm oil biodiesel. In the economic concept in international trade, it is called a dumping practice if a country sells a product at a cheaper price in its export market compared to the selling price in the domestic market. In the case of biodiesel, the real question is whether the selling price of pure palm oil biodiesel (B100) in the United States market is cheaper than the biodiesel selling price in Indonesia.

When referring to the price of biodiesel (B100) in Indonesia, in 2016 for example, the average price of biodiesel in Indonesia is Rp 8,183 per liter. If biodiesel export taxes/levies are calculated and the transportation costs (c.i.f) to US ports (on-board price), then the price of Indonesian palm biodiesel is around Rp 9,410 per liter. While the retail price of soybean biodiesel (B100) in the United States market in 2016 averaged at Rp 10,534 per liter.

So from the price illustration, it is almost impossible for Indonesia to practice dumping. Because it is impossible for biodiesel producers to sell biodiesel in the United States below the price in Indonesia (IDR 8,183) because they will definitely suffer a loss. The fact that  the price of palm biodiesel in Indonesia is lower than the price of soybean biodiesel in the USA market is only normal. In terms of the raw material, the biodiesel from soybean is not competitive . Palm oil productivity ranges from 5 tons of oil per hectare, while soybean productivity is only about 0.6 tons of oil per hectare. Likewise, the production costs are definitely cheaper for palm oil biodiesel compared to soybean biodiesel.

To be honest and fair, the accusation of biodiesel subsidies is actually more accurately directed to the United States’ soybean biodiesel. According to The Global Subsidies Initiative Study, it was revealed that the United States, during 2006-2016, provided soybean biodiesel subsidies of around 15-17.6 billion US dollars or around 1.5-1.7 billion dollars every year. The study also revealed that the soybean biodiesel subsidies is around 61-72 percent of the retail price of soybean biodiesel. This means that if there are no subsidies, the retail price of soybean biodiesel (B100) in 2016 in the United States market is around IDR 17,000 per liter.

Thus, the United States accusation that palm biodiesel is carrying out dumping practice is not supported by any facts. The accusation of palm oil biodiesel subsidized from the Indonesian Government is also not supported by any facts. On the contrary, the United States actually provides a large subsidy for the soybean biodiesel.

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