There’s another trade war brewing over milk, oil

By Eko Listiyorini and Yoga Rusmana

While the world focuses on the ongoing trade war between China and the US, another spat has been brewing between commodity giant Indonesia and the European Union.

Indonesia, the top producer of the world’s most-used vegetable oil, is seeking to raise import tariffs on EU dairy products to 8%-18%, according to Enggartiasto Lukita, the trade minister for the Asian nation. That’s in retaliation to the bloc’s plan to impose anti-subsidy duties of the same rate on Indonesian palm biodiesel, he said.


“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.”

The feud over palm oil between the two trading partners escalated earlier this year, when the European Commission decided to place stricter limits on palm oil’s use in biofuels from June on concerns over deforestation. Indonesia, as well as No. 2 palm producer Malaysia, have warned that the move risks causing an all-out trade war, saying that the EU is unfairly discriminating against palm oil and jeopardizes the countries’ fight against poverty.

Indonesia, which currently has a 5%-10% import duty on EU dairy, says it is open to going further than matching the EU’s levy by raising its tariffs to 20%-25%.

Indonesia will turn to other dairy suppliers, such as Australia, New Zealand, the U.S. or India, Lukita said. Indonesia is the third-biggest buyer of skim milk powder from the EU after Algeria and China, according to the European Commission’s data. The EU is Indonesia’s third-largest trading partner while Indonesia ranks 31st for the EU.