• by Kanis Dursin (jakarta)
• Tuesday, December 14, 2010
• Inter Press Service

Business people and officials are demanding more fair trade from the European Union, arguing that its policies, including those that come in the guise of climate change concerns, make it difficult for the country’s products to compete in EU market.

Their list of concerns about EU policy also include Indonesia’s being left out of trade privileges, such as those extended to other countries struck by natural disasters. 'We are not asking for zero or low import tariffs but equal treatment. Similar products must be subjected to the same import tariffs regardless of their country of origin,' says Ade Sudradjat, chairman of the Indonesian Textile Producers Association.

Indonesian products are subjected to import tariffs of between 13 and 16 percent when entering the EU market, according to Sudradjat.

Business people point out that Indonesia has been struggling to get a better foothold in the EU, given a slight decline in trade volume in recent years, while competing with other regions favoured by the bloc.

'The European Union as a whole is now paying more attention to their former colonies in North Africa and the Caribbean by giving preferential treatments in the form of lower import tariffs,' Sudradjat says.

The EU has reduced import tariffs for goods from 176 Least Developed Countries and territories as parts of its Generalised System of Preferences (GSP), giving them additional edge over countries like Indonesia, which has been struggling to keep prices of its products low amid rising labour costs and transportation.

The EU also grants tariff waivers to natural calamity- struck countries to help them to make speedier recovery. 'Indonesia has seen some of the world’s worst earthquakes and tsunamis, but why did Indonesia not get any tariff waiver from the European Union?' asks Sudradjat, referring to a series of disasters that have hit the country, including the Aceh killer tsunami of December 2004 and deadly earthquake in West Sumatra in 2009.

The EU is Indonesia’s fourth biggest export market after Japan, the United States, and China, with trade volume reaching 22 billion U.S. dollars in 2009, down from 25.8 billion dollars in 2008. The balance of trade has always been in favour of Indonesia, which recorded a trade surplus of 4.85 billion dollars in 2009, coming down from 6 billion dollars in 2006.

Indonesia’s main exports to the EU include crude palm oil, copper ores and concentrates, coffee, and wooden furniture, while its imports are mostly raw materials and machineries used to produce goods for export. Textiles are a key product, since each person in the EU is said to use an average of 34 kilogrammes of textiles a year.

Gusmardi Bustami, director general of international trade cooperation at the Ministry of Trade, says the trade volume and surplus figures do not reflect the full trade potential between Indonesia and the EU.

'We can still expand our market access by improving the quality standards and designs of our products,' says Bustami. 'Indonesia sees Europe as a potential market for exports and thus must be maintained, while the EU sees Indonesia as a potential market for its machineries.'

Erwin Aksa, chairman of Indonesian Young Entrepreneurs Association, calls on the EU to explain its GSP and tariff waivers to certain countries. 'We can always file complaints with the World Trade Organisation if they do not reveal the reasons why certain countries are granted GSP or tariff waivers,' points out Aksa.

But WTO rules allow member countries to offer preferential treatment to Least Developed Countries or other areas. The EU classifies Indonesia as a developing country and thus ineligible for GSP.

Aside from discriminatory import tariffs, Bustami also expressed concerns over the European Union’s Renewable Energy Directives adopted in April 2009, which among others assigns palm oil’s greenhouse gas (CHG) emission savings value at 19 percent only, far below the minimum benchmark of 35 percent in November 2010 and 50 percent in 2017.

This value designation means that under its current form, palm oil — Indonesia is the world’s top producer followed by Malaysia — cannot be converted into biofuels in Europe, which has a target for 10 percent renewable energy use in land transportation by 2020. The product, however, could still be exported to Europe for cooking oil and soap.

The EU directive also restricts the type of land that could be cultivated to produce biofuels feedstock crops. Some international non-governmental groups have accused Indonesia of converting protected forests and peat land into oil palm plantations, an allegation the country has strongly rejected.

Strongly opposing what they see as a trade barrier, Indonesia and Malaysia accuse the European Union of employing 'dirty' trade tactics to reduce its dependence on palm oil and spur the growth of its rapeseed and soybean industry. The EU directive gives a 39 percent CHG emission savings value on rapeseed and a 31 percent savings value on soybeans.

'We have asked the EU to be fair and not to discriminate against our products. Why did they impose greenhouse gas emission savings value of 35 percent for crude palm oil?' Bustami says, adding that this poses a serious threat to Indonesia’s exports to Europe.

'We are challenging them to provide scientific evidence of palm oil’s low value of CHG emission savings and we are also doing research on this issue and if we can prove that they are unfair, we will certainly ask them to revoke the policy,' he says.

Bustami explains that the palm oil issue could adversely affect the country’s exports to Europe — and in turn affect Indonesia’s ability to buy machineries and raw materials from Europe. Palm oil accounts for 2.6 billion dollars of the country’s total export value to Europe.

In truth, Agriculture Minister Anton Apriantono says, the EU directive is about reducing its dependency on palm oil instead of a genuine green concern. 'We are being attacked with environmental issues, while the real reason is trade competition,' he told the ‘Jakarta Post’ newspaper.

'If we cannot resolve the dispute bilaterally, we will have no option but to bring the case to the WTO,' Bustami says.

© Inter Press Service (2010) — All Rights Reserved. Original source: Inter Press Service

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