The Indonesian Government has requested consultations with the EU at the World Trade Organisation because of the EU’s imposition of additional tariffs on imports of biodiesel from Indonesia.
Indonesia has made a request on August 11, arguing that the EU’s countervailing duties (CVD) are incompatible with the GATT and WTO’s Agreement on Subsidies and Countervailing Measures.
Brussels introduced the CVD measures in July 2018, literally weeks after the WTO had found that the EU’s antidumping duties imposed on Indonesian biodiesel were illegal under the rules of the organisation.
The request for countervailing duties came from the same organisation that requested the antidumping duties: the European Biodiesel Board.
It has been apparent for more than a decade that not only is the EU inefficient at growing oilseed crops; it is also inefficient at turning those oilseed crops into renewable fuels.
The European Biodiesel Board, which represents biodiesel producers, has sought tariffs on biodiesel and ethanol from Indonesia, Argentina, the United States and Brazil. The EBB was also the body that lobbied heavily for the effective ban of palm oil from participating in the EU’s renewable subsidy scheme.
Just days after Indonesia brough the CVD matter to a head at the WTO, the European Commission stated that it has opened a circumvention investigation into biodiesel from Indonesia.
The EU is contending that biodiesel is being exported from the United Kingdom and China as a means to avoiding the countervailing duties it has imposed.
As has previously been pointed out in numerous government and industry reports, China’s biodiesel production capacity has expanded significantly – because of export demand.
As the US Department of Agriculture notes:
“China’s 2022 biodiesel production is forecast at 2.4 billion liters, up by more than 32 percent from 2021 due to a surge in export demand, well above previous records almost entirely to the EU … ginning in 2020, China’s production yearly capacity of fatty acid methyl esters (FAME) grew to 2.6 billion liters. These facilities are located mainly in Shandong, Guangdong, Shaanxi, and Jiangsu. Hydrogenation-derived Renewable Diesel (HDRD) plants have a combined annual capacity of 2.3 billion liters with an additional 3.4 billion liters capacity planned. Nearly all plants are export-oriented to take advantage of EU tax policies.”
The EBB’s consistent pursuit of subsidies and import tariffs underlines that the European Union is an expensive place to produce biodiesel. If the bloc is unable to compete with biodiesel from China – as well as Indonesia, Argentina and the US – it should perhaps reconsider its existence.
Against this backdrop is the introduction of the EU Deforestation Regulation. In an interview with the Financial Times this week, Executive Director of the International Trade Centre Pamela Cooke Hamilton said that the EU’s new trade rules on deforestation risk “cutting off” smaller suppliers and could be “catastrophic” for global trade.
This, combined with the new investigation, does little to assuage the view in Indonesia that the European Union is pursuing Indonesia’s largest export industry with extreme prejudice.