May 3, 2013 / 7:16 AM / 7 years ago

INTERVIEW-Indonesia may turn to WTO if EU sets penalties in biodiesel spat -industry

JAKARTA, May 3 (Reuters) - Indonesia could make a complaint to the World Trade Organization if the European Union imposes penalties over the country’s biodiesel exports and subsidies, an industry group said on Friday, after the two sides reached a standoff in talks.

Indonesian government and industry officials held two days of biodiesel talks with EU delegates in Jakarta last week, to resolve a long-running probe into dumping and illegal subsidies.

Indonesia is the world’s top producer of the palm oil used to make biodiesel, with the European Union taking more than 80 percent of its biodiesel exports of 1.5 million tonnes last year, industry officials say.

In its investigation, the EU last month began registering more imports of biodiesel from Argentina and Indonesia, making it more likely the bloc will place duties on the two countries in the next few months.

“I think they will impose penalties,” Paulus Tjakrawan, general secretary of industry body the Indonesian Biofuel Producers’ Association (APROBI) told Reuters.

“They will impose penalties because of politics. It is over-protection of their own countries in the European Union.”

Indonesia gives subsidies to its biodiesel industry but only for domestic use and not exports, said Tjakrawan, who was among a host of government and industry officials participating in the talks.

Preliminary results of the EU investigation into illegal dumping are due to be announced in May, while the outcome on the subsidy issue is set for August, he added.

Tjakrawan said he expected the grouping to levy a tariff of about 9 percent as a penalty for the dumping, though he did not know what the penalty over the subsidies would be.

Such penalties could prompt Indonesia to complain to the World Trade Organization, he said.

“If they want to impose the two things for subsidies and dumping, of course we have to take another step...first, of course, is to go to the WTO,” Tjakrawan said in an interview.

“It is not fair, this is a trade barrier, especially for the subsidy.”

The Indonesian government could approach the World Trade Organization over any infringement of trade rules it spots in the EU report, said Ernawati, director of trade defence at the country’s trade ministry.

“If there are violations to the WTO rules and regulations we could file them to the WTO’s dispute settlement body,” she said.

Food and farm trade policies in Southeast Asia’s largest economy have drawn criticism from international trading partners, including the Organisation for Economic Cooperation and Development. [ID:ID:nL3E8LA0WS]

Last month the government said Indonesia would scrap import quantity limits on horticultural products, as it looked to head off a WTO trade spat with the United States.

Turkey, Indonesia’s largest supplier of wheat flour, is also readying a possible WTO case against Indonesia over a temporary tariff Jakarta imposed on imports of the commodity.

Indonesia’s palm oil production this year is expected to be about 28 million tonnes, with exports at 17 million to 18 million tonnes.

Lower export taxes for palm-based biofuel have encouraged Indonesian firms to beef up processing facilities at home. (Reporting by Michael Taylor and Yayat Supriatna; Editing by Clarence Fernandez)

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