French wheat exports await Indonesia approval

PARIS (Reuters) - French wheat exports to Indonesia are on hold as traders await the approval of a food safety agreement between the two countries, something exporters say is being delayed by Indonesia in retaliation against a French palm oil tax plan.

A farm ministry official from Indonesia, the world’s largest producer of palm oil, said the delay was a procedural one, and denied any link to the proposed tax.

France’s additional tax on palm oil, due to come into force next year, is billed as an environmental levy on a product associated with deforestation and other environmental damage.

The delay to exports from the European Union’s largest grain exporter was on the agenda of France’s Secretary of State for Trade Matthias Fekl when he traveled to Indonesia earlier this month.

A spokesman for Fekl said trade barriers were discussed, and that he was unable to give further details. Exporters said they had learned that the palm oil tax was at the root of the delay.

“The door is closed in retaliation against the project to tax palm oil,” one exporter said. “Indonesia is losing a supplier at a time when French wheat is competitive.”

The problem comes just a few months after France’s first wheat exports to Indonesia since the 2008/09 season as a number of factors make French wheat affordable for the country.

Indonesian wheat importers bought 300,000 tonnes of French wheat earlier this year.

That was just before a new Indonesian food safety law came into force under which all grain, fruit and vegetable must be tested by special laboratories before being exported.

France has asked that its own testing systems be recognized under this legislation. It has yet to sign a deal to that effect, and French exporters in the meantime cannot clear their exports.

Indonesia’s agricultural authorities denied any link with the palm oil tax.

“We’re now in verification process (on the food safety deal) ... As long as it’s not done yet, they can’t export yet, and this process is long,” Banun Harpini, head of Indonesia’s Agriculture Quarantine Body at the agriculture ministry, told Reuters.

She added that it had offered France to apply for an alternative laboratory registration but Paris had not done so yet.

France’s palm oil tax proposal has yet to come into force but Indonesia, along with second-largest producer Malaysia, has protested against it, calling it discriminatory.

Indonesia raised the issue at the World Trade Organisation (WTO) earlier in March.

A senior Indonesian government official said he was not aware of any restrictions on French agricultural products.

“Such uncoordinated retaliations would at this stage almost certainly have a negative effect on the currently ongoing bilateral diplomatic efforts to resolve the proposed French super-tax on palm oil,” he said.

Reporting by Valerie Parent, additional reporting by Bernadette Christina Munthe and John Chalmers in Jakarta, Writing by Sybille de La Hamaide; Editing by Andrew Callus and Mark Potter