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Economy

Indonesia joins China and South Korea on US trade hit list

Biodiesel duties follow measures against solar panels and washing machines

U.S. trade group, the National Biodiesel Board, says biodiesel imports from Indonesia and Argentina surged by 464% from 2014 to 2016.   © Reuters

JAKARTA -- Indonesia is the latest Asian country to face American trade curbs after the U.S. Department of Commerce said it planned to slap anti-dumping duties of 92.52% to 276.65% on biodiesel imports from the archipelago.

Argentina, another biodiesel producer, was also targeted by the Feb. 21 announcement, after U.S. businesses complained that they were being undercut by unfairly subsidized fuel from both countries. The commerce department said that exporters from Argentina and Indonesia respectively sold biodiesel in the U.S. at 60.44% to 86.41% and 92.52% to 276.65% below what it ddeems fair value.

The U.S. International Trade Commission will make a final decision on April 6 on whether the imports have hurt U.S. producers. If the ruling is upheld, the duties recommended by the commerce department will effectively price Indonesian biodiesel out of the U.S. market. 

It seems unlikely the ITC will reject the commerce department duties, after saying in December that the U.S. producers were "materially injured by reason of imports from Argentina and Indonesia."

According to the National Biodiesel Board, a U.S. industry group, imports from Argentina and Indonesia surged by 464% from 2014 to 2016, leading to a near 20% fall in the market share of domestic producers. 

"We appreciate seeing illegally dumped imports remedied," said Kurt Kovarik, the National Biodiesel Board's  vice president of federal affairs.

The commerce department named Musim Mas and Wilmar Trading, two Singapore-based companies prominent in Indonesian's palm oil and related biodiesel sector, as culprits. Musim Mas was singled out for "its failure to provide certain information as requested." Indonesia and Malaysia are sources for around 85% of the world's palm oil, an ingredient in some forms of biofuels.

The U.S. also recently announced tariffs on imports of solar panels and washing machines from China and South Korea. In addition, the commerce department last week recommended that the U.S. impose tariffs on steel and aluminum imports. Seoul has already complained to the World Trade Organization over measures implemented before U.S. President Donald Trump took office in early 2017.

Anti-globalization and protectionism are high on Trump's agenda. The U.S. says it is not trying to start a trade war but that it wants what Trump described as reciprocity during his recent State of the Union speech.

In a statement, U.S. Secretary of Commerce Wilbur Ross said: "Even our closest friends must play by the rules." Ross added that his country "values" its ties with Indonesia, visited by both Vice President Mike Pence and Secretary of Defense Jim Mattis over the past year.

The commerce department's comments about steel imports have worried the European Union. The European Commission, equivalent to an executive branch in the EU, has expressed concerns about what they see as an increasingly protectionist agenda espoused by the Trump administration, as European steel exports to the U.S. also come under threat.

However, the EU staunchly protects its agricultural sector by subsidizing exporting farmers. Indonesia, too, has always set high barriers of entry to parts of its economy, applying "local content" requirements in the tech sector, for example.

Indonesia's government has yet to react to the U.S. biodiesel measures but is likely to be mulling action at the WTO. On Jan. 25, the WTO dispute settlement panel largely upheld complaints made by Indonesia over EU anti-dumping measures taken against Indonesian biodiesel, saying that the EU failed "to establish the existence of significant price undercutting with regard to Indonesian imports."

However, even if Indonesia takes action against the U.S. at the WTO, resolution could take years. "To put into perspective in EU's ruling dispute case, Indonesia submitted first consultation requests to the EU as early as June 2014," said Oscar Tjakra, director of food and agribusiness at RaboResearch, part of RaboBank.

In the meantime, trade negotiators from the European Commission are meeting counterparts from the Indonesian government in Surakarta this week. Despite rows over biodiesel and over proposals by the European Parliament, the legislative branch of the EU, to curb imports of palm oil, the two sides are now on the fourth round of wide-ranging trade talks and hope "to achieve an ambitious and a mutually beneficial free trade agreement," according to an EC spokesperson.

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