WTO rules in Indonesia's favour in EU biofuel anti-dumping dispute

The EU will likely need to slash five-year old anti-dumping duties on Indonesian palm oil-based biofuels after the WTO ruled that the bloc had acted inconsistently with trade rules.

In an announcement made public on Thursday, the WTO said the EU had acted illegally when it slapped 8.80-20.5% tariffs on palm oil methyl ester (PME) in 2013.

The EU had unsuccessfully claimed that because Indonesia placed an export duty on palm oil and not PME, Indonesia had lower costs, allowing them to dump product.

But in a complex ruling, the WTO said prices the EU had constructed to justify the tax were inconsistent with anti-dumping duty legislation and that it should have used producers’ own input costs. And in any case, the WTO added, the EU imposed a tax higher than the dumping margin.

"We conclude that, to the extent that the measures at issue are inconsistent with the Anti-Dumping Agreement and the GATT 1994, they have nullified or impaired benefits accruing to Indonesia under these agreements."

It added: “We recommend that the European Union bring its measures into conformity with its obligations.”

Indonesia’s trade minister, Enggartiasto Lukita, heralded the ruling as “a landslide victory” and said it would reopen European markets to PME.

"The decision will subsequently reopen Indonesia's market and revive our biodiesel exports to the EU, which have declined sharply due to the anti-dumping duties imposed by the EU," Trade Minister Enggartiasto Lukita said in a statement on Friday.

Since 2013, Indonesia's biodiesel exports to the EU have fallen from $649 million in 2013 to $150 million by 2016, according to the Indonesian trade ministry, adding that biodiesel exports to the EU could be worth $1.7 billion by 2020.

The case follows that of Argentina, where the EU had placed punitive taxes on imports of soy methyl-ester into Europe for the same reasons.

The WTO ruled last year against those taxes and the EU dropped the duty from 22-25.7% to 4.5-8.1%.

However, this could be just the start of a longer running dispute over palm oil use as as fuel feedstock.

Later this year the EU Parliament will enter negotiations with the EU Council of Ministers to draft legislation that may lead to an effective ban on PME use in European biofuels by refusing to recognise that the fuel cuts emissions and is therefore renewable.

The legislation, known as RED II, is likely to be be finalised by November.