Efforts made by the Indonesian government to convince France not to impose a progressive tax on imports of crude palm oil (CPO) and its derivatives have had some success. According to the latest stories, French authorities agree to cut the proposed additional import tax from 300 euro to 90 euro per ton. Earlier, on 21 January 2016, France approved a bill that gives birth to a progressive import tax on CPO and derivatives starting at an additional 300 euro per ton in 2017 and then increasing to 700 euro per ton in 2019, and to 900 euro per ton in 2020. Currently, France's import tax on CPO is just above 100 euro per ton.
French parliament approved this amendment, part of a wider biodiversity bill, in an attempt to discourage deforestation that occurs as a result of expansion of the palm oil industry as well as to protect its citizens from the negative health effects caused by the consumption of palm oil (due to the high level of saturated fat). However, those palm oil producers that commit to criteria of environmental sustainability are exempted according to the text of the bill. Still, Indonesia and Malaysia, the world's top palm oil producers and exporters, continue to object calling the bill discriminatory and unfair. Although Indonesia's CPO exports to France are relatively small (around 100,000 tons per year), there is concern that other countries may implement similar regulations.
Despite backing off from a higher additional tax, the additional 90 euro per ton of CPO that is imported into France still implies that the country's import tariffs will nearly double and therefore Indonesia will continue to object to France's CPO import tax hike, said Musdhalifah Machmud, official at Indonesia's Coordinating Ministry for Economic Affairs. He added that if French authorities will not scrap these plans then Indonesia will raise the issue at the World Trade Organization (WTO).
Earlier, in September 2015, India (one of the world's largest CPO importers) raised its import taxes on crude and refined edible oils by 5 percent in a bid to boost the domestic industry and become self- sufficient in edible oils.
Indonesian Palm Oil Production and Export Statistics:
(in USD billion)
¹ indicates forecast
Sources: Indonesian Palm Oil Producers Association (Gapki) & Indonesian Ministry of Agriculture