It could have been worse for the globe's top palm oil producers Indonesia and Malaysia. Initially France suggested an additional 300 euro per ton tax hike on palm oil imports. However, lobbying conducted by Indonesian officials seems to have had some success and the proposed tax hike was cut to 90 euro per ton. After France's National Assembly approved the tax hike on Thursday (17/03), it is now up to the country's upper house to review the bill. This is expected to be done in May or June this year.

Indonesian and Malaysian officials said the tax hike is discriminatory and unfair. Palm oil shipments are a key foreign exchange earner for both nations and now they fear other countries will adopt a similar policy as France. Earlier, when the bill still called for an additional 300 euro per ton increase, Indonesian officials said the country would raise the issue at the World Trade Organization (WTO). Whether it will still seek help from the WTO remains unclear.

It is important to note that edible oils produced in a sustainable way are not subject to this additional tax rate. Therefore, French officials say the bill is acceptable and respects the treaty of the WTO.

Key Points

France wants to raise tax on imports of palm oil, copra (coconut) and palm kernel oil - used in the food sector - to combat global deforestation and protect its citizens' health. Cosmetics and biofuel are not affected

The additional tax has been put at 90 euro per ton (effective per 2017), down from an initially proposed 300 euro per ton

The bill now needs to be reviewed by the French Upper House

Indonesia and Malaysia object to the tax hike and may raise the issue at the WTO

Indonesian Palm Oil Production and Export Statistics:

   2008  2009  2010  2011  2012  2013  2014  2015   2016
(million tons)
  19.2   19.4   21.8   23.5  26.5   30.0   31.5   32.5   32.0¹
(million tons)
  15.1   17.1   17.1   17.6  18.2   22.4   21.7   26.4   27.0¹
(in USD billion)
  15.6   10.0   16.4   20.2  21.6   20.6   21.1   18.6   18.6¹

¹ indicates forecast
Sources: Indonesian Palm Oil Producers Association (Gapki) & Indonesian Ministry of Agriculture