Indonesia minister proposes dairy tariffs to fight EU biodiesel duties

JAKARTA (Reuters) - Indonesia's trade minister on Friday said he has asked dairy product importers to find new sources of supply other than from countries in the European Union, as Southeast Asia's largest economy is working to place a levy on European dairy goods.

Enggartiasto Lukita said he will immediately recommend to an inter-ministerial team a 20%-25% tariff on EU dairy products as the appropriate response to the EU's plan to impose anti-subsidy duties of 8%-18% on palm biodiesel from Indonesia.

The EU duties would be another blow to Indonesian biodiesel producers after the 28-nation block said in March that palm oil should be phased out of renewable transportation fuels due to palm plantations' contribution to deforestation.

Lukita said he had met with his European counterparts to discuss the palm oil issue and warned them that the planned EU duties must be based on "fair parameters".

"If the parameters are not fair, it's a step towards protectionism and a trade war, and we will not stay silent for the unfair treatment," he told an economic forum in Jakarta.

Biofuel producers in Indonesia have said they do not receive subsidies from the government.

EU representatives in Indonesia were not immediately available for comment. Lucas Cibor, interim head of the EU mission to ASEAN, on Thursday said the EU had explained its policy on sustainable biofuels to Indonesia and Malaysia.

Indonesia and Malaysia, the world's top two palm oil producers, have repeatedly said the European measures against the edible oil industry are discriminatory.

The European Commission is still investigating the palm subsidies allegation, but the proposed duties may be put in place by Sept. 6.

Lukita did not give a timeline for the proposed Indonesian tariffs on dairy products. Dairy importers have been asked to buy products from suppliers in Australia, New Zealand and the United States, he said.

Jakarta has recently signed a free trade agreement with Australia that will remove tariffs on dairy products starting from next year. Levies for most dairy products from the EU and the United States are now around 5%.

Indonesia's total dairy and egg imports in 2018 were worth $1 billion, trade ministry data showed.

European spirit makers earlier this year said they faced difficulties exporting drinks to Indonesia. An Indonesian trade ministry official said there were delays in granting import licences for spirits from Europe but denied these were related to the dispute over palm oil.

(Reporting by Bernadette Christina Munthe; Writing by Gayatri Suroyo; Editing by Tom Hogue)