Indonesia Declares a Trade War to the European Union

Indonesia, which is the largest producer of palm oil, plans to raise the import duties on dairy products from EU countries to 8-18 percent.

The intention of raising the tariffs was announced by the Minister of Commerce of the Asian country Enggartiasto Lukita. The measure is in response to the Union's plan to impose similar duties on Indonesian palm oil biodiesel, he added.

"I've spoken with dairy importers here and told them that they'd better look for other suppliers outside Europe," Mr Lukita told a business forum in Jakarta.

"(The EU) wants to impose an 8-18 per cent tariff (on palm biodiesel) so to make it fair, we will also impose the same tariff when the time is right.

"We're not going to be quiet about this unfair treatment."

The dispute over palm oil between Indonesia and the EU escalated earlier this year when the European Commission decided to impose stricter restrictions on the use of palm oil in biofuels since June over concerns of deforestation. Indonesia, as well as Malaysia, warn that the move could cause a full-scale trade war, saying the EU unfairly discriminates against palm oil and threatens countries' struggles against poverty.

Indonesia, which has introduced import duties from 5% to 10% on EU dairy products, says it is ready to go further by raising levies by 20% -25%.

Indonesia will target other dairy suppliers such as Australia, New Zealand, the United States or India, says Lukita. The country is the third largest buyer of skimmed milk powder from the EU after Algeria and China, according to European Commission figures. The EU is Indonesia's third largest trading partner, while Indonesia ranks 31st in the Union.