What began as bickering over Indonesian palm oil with the European Union has developed into a much deeper trade war with imported European spirits and now dairy products being dragged in the fray.
Trade frictions have erupted since the European Commission came to the conclusion in March that palm oil causes unnecessary deforestation and should not be considered sustainable, meaning that it would not be considered as green and would be phased out as transport fuel between 2023 and 2030.
Indonesia, the world's leading producer of palm oil, has threatened to get even.
In September, European Union trade commissioner Cecilia Malmstrom sent a letter to her Indonesian counterpart, Enggartiasto Lukita, expressing "deep concern" that since the beginning of the year Indonesia has repeatedly refused requests from importers for spirits and other beverages from Europe, resulting in a de facto ban. The request, Malmstrom said, came from the Ministry of Commerce.
European alcohol shipments had been stuck in containers and warehouses because, according to a Reuters' report, several brands had run out of stock.
Through blocking new import approvals and imposing additional tariffs, Indonesia has also taken measures to limit EU dairy products since August. The only way to settle disagreements was to bring a case to the WTO, Malmstrom said.
Indonesia did just that this month, filing a lawsuit at the body based in Geneva. In late November, the EU also initiated its own WTO complaint about Indonesian curbs on exports of nickel ore and this month hit Indonesian biodiesel with tariffs.
According to the European Commission, the EU biodiesel market is worth an estimated € 9 billion ($10 billion) a year, with imports from Indonesia worth around € 400 million. Last year, more than 7 million tons of palm oil were consumed by the country, 65 percent of which was used for electricity.
In April, a trade ministry official acknowledged delays in granting spirits import licenses from Europe but denied that it was in retaliation for EU palm oil plans and said that it was about consumer preferences. Indonesia controls alcohol imports through an annual plan for importation and distribution.
A restaurant manager in Jakarta, who requested anonymity, said it was more difficult now to get imported EU wine or other liquor and they had to replace some products with "new world" wine.
Another bar owner said that in the last six months his premises had begun to feel the effect with some European beer brands no longer available and spirits becoming more scarce.
