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ne may not realize that palm oil is found in many products in our daily life. Palm oil is used to produce food items such as margarine, chocolate and cooking oil; household products like soap and shampoo; and various make-up and other cosmetic products. More than 50 percent of products on supermarket and convenience store shelves contain palm oil. These days, palm oil is also processed into biofuel as an alternative to fossil fuels that are rapidly running out and which are regarded as a major source of global warming.

It is not widely known that for a very few developing countries, palm oil means more than a plant or a product. The palm oil sector provides a livelihood for 16 million Indonesians through direct and indirect employment. Oil palm plantations involve small farmers living in rural and remote areas: 42 percent in Indonesia, 40 percent in Malaysia and 80 percent in Nigeria. In Indonesia alone, around 61 cities and small towns have developed from and live off this sector. Palm oil is also one of the most important sources of export earnings for Indonesia, worth US$19 billion annually, with the EU, China and India Indonesia'€™s main palm oil export destinations.

Therefore, it should not have surprised anyone when Indonesia expressed great concern after the French Senate on Jan. 21 adopted Amendment No. 36 to a proposed law on biodiversity, which will impose progressive taxes on palm oil, palm kernel and food containing such oils.

It is proposed that taxes be applied on these products, beginning at ¤300 (US$335) per ton in 2017 and gradually increasing to a staggering rate of ¤900 per ton in 2020 and further increased annually, while leaving taxes on other vegetable oils such as olive, corn and peanut oil practically untouched, ranging between ¤113.24 and 170.13 per ton. To give some perspective, the selling price of palm oil is only ¤550 per ton.

The proposed tax will be imposed on producers in France, on importers and persons selling those products in France from either other EU members or outside the EU. Since palm oil in the EU is entirely imported, it is not difficult to appreciate that the proposed tax has caused great concern among palm oil-exporting countries like Indonesia: The tax would make palm oil uncompetitive in the French market and lead to its substitution with other vegetable oils by relevant industries. Clearly, the proposed tax would breach the two most important WTO principles: national treatment and non-discrimination.

Article III:2 of the 1994 General Agreement on Tariffs and Trade (GATT) provides that imported products shall not be subject, directly or indirectly, to internal taxes or other internal taxes in excess of those applied, directly or indirectly, to like domestic products. It may be debatable whether the definition of '€œlike domestic products'€ includes '€œlike products'€ from other EU member states, or shall be confined to products obtained wholly from non-EU member states.

However, the main issues remain: The proposed tax will discriminate against palm oil originating in countries like Indonesia, Malaysia and Nigeria. Members of the WTO may capitalize on Article XX of GATT on general exceptions to adopt measures such as internal taxes deemed necessary to protect human, animal or plant life or health. But such measures should not be more trade-restrictive than necessary, and not applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination or disguised restriction on international trade.

It is not really clear what is the main rationale for the French Senate to agree to amend the law on biodiversity last month. If the environment is the issue at hand, it is worth mentioning that palm oil requires far less land than other vegetable oil crops (corn, rapeseed, soya and sunflower) to produce the same output of oil, absorbs far more carbon and requires significantly less chemicals and pesticides to grow. The government of Indonesia, in cooperation with industry players, local communities and regional governments, has also embarked on initiatives to educate farmers on healthy and responsible farming.

As a result, in just three years, Indonesia has managed to produce half of the total global international sustainable palm oil, contributing 6 million out of 12 million tons of sustainable palm oil in the world in 2015. Clearly, this is an area where France could cooperate with Indonesia to further improve the environmental friendliness of palm oil, rather than adopting an excessive tax scheme on palm oil, which will only reduce millions of Indonesian farmers to calamitous poverty '€” and we all know too well that poverty is a significant incubator of extremism.

If health is the concern, most recent studies confirm that consumption of saturated fatty acids from palm oil does not, per se, lead to an increased risk of cardiovascular diseases. Too much fat '€” or any other ingredient '€” in the diet is obviously a bad thing. Thanks to its unique mixture of saturated, monounsaturated and polyunsaturated fats, palm oil is highly adaptable and serves as a natural alternative to nasty trans fats.

There is much more that can be done to improve the health features of palm oil, for example, by taking advantage of the latest innovations in scientific and technological development. However, if for one or another reason saturated fats need to be regulated, the measures taken should cover all food products containing saturated fats regardless of their origin, whether from palm oil, other vegetable oils or animal fats.

Discouraging the utilization and consumption of palm oil in favor of other, European home-grown oils, as prescribed by Amendment 367, will be felt as a punitive measure by Indonesian farmers. It is not a friendly way of addressing issues, and it is not at all an effective way of promoting peace through commerce. Let us not forget what an American founding father, president Thomas Jefferson, taught us two centuries ago: Peace, commerce and honest friendship with all nations, entangling alliances with none.
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The writer is former Indonesian ambassador to the WTO.