India’s Tariff on CPO and CPO Price: Why Tariff Matters More than Price on Indonesia’s CPO

Abstract

Palm oil and its derivatives are one of Indonesia's prominent export commodities on the global market. India is one of the main biggest export destinations of Indonesia's CPO, thus every trade policy taken by India regarding CPO is important to Indonesia's trade balance. This study has found that tariff imposed by India on Indonesia's CPO has an elastic relationship compared to the CPO price. Moreover, this study found that changes in tariff are likely to significantly affect Indonesia's CPO export to India, compared to CPO price. Increase in price does not affect Indonesia's CPO export to India since it has inelastic relationship; as such the percentage of change in quantity does not exceed the change of price percentage.