Indonesia takes EU to WTO over ‘discriminatory’ palm oil policy

A logo is pictured outside the World Trade Organization headquarters, near a stop sign, in Geneva, Switzerland. Sketched by the Pan Pacific Agency.

JAKARTA, Dec 16, 2019, The Jakarta Post. Indonesia added fuel to its ongoing feud with the European Union last week by filing a lawsuit to the World Trade Organization (WTO) against the bloc’s palm oil policy, which Indonesia has deemed discriminatory to its palm oil sector, The Jakarta Post reported.

Trade Minister Agus Suparmanto said authorities sent an official request for consultation on Dec. 9 to the EU to initiate the lawsuit against the latter’s Renewable Energy Directive II (RED II). He said the government made the decision after conducting a scientific study and consulting with stakeholders in the palm oil sector.

“With the lawsuit, Indonesia hopes the EU will promptly change its RED II policy and delegated act as well as scrap the high-risk ILUC [Indirect Land Use Change] status it has given to palm oil,” added Agus, as quoted in a statement published on Sunday.

The decision came after the European Commission, the EU’s executive arm, adopted the directive last March, which categorizes palm oil as an unsustainable product and lays out plans to phase out its use in biofuels by 2030. Indonesia had previously threatened to take the issue to the WTO, adding that it could either file a lawsuit independently or collaborate with Malaysia, another major palm oil producer.

The lawsuit, Agus said, was a sign of the “government’s seriousness” about “fighting the EU’s discrimination”. He said the RED II policy limited market access for palm oil and palm oil-based biofuel, arguing this jeopardized the country’s palm oil product exports to the EU market.

The ministry’s foreign trade director general, Indrasari Wisnu Wardhana, echoed the minister’s statement.

“The government objects to EU’s decision to end the use of palm-oil based biofuel. Aside from negatively impacting Indonesia’s palm oil exports to the EU, [the policy] will also tarnish the image of palm oil products in global trade,” he said.

Statistics Indonesia (BPS) data show that exports of fatty acid methyl ester (FAME), the raw material used for palm-oil based biofuel, to the EU have decreased over the last five years. Between January and September this year, the value of FAME exports totaled US$882 million, down 5.58 percent compared to the same period last year.

Globally, palm oil and FAME exports also dropped 6.96 percent to $3.04 billion between January and September from $3.27 billion recorded in the same period last year.

In the statement, the ministry’s international trade negotiation director general, Iman Pambagyo, said the government had made similar complaints through the Indonesia-EU Comprehensive Economic Partnership Agreement (IEU-CEPA) working group on trade and investment as well as at a WTO Technical Barriers to Trade Committee meeting. He said Indonesia needed to formalize its objections to the EU policy.

Last week, the government hinted at a possible lawsuit against the EU’s biodiesel tariffs. The bloc imposed the tariffs on Dec. 9 after the European Commission claimed it had discovered the Indonesian government was allegedly providing trade-distorting subsidies to several biodiesel producers.

“The possible steps vary from appealing the decision at the EU’s local courts […] to challenging the EU at the WTO DSB [Dispute Settlement Body],” Trade Ministry trade security director Pradnyawati said previously.

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