Indonesia hits back at EU palm oil “discrimination”

Indonesia hits back at EU palm oil “discrimination”

Indonesia’s President Joko “Jokowi” Widodo has again raised the issue of European Union curbs on the palm oil trade during a meeting with EU business representatives last week.

“Indonesia will not keep silent about the EU’s discrimination,” Jokowi declared to members of the EU-ASEAN Business Council at the Merdeka Palace, “Negotiations over the Indonesia-EU CEPA [Comprehensive Economic Partnership Agreement] will continue. Palm oil will certainly be part of it.”

Jokowi also expressed regret that data about the actual condition of Indonesia’s oil palm plantations conveyed by the Indonesian government and palm oil producers had not received due attention from the bloc.

The Indonesian leader went on to detail plans to see palm oil production become a domestically consumed production.

“Why not use it for ourselves?” he said, “Why do we have to go through fighting with the European Union with the CPO [crude palm oil] bans and discrimination.”

Trade negotiations hit a rough patch last month, after a leaked EU Renewable Energy Directive (RED) II-Delegated Act document exposed Brussels’ plans to maintain its policy against palm oil products, especially biofuel.

The European Commission hit Indonesian biofuel producers with duties of 8 to 18 percent in August, and plans to halt all palm oil imports by 2023 in an effort to protect the continent’s vegetable, soybean and sunflower oil industries. Authorities have also stuck to their position that palm oil poses health risks, and is a significant factor in deforestation.

Not everyone is convinced, however. Skeptics have charged European lawmakers with “illogical and ill-informed” antipathy; others point to previous Commission President Juncker’s nod to US soybeans as proof of a double standard for developing agricultural economies.

Even so, Indonesia looks set to continue negotiations on the economic agreement with the EU, with ministerial priorities being to protect the country’s largest export commodity as part of IEU-CEPA talks.

“We hope the EU will come to the negotiation table in good faith this time. It will make up for their discriminative anti-palm oil policy so far,” said deputy foreign minister Mahendra Siregar.

Jakarta has good reason to keep talks afloat; the country currently exports some $650 million worth of biofuel to Europe each year, barely 2% of Indonesia’s $31 billion trade with the EU. For an inter-regional trade deal to unravel over palm oil would undoubtedly count as throwing the baby out with the bath water.

Moreover, Indonesia is holding on to a hefty bargaining chip. As the country’s Coordinating Minister of Economic Affairs Airlangga Hartarto highlighted at the event, Indonesia is now Dutch aircraft manufacturer Airbus’ largest buyer. Jakarta is willing to disrupt Airbus deals should the EU refuse to budge on its stance on palm oil.

“We remind you that Indonesia is Airbus’ biggest buyer. We still have pending orders for 200 aircraft. We have to find a solution for the EU’s biodiesel problem,” Airlangga warned attendees.

CEPA negotiations are scheduled to close by the end of this year, but there is no guarantee that Indonesia and the EU will ever reach a deal. Regional momentum is not in their favour; EU-Malaysia CEPA talks broke down in 2012, while similar negotiations with Thailand have not resumed since 2014.

Still, with no end in sight for the China-US trade war, two of Indonesia’s most important markets to date, Jakarta may be looking to cultivate its seeds in different fields. Europe could be one of them.

Joanna Eva is a London-based analyst and contributor with a range of clients in the risk consulting industry. She specializes in Asian political and economic analysis, having lived and travelled extensively in the region for close to a decade. She holds a Master of Law from the University of New South Wales and received her Bachelor of International Studies from the University of Sydney. She is proficient in English and Mandarin Chinese.

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