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Trade

Indonesia says WTO process against EU palm oil curb to start soon

Whole process is expected to last for 1.5 years

Palm oil cultivation is blamed for devastating the environment, decimating natural habitats and the emission of greenhouse gases.   © AP

JAKARTA -- Indonesia said Tuesday it expects to begin a World Trade Organization process to resolve a dispute with the European Union over palm oil by the end of this month. 

Trade officials said they were finalizing the questions to be discussed with the EU, as part of the formal WTO dispute process, after the government lodged a lawsuit against the bloc last month. If a mutually agreed solution is not reached during the 60-day consultation phase, a panel will be set up by the WTO's Dispute Settlement Body to abjudicate.

"We need to do these consultations as soon as possible, because the European Union's pressure against palm oil is getting stronger," Indonesian Deputy Trade Minister Jerry Sambuaga told a press conference in Jakarta on Tuesday.

"Indonesia rejects all forms of discrimination that are against the free trade principles of openness, impartiality and consistency. Very ironic ... that the European Union as a champion of free trade has acted inconsistently and discriminatorily, and over protective... against palm oil," he added.

Palm oil is widely used in everyday items and foods, from margarine and peanut butter to cosmetics and biofuels. Indonesia is the world's largest producer, contributing 56% of global palm oil supply in 2018, followed by Malaysia with 28%.

But palm oil cultivation has devastated the environment and is responsible for widespread deforestation, the decimation of natural habitats and greenhouse gas emissions. This is why the European Commission is phasing out palm oil imports as transport fuels through its Renewable Energy Directive 2021-2030.

The regulation, formed in 2018, has triggered protests from Indonesia and Malaysia, which has separately said it would also lodge a WTO complaint against the EU palm oil blockade.

Indonesian officials have repeatedly threatened to bring the palm oil dispute to WTO last year, but only finally lodged a formal lawsuit to the WTO on Dec. 9.

Sambuaga said the consultation process could begin as soon as the end of this month.

Director for Trade Security Pradnyawati said it took more than a year from when President Joko Widodo first expressed his displeasure with the EU's "discriminatory" treatment of palm oil for Indonesia to hire and prepare the case with a team of international and local lawyers.

"Now we can declare that we're ready to face the EU at the WTO," she said, adding the whole process is expected to last for one and a half years.

Indonesian trade data show a declining trend in Indonesia's palm oil and biofuel exports to the EU over the past five years. In January-September 2019, biofuel exports amounted to $882 million, a 6% drop from the same period of 2018.

The EU is one of the top export markets for both Indonesia and Malaysia and officials in Jakarta and Kuala Lumpur fear relentless campaigning against palm oil could trigger a broader global backlash that would threaten the industry's survival.

To protect the industry, Indonesia has moved to increase domestic palm oil consumption by introducing policies to gradually increase the level of palm oil in diesel sold in the country.

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