Indonesia threatens to ban European goods as palm oil row escalates

JAKARTA • Indonesia threatened to ban imports of goods from the European Union (EU) in retaliation for the bloc’s move to impose stricter limits on how palm oil can be used in green fuels.

The world’s largest palm oil producer is considering such a step to protect the interest of almost 20 million people, whose livelihood is tied to the commodity, Indonesia’s Coordinating Minister for Maritime Affairs Luhut Pandjaitan told reporters in Jakarta yesterday.

The minister hinted that jets manufactured by European companies could be among the target for boycott, saying the country would require about 2,500 aircraft in the next two decades.

“There are a lot of European products that we need,” Pandjaitan said. “We have 269 million people in Indonesia. We have a big market.”

Palm oil has emerged as a flashpoint in a potential trade war between the EU and top producers Indonesia and Malaysia, which together account for about 85% of global supply.

The European Commission last week restricted the types of biofuels from the vegetable oil that may be counted toward its renewable-energy (RE) goals. The proposed EU curbs have weighed on benchmark palm prices, which have fallen for five quarters in a row.

Indonesia is also planning to lodge a formal protest with the World Trade Organisation (WTO) if the EU ratifies the proposal, Coordinating Minister for Economic Affairs Darmin Nasution (picture) said. Palm oil is not just an export earner for Indonesia as it is instrumental in lowering poverty and, therefore, meeting a key criteria of the sustainable development goals, he said.

The EU argues the new measure and palm oil sustainability criteria are compatible with WTO rules.

The new regulation is now set for a two-month scrutiny period when the bloc’s member states and the European Parliament can express objections. If none is received, the measure will be published in the EU official journal and become a law.

The EU RE law obliged the commission last year to set sustainability criteria for palm under its green goals. It specifies that the use of unsustainable food and feed crop-based bio-
fuels should be limited from 2019 and a gradual phase-out should start in 2023, leading to a ban by 2030.

“We are concerned that this discriminatory act will surely affect the long-standing bilateral relationship between Indonesian and the EU, and further delay the conclusion of the Indonesia-EU Comprehensive Economic Partnership Agreement,” Nasution said in a statement.

The EU wants to lead the battle against global warming and has toughened goals to reduce greenhouse gases blamed for climate change. It aims to cut emissions by at least 40% by 2030, boost the share of RE to 32% and increase energy efficiency by 32.5%.

Indonesia will continue to collaborate closely with other palm oil-producing countries, as well as Asean framework to promote palm sustainability and establish a common position against the discriminatory action, Nasution said. — Bloomberg