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Will the European Union Propose New Trade Barriers against Palm Biofuel?

The European Commission announced in mid-August its plans to revise the Renewable Energy Directive (RED) II, once again. This revision is widely expected to pave the way for additional non-tariff barriers against palm oil biofuel.

The current RED trade barriers are the subject of an ongoing dispute at the WTO. While the European Union has largely downplayed the existence of the complaint’s merits in Geneva – as part of a general lurch away from the international trading system in recent years – the action of Brussels does have real-world implications: it affects the European Union’s efforts to strengthen ties with ASEAN.  

In 2019, at the height of the last RED II revision, the European Union sought to become a “Strategic Partner” of ASEAN. Unfortunately, for Brussels, this was rejected by ASEAN. In fact, Indonesia’s Vice Foreign Minister Mahendra Siregar, said at the time in reference to the RED II decision, All Indonesia-EU relationships will be overviewed related to that discriminative policy by the EU.”

This presents a strategic challenge for Commission President, Ursula von der Leyen, and her fellow Commissioners. To continue to discriminate against Europe’s largest trading partner in SE Asia, or seek common ground that both parties can live with?

As such, the Indonesian Palm Oil Association (GAPKI) has put forth a series of highly recommended principles the European Commission should adopt before moving ahead with any new regulations that could introduce new non-tariff barriers against Indonesian palm oil.

You can read those recommendations and GAPKI’s full Feedback submission here and below.

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Full Response from Indonesian Palm Oil Association (GAPKI)

Palm oil and palm oil products are Indonesia’s largest export. Palm oil is ASEAN’s largest agricultural export. Indonesian Palm Oil Association considers that the EU RED II revision must operate on the following principles, without which it will once again be a discriminatory measure against Indonesia:

  1. Non-Discrimination against Indonesian Palm Oil. There should not be discrimination targeted at palm oil when compared with ‘like’ products such as soy, rapeseed, sunflower and others. Discrimination contained in the previous RED II Delegated Act should be abolished.
  2. A Level Playing Field for Certification. All existing and recognized standards for palm oil (including Indonesia’s government standard, ISPO) should be included and recognised without prejudice by the EU.
  3. Level Playing Field for Countries. All producers of palm oil should be treated equally, without loopholes of exemptions for specific producers or exporters. Indonesia should not be prejudiced in relation to other countries.

It is essential to recognize the context of this RED II revision.

The published Roadmap on “EU Renewable Energy Directive (RED II) – revision” is the latest in a long series of EU initiatives aimed to regulate and exclude palm oil imports. The European Green Deal – which pushes for this early RED II revision – is the latest tool from the EU to impose new barriers to palm oil.

The RED II and Delegated Act have already confirmed the phasing out of palm oil biofuels by 2030, by wrongly classifying palm oil as “high ILUC risk”. The EU’s RED II is highly discriminatory against our palm oil exports, and as a result the Indonesian Government has challenged the RED II at the WTO. Other trade-related responses have also been undertaken in response to EU protectionist regulations targeted at Indonesian palm oil.

If the EU persists with this approach it will exacerbate the existing discrimination against Indonesia. This discrimination is found not only in the acknowledged efforts to ban palm oil outright – but also in the more subtle attempts at discrimination. This includes efforts that seek to regulate or impose Western ‘sustainability’ criteria onto developing world farmers.

The measures will disproportionately impact small holder farmers, of which there are 2.3 million in Indonesia alone.

In short, the imposition of additional discriminatory measures in RED II would be further evidence, once again, that Europe is undertaking these actions to protect the rapeseed biodiesel industry under the pretext of environmental protection and climate change.

Facts on Indonesian Palm Oil

The Indonesian palm oil community has changed the lives of Indonesia’s farmers. There are 2.3 million smallholders in Indonesia. They employ 4.6 million people on small farms across Indonesia’s 17,000 islands.

  • Sustainable: The Indonesian government and palm oil community are committed to producing 100% sustainable palm oil under the Indonesian Sustainable Palm Oil (ISPO) initiative, which will be the world’s largest-ever sustainability scheme. ISPO includes requirements on social responsibility, health, safety and employment conditions, as well as protections in place for the environment, natural resources, biodiversity and protected species. 
  • Environmental Protection: Last year, the President of the Republic of Indonesia, Joko Widodo, renewed the moratorium on new licenses for oil palm expansion for another three years, a major environmental commitment.
  • Orangutan: Indonesia has more orangutans than any country on Earth, and is committed to protecting this iconic species. Orangutans are protected under Indonesian law, and conservation programs mean that population numbers are stable. Over 100,000 orangutans live in Indonesia’s Kalimantan state alone.
  • Land Use: Indonesian palm oil has a significantly lower environmental footprint than other commodities, including beef and soy. Even the European Commission admits this fact in their report, The impact of EU consumption on deforestation: Comprehensive analysis of the impact of EU consumption on deforestation”, which was published in 2013.
  • Efficiency: Oil palm cultivation has the lowest impact on land use of all oilseeds: it requires 10 times less land area than soybean for equal production.
  • Deforestation: The scare stories about forests in Indonesia are untrue. The recently published United Nations FAO Report “Forest Resources Assessment for 2020 (FRA 2020)” confirms that deforestation rates have declined significantly in Indonesia, and Indonesia remains one of the most-forested countries in the world. Indonesia has a far higher percentage of forest area than any EU country.
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