Indonesia hits European Union with WTO lawsuit over palm oil

Palm oil plantations in East Kalimantan - the Indonesian part of the island Borneo. [European Space Agency / Flickr]

Indonesia on Sunday (15 December) said it has filed a World Trade Organisation lawsuit against the European Union over plans to phase out palm oil-based biofuel for cars, the trade ministry said.

The action could escalate a trade dispute between Indonesia – the world’s top palm oil producer – and the EU, which plans to end its use of biofuels by 2030, citing concerns over widespread deforestation caused by the sector.

The EU earlier imposed duties on imports of subsidised biodiesel from Indonesia saying it was needed to level the playing field for its producers.

In response to what it called “discriminative” policies against its key palm oil exports, Indonesia said it filed a complaint with the WTO last week.

“Indonesia officially sent a request for consultation on December 9, 2019 to the EU as the initial step for the lawsuit,” Trade Minister Agus Suparmanto said in a statement Sunday (15 December).

Palm oil to be phased out in EU by 2030

The use of palm oil as fuel should disappear in Europe by 2030 under a reform of the bloc’s renewable energy laws agreed this morning after all-night negotiations.

Neighbouring Malaysia, the world’s second-biggest palm oil producer, has also threatened WTO action against the EU.

Teresa Kok, the minister overseeing Malaysia’s palm oil sector, told AFP on Monday that she will head to Europe in March, and a challenge will not be filed until after then.

She said she wanted to try to convince European officials to change course on her trip.

“I want to give my trip a chance and see whether I can avoid filing the case at the WTO,” she added.

Malaysian minister: 'Palm oil is a deal-breaker for EU-ASEAN trade relations'

Teresa Kok, Malaysia’s Minister of Primary Industries, visited Brussels and other European capitals this week in a last-ditch effort to kill new EU rules that will ban the use of palm oil in biofuels – a measure European adopted because of concerns about deforestation.

Palm oil is the world’s most widely used vegetable oil and a key ingredient in a wide range of products from food to cosmetics.

But environmentalists say it drives deforestation, with huge swathes of Southeast Asian rainforest logged in recent decades to make way for palm plantations.

Iman Pambagyo, Indonesia’s director general for international trade negotiations, said Jakarta had previously tried other bilateral avenues to reach an agreement, without success.

“We need to assert Indonesia’s stance on EU policy,” Pambagyo said, referring to the WTO complaint, and adding that he hoped for a “best solution”.

Palm oil ban on the ropes as Commission weighs options

Under the EU’s new renewable energy rules, the European Commission has to define criteria that are meant to curb the use of the most climate-damaging biofuels. A new study warns that if handled incorrectly, the use of fuels like palm oil will increase instead of being phased out.

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