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 Palm oil Issue in the I-EU CEPA negotiations

16.07.2020 (www.neweurope.eu) - Various efforts to revive the economy that is immersed in a crisis are being carried out by the Indonesian government in this ‘new normal’ era. One of those efforts is to complete the delayed 10th round of negotiations between the Indonesia-European Union Comprehensive Economic Partnership Agreement (I-EU CEPA).

The I-EU CEPA is the largest bilateral negotiation currently managed by the Indonesian Government. The EU is still the third-largest destination for Indonesian exports and the EU member states are often the main sources of foreign investment in Indonesia. I-EU CEPA exists as a forum that aims to improve economic relations and provide benefits for both parties.

Unfortunately, however, based on the latest developments, the further I-EU CEPA Negotiation will be more complicated. In July 2019, the European Commission has updated its action plan to protect and restore the world’s forests.

The EU shows its interest in developing due diligence rules on commodities that are at risk for forests. Products produced by converting forests with High Carbon Stocks and High Conservation Value or peatlands that do not respect human rights standards will be prevented from entering the EU market.

This action plan recognises that agricultural commodity production is a major cause of forest loss. The action includes political steps to reduce EU consumption of products that cause deforestation. The impacts of indirect land-use change from biofuels, also known as ILUC, are related to the unintended consequences of releasing more carbon emissions. The EU has created the Renewable Energy Directive II (RED II) which sets limits on high-risk biofuels, bioliquid and biomass fuels with significant expansion in soils with high carbon stocks.

These limits will affect the amount of fuel that the European Union’s members can count towards their national renewable energy targets. EU members will still be able to use (and import) the fuel covered by these limits, but they will not be able to include it when calculating the extent to which they have met their renewable targets. The European Union has set a gradual target for no longer using these emission sources by 2030.

Palm oil is the most highlighted product and is categorised by the EU as an ILUC factor. The Indonesian government objected to the policy. Through the Permanent Mission of the Republic of Indonesia in Geneva, the government of Indonesia officially filed a lawsuit against the EU at the World Trade Organization on December 9, 2019. The lawsuit was filed against RED II policy and EU Delegated Regulation.

These policies are considered by Indonesia to have discriminated against oil palm products. Since the majority of palm oil imported by the EU is intended for biofuel, the ‘ban’ will certainly have a big impact, then it is not surprising that Indonesia (and also Malaysia) as the largest exporter opposed it.

According to the 2020 Fern report, the problem occurred because Indonesia and the EU had various misconceptions and/or differing views on how to deal with palm oil. In its Action Plan, the EU stated its intention to select a ‘deforestation-free’ supply chain, while Indonesia spoke in terms of ‘planned deforestation’ or ‘limited development strategies’ about palm oil.

The EU intended to overcome the ‘invalidity’ in the allocation of concessions or conversion process, while Indonesia preferred to talk about the ‘license review’ process. Indonesia insisted that the Indonesian Sustainable Palm Oil (ISPO) standard was sufficient to be treated as evidence of sustainable palm oil, while most EU stakeholders considered that ISPO was inadequate and preferred the Roundtable on Sustainable Palm Oil (RSPO) certification scheme.

What should be done to overcome these differences in view? First, it is very important to understand the position of each country. The EU and Indonesia are both under the coverage of the Paris Agreement. The two parties have determined the contribution of their respective National Constituencies, albeit in different proportions. Thus, every action taken should respect the sovereignty of each party.

Second, the EU can support Indonesia in implementing its own laws and regulations, which include all conventions on human rights and international environment that have been ratified by Indonesia.

Finally, the actions of each party must be based on an inclusive, transparent and deliberative process. This will ensure that those actions are widely supported and understood by all stakeholders – including the private sector, Non-Government Organizations, indigenous peoples and small farmers.



Malaysian Palm Oil Board ( MPOB ) Lot 6, SS6, Jalan Perbandaran, 47301 Kelana Jaya, Selangor Darul Ehsan, MALAYSIA.
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