The Palm-Oil debate - tit-for-tat Trade war looming? BritCham coerces dialogue

Background

On 13th of March 2019, European Commission adopted a delegated act of Renewable Energy Directives II (RED II) which sets out the criteria for determining high ILUC-risk feedstock for biofuels and the criteria for certifying low indirect land-use change (ILUC)–risk biofuels, bioliquids and biomass fuels. Classifying palm oil as a high risk unsustainable vegetable commodity, RED II's delegated act is considered discriminatory by Indonesia. This act has raised many concerns in Indonesia considering palm oil has contributed significantly to the country's economic growth and may MNCs have been very willing buyers and users across a diverse range of products. Consequently, the announcement of this act has already triggered a strong response from the Government of Indonesia, with the pre-emptive move amounting to the removal of EU-originating alcohol products from the list of import quotas. There is now great concern that a trade-war could begin and CEPA negotiations must be regarded as in-jeopardy presently. There is talk of a boycott of CEPA negotiations.

 

 

BritCham Action

Following a meeting with the Coordinating Minister of Economy, Pak Darmin Nasution, at which he asked the international private sector to be sympathetic to the Indonesia position, BritCham Chairman, Ainsley Mann requested an audience with the EuroCham Board. During this presentation, Ainsley suggested that it was not evitable that the private sector position be aligned to the diplomatic position. He urged that chambers of commerce and business groups reserve the right to act independently of the EU Commission official position. If the Commission’s action and rhetoric did match the sentiment of members in particularly and the international business community in general.

 

 

EuroCham Follow-Up

EuroCham followed up this Board debate by inviting BritCham and a selection of its interested members to a meeting with EU Ambassador Vincente Guérend.

 

At this meeting the Ambassador stated that he felt that the timelines and review element of the RED II were not properly understood. He also implied that it was highly unlikely that the terms within RED II would be revisited. He also assured attendees that the EU planned to take all reasonable steps to ensure that there was no escalation in trade tension. Members present made a number of points for the record. Namely, that it was wrong to single out palm-oil when, for example rapeseed has a more damaging footprint; that not giving enough time to adjust livelihoods could turn small farmers to, for example, charcoal- the recent African experience; to appreciate that actually corporate Indonesia is already rising to the challenge of sustainable production. However it is the very substantial number of small-holders who cannot, regardless of the threat of sanctioning their production; the EU should be very clear that their own motives are balanced, clean and not in any way commercially-driven.

 

Thank you to those members and advisors who attended.

 

 

Next Steps

It is agreed that there needs to be up to two months to wait and watch the impact of diplomatic efforts. If the quota removal remained unchanged and/or if any other import restrictions introduced, the Chambers would meet to review options which would include a wider debate among respective interested members.

 

 

To BritCham members

BritCham is an institutional Gold member of EuroCham and has a permanent seat on its Board. We are both pleased and grateful that its Board reacted positively and with urgency to the BritCham request to convene an Ambassador-level meeting.

 

If you are a BritCham member and have a particular opinion on the RED II directive or the wider palm oil debate, then please share those views, either privately with our Board or for more general distribution. If you would like to kept up to speed with discussions and developments, please let us know. In either case, write to: yue@britcham.or.id

Thank you