Thursday, December 7, 2023

Indonesia Can Sue EU over Protectionist Green Policy: Economist ​​​​​​​

Jayanty Nada Shofa
October 24, 2023 | 3:20 pm
Senior economist Mari Elka Pangestu (in red) on stage at the 2023 BNI Investor Daily Summit at Hutan Kota by Plataran in Jakarta on Oct. 24, 2023. (Investor Daily/David Gita Roza)
Senior economist Mari Elka Pangestu (in red) on stage at the 2023 BNI Investor Daily Summit at Hutan Kota by Plataran in Jakarta on Oct. 24, 2023. (Investor Daily/David Gita Roza)

Jakarta. An expert said Tuesday that Indonesia could file a lawsuit against the European Union (EU) at the World Trade Organization (WTO) for the bloc’s protectionist green policies.

The EU’s environment-related policies are sparking concerns in Indonesia. The EU’s anti-deforestation regulation -- also known by its acronym EUDR -- requires certain commodities such as palm oil to be deforestation-free before entering the European market. According to senior economist Mari Elka Pangestu, the EU could be imposing protectionist or import-restricting policies under the pretense of saving the planet.

“If we speak of protectionism, we are incredibly worried about Europe’s green policies. Are they really green or is this a hidden protectionism?” Mari, who formerly served as a managing director at the World Bank, told the 2023 BNI Investor Daily Summit at Hutan Kota by Plataran on Tuesday.

“We can take this matter to the WTO. We are aware how the dispute settlement is currently not functioning, but we need to push for non-discrimination and transparency principles to prevent protectionism,” the former trade minister said.


The WTO lawsuit can be part of Indonesia’s efforts to make sure a proper multilateral trading system is in place.

“A properly functioning multilateral trading system plays a part in Indonesia and East Asia’s economic growth. That is why we have to fight for the fundamentals of the multilateral trading system, including non-discrimination ... and prevent protectionism,” Mari said.

The EUDR requires operators and traders to prove their products are not produced on land subject to deforestation after Dec. 31, 2020.  They must present the geolocation coordinates of the land where the commodities and products are produced. Palm oil, cattle, soy, coffee, cocoa, timber, and rubber as well as the derivatives of the said commodities are subject to the EUDR. Top palm oil producer Indonesia said that these coordinate requirements could threaten its smallholders.

Just last month, Indonesia -- along with 16 other like-minded countries -- sent a joint letter to the EU’s top brass to express their concerns over the EUDR. The senders also included Argentina, Brazil, Bolivia, Colombia, Dominican Republic, Ecuador, Ghana, Guatemala, Honduras, Ivory Coast, Malaysia, Mexico, Nigeria, Paraguay, Peru, and Thailand. 

The joint letter requested the EU to consider producing countries’ concerns while formulating the implementing acts and guidelines of the EUDR. The said 17 countries also called for the European grouping to prevent trade disruption, including the excessive administrative burden related to the geolocation and traceability requirements.

The WTO currently does not have a functioning appellate body. This is a seven-membered body that is in charge of reviewing the appeals. The “judges” serve on four-year terms. However, the members whose terms had expired have not found a replacement. The US has blocked the appointment of new members following its concerns over the body’s judicial overreach in their dispute handling.

Indonesia currently has an ongoing dispute with the EU at the WTO. The European bloc sued Jakarta after the latter restricted its unprocessed nickel ore exports. Indonesia has filed an appeal right after the WTO ruled in favor of the EU. However, the lack of a functioning appellate body puts Indonesia's appeal in a queue.

Read More: Everything Must Go According to Plan: Jokowi on Export Restrictions

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