Jokowi, Mahathir Tell Brussels to Get Ready for Retaliation Over Discriminatory Palm Oil Restriction

Jakarta. Indonesian President Joko "Jokowi" Widodo and Malaysian Prime Minister Mahathir Muhammad have sent a scathing joint letter to the European Union, conveying grave concerns from the two countries over an EU plan that would effectively ban palm oil fuel in its member states over the next decade. The letter comes with a threat of trade retaliation against the plan.

Sending the letter was the latest move by two of the world's largest palm oil producers to try to keep Europe, one of the largest palm oil markets, from making a ruling against the commodity.  

The European Commission adopted on March 13 what has become known as the delegated act, which classifies palm oil as unsustainable. 

The European Parliament and the Council of the EU have two months to scrutinize the act and express any objection before it is published in the Official Journal of the European Union and becomes binding to all EU member states. 

"Should this delegated regulation enter into force, our governments shall review our relationship with the European Union as a whole, as well as its member states. This may include the reviewing of our partnership negotiation, procurement contracts and key imports from the EU," Jokowi and Mahathir wrote in the April 5 letter. A draft of the letter was made available to the Jakarta Globe on Tuesday (09/04). 

"Both our government will challenge the delegated regulation through WTO dispute settlements and other avenues as the discrimination exercised against palm oil is obvious," the leaders said, referring to the dispute resolution mechanism at the World Trade Organization. 

Indonesian and Malaysian representatives under the Joint Mission of the Council of Palm Oil Producing Countries (CPOPC) are in Brussels on Monday and Tuesday to meet with the European Commission, the European Parliament, the European Council and various stakeholders involved in the supply chain of the oil palm industry to convey the producers' "grave concerns" against the delegated act. 

Indonesia and Malaysia are particularly aggrieved by the EU's novel use of the Indirect Land Use Change (ILUC)—which they say is a scientifically flawed measurement—as a base for restricting the use of palm oil biofuel in the European market. 

The two Southeast Asian countries claim that on the other hand ILUC benefits rapeseed oil and soybean oil producers from other countries. 

"The claims made by the EU Commission that the delegated act is based on scientific and environmental grounds do not bear close scrutiny. Among others, soybean oil from selective sources has been categorized as low-risk ILUC, despite the EU's own in-house research concluding that soybean is responsible for far more 'imported deforestation,'" Jokowi and Mahathir wrote. 

"This calls into question the whole delegated regulation and the probability that political and economic protectionism rather than science-based decisions were the true drivers of this delegated regulation. Both of our governments view this as a calculated and adverse economic and political strategy to remove palm oil from the EU marketplace," the leaders wrote. 

Indonesia and Malaysia also said the delegated act undermines their achievement in alleviating poverty and meeting other United Nations Sustainable Development Goals. 

The Delegated Act

In a previous statement, the European Commission delegation to Indonesia said that the delegated act—issued as part of an effort to meet the EU's renewable energy target of at least 32 percent by 2030—does not target or identify palm oil "as a bad biofuel per se."

Instead, the act was based on global deforestation data from 2008 to 2015—considered to be the best available scientifically on consistency consideration—which linked palm oil with the highest level of deforestation. 

"From 2008 to 2015, 45 percent of oil palm plantation expansion took place in high carbon stock areas. This is way above the figures for other feedstocks," the delegation said in the statement. 

Since 2015 Indonesia has taken steps to reign in uncontrollable growth of oil palm plantation. 

On average, Jokowi's administration issued permits for about half of the forest area his predecessor Susilo Bambang Yudhoyono converted into oil palm plantations every year. 

It should also be noted that most permits under Jokowi were carried over from the two terms of SBY's presidency.  

Last year, Jokowi also imposed a three-year moratorium on new oil palm plantations and reviewed existing permits for possible violations of environmental standards.

The European Commission said it would take Indonesia's recent efforts at improving the environmental sustainability of its palm oil industry into account when it reassesses the data and methodology used in the delegated regulation the next time it is due for revision in 2023. 

"This delegated European Commission regulation is neither the beginning nor the end of a policy process, it is just one more step on a long and collective journey toward sustainable development and carbon neutrality," Vincent Guérend, the EU ambassador to Indonesia, said in the statement.

Palm oil is Indonesia's second largest export, accounting for 11 percent of the country's total exports in 2018. 

It fetched $20 billion of export revenue last year, below only coal's $24 billion. 

The European Union is Indonesia's second largest palm oil market after India, and above China.