Indonesian palm oil exports set to increase? EU trade talks spark concern from FoE

13 Mar 2019 --- Concerns over palm oil production have been reignited ahead of the latest round of negotiations concerning the EU-Indonesia trade deal, the Comprehensive Economic Partnership Agreement (CEPA). Scheduled to be discussed this week in Brussels, the objective is to facilitate and create new market access, increase trade between the EU and Indonesia, as well as to expand direct investment. Environmental campaigners, Friends of the Earth (FoE) Europe, have voiced concerns over palm oil production links with large-scale habit biodiversity loss, as a driver for climate change and worker rights violations.

The group believes the envisaged EU-Indonesia free trade agreement could ramp up the export of Indonesian palm oil to Europe and thus “increase the damage.” This comes just after Indonesia has also inked another trade deal with Australia aimed at stepping up trade and investment between the two countries.

The EU officially launched its CEPA negotiations with Indonesia in July 2016, and there have been several rounds of talks in recent years, with the latest round planned for this week.

According to the EU, negotiators are making good progress across the board, particularly on the chapters on customs and trade facilitation, sanitary and phytosanitary issues, rules related to trade in food, animal and plant products, technical barriers to trade, as well as questions related to sustainable development.

According to the European Commission’s (EC) report from the last meeting in October 2018: “The round also saw good advancement on government procurement and on disciplines related to state-owned enterprises. The first discussions took place on the respective initial offers on services and investment, while the initial tariff offer for trade in goods was further clarified during this round.”

“Both sides agreed on a comprehensive list of follow-up items, which will help prepare the seventh round of negotiations to be held during the week of 11 March 2019 in Brussels,” it says. 

Europe remains the leading market for sustainable palm oil and environmental and sustainability issues continue to be a topic of debate among consumers and policy makers. People are looking for greater levels of transparency, commitment and sustainability which has prompted many key players to step up their sustainability commitments and pledge to create a deforestation-free industry, and more. 

Instead of talks of trade agreements that could impact palm oil imports into Europe, FoE Europe urges domestic reforms in Indonesia to “tackle the underlying causes of the expansion of palm oil cultivation.” It says that the EU should immediately phase out palm oil from its biofuel policy and ban the import of illegal and unsustainable palm oil.

“For decades, enormous areas of primary and secondary forests have been cleared and burned for palm oil plantations, local communities have been deprived of their lands, there is a systemic occurrence of labor rights violations in the sector, workers have been treated very poorly, the environment has been polluted and deforestation has made Indonesia a major contributor to climate change. Voluntary industry-led certification schemes such as the Roundtable on Sustainable Palm Oil (RSPO) have proven to be insufficient,” says the FoE Europe report calling for “No palm oil in the EU-Indonesia trade and investment agreement.”

FoE Europe also says that if the agreement between the EU and another ASEAN (Association of Southeast Asian Nations) country, Vietnam, is anything to go by, tariff reductions for 99 percent of all traded goods can be expected and would in all likelihood include palm oil and its products.

A sustainable supply chain 
However, the RSPO is also working towards making sustainable palm oil the norm through a process of market transformation and has a goal to reach 100 percent certified sustainable palm oil in Europe by 2020. 

The food industry is taking the issue of sustainable palm oil seriously with many suppliers working toward greater sustainability commitments, as palm oil production and its use within the food industry remains a highly controversial and divisive issue. Conservation practitioners, scientists and consumers consider it one of the most significant threats to tropical biodiversity. 

In contrast, other parties, especially palm oil producers, governments and communities that grow the crop, rely upon palm for its high yields and financial returns. Consequently, there are different viewpoints about the interaction between sustainable land use, the reality of reaching a guaranteed 100 percent sustainable supply chain and oil palm cultivation.

The debate is leading to more global consumers making ethical choices about products containing palm oil. Last April, UK retailer Iceland banned using the crop in its own-label brands and in June 2018, RSPO CEO, Datuk Darrel Webber warned against the unforeseen sustainability and biodiversity impacts that may come from switching to, what he calls, less sustainable edible oils than palm oil. 

The EU has previously agreed to phase out the use of palm oil in transport fuels from 2030, however, it remains upbeat about the current CEPA trade negotiations as a whole, despite the palm oil issues raised by the likes of FoE Europe. 

During last month’s meeting of the Council of Palm Oil Producing Countries (CPOPC), officials addressed the “discriminatory measures arising from the proposed Delegated Regulation Supplementing Directive 2018/2001 of the EU Renewable Energy Directive II.”

The CPOPC views this as “a political compromise within the EU aimed at isolating and excluding palm oil from the EU mandated biofuel sector to the benefit of other vegetable oils, including EU rapeseed.”

Meanwhile, Indonesia’s current trade policy is very proactive in looking for market access in various parts of the world and the country has also recently signed a deal with its neighbors Australia. The Indonesia-Australia Comprehensive Economic Partnership Agreement (CEPA) could have an impact on palm oil exports and is also welcomed by Australian farmers looking to ship more agricultural commodities into Southeast Asia’s biggest economy. The deal, expected to be ratified by the end of the year, will eliminate all Australian tariffs on imports from Indonesia and the majority of Indonesian tariffs will be gradually removed.

According to the Indonesian Palm Oil Association (GAPKI), palm oil prospects for 2019 also look promising. “Business actors in the Indonesian palm oil industry, especially GAPKI, remain optimistic that in 2019 the industry we still have good prospects,” it says. 

This is supported by Indonesia’s improving economic growth. In accordance with government policies to increase investments, increase exports, especially to non-traditional markets, increase national productivity, decrease poverty and economic disparity, the 2019 program is focused on a series of measures. 

These include expanding positive palm oil campaigns in domestic and major export destination countries; encouraging and participating in the replanting or rejuvenation government-backed programs; advocating for various regulations in the region and encouraging the acceleration of sustainability and the Indonesian Sustainable Palm Oil (ISPO) system – a policy adopted by Indonesia’s Ministry of Agriculture aimed at improving the competitiveness of Indonesian palm oil in the global market, reducing greenhouse gas emissions and draw attention to environmental issues.

However, FoE Europe insists: “A variety of initiatives and approaches is needed to solve the issues around unsustainable palm oil cultivation in Indonesia. However, a trade agreement is the wrong place to do this.”

By Gaynor Selby