Indonesia has a strong bargaining position to negotiate with countries that obstruct its crude palm oil (CPO) export as it has reciprocal trade relations with many of them.
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MANADO, KOMPAS – Indonesia has a strong bargaining position to negotiate with countries that obstruct its crude palm oil (CPO) export as it has reciprocal trade relations with many of them. Apart from exporting CPO, for instance, Indonesia also imports aircraft and a number of products from European Union states.
The economic region obstructs Indonesia’s CPO export through its plan to stop using CPO products in 2021. Vice President Jusuf Kalla said trade relations could support Indonesia’s position at the negotiation table. “If they stop importing CPO from Indonesia, we can also stop importing Europe’s products, such as aircrafts,” Kalla said in Manado on Monday (19/3/2018).
Deforestation is the cause of the issuance of European Parliament’s resolution on palm oil, which excludes CPO from its list of sustainable biofuels.
Three countries and one economic zone, namely the US, Norway, India and the EU, are obstructing Indonesia’s CPO export. Kalla said that the obstruction was based on trade competition. A number of countries are pushing for the sales of sunflower seed oil, soybean oil, corn oil and canola oil.
Another effort to resolve the export obstacle is to work together with Malaysia, the world’s second largest CPO exporter. “Indonesia and Malaysia export at least 70 percent of the world’s CPO,” Kalla said.
The Trade Ministry is preparing a strategy to improve the image of CPO and its derivatives to face negative campaigns. Trade Minister Enggartiasto Lukita said that such campaigns were discriminatory towards CPO and its derivatives.
Indonesia has defended itself by promoting facts of its sustainable palm oil cultivation and the comparison between environmental effects of palm oil plantation and other plant-based oils and cattle farming. “The goal is to establish a fair, instead of discriminatory, international trade system,” Enggartiasto said.
According to him, the area needed for palm oil plantation is far smaller than for soybean, sunflower and canola. The productivity and production of palm oil is far higher than the other three plants. Currently, the world has 277 million hectares of plantation producing 199 million tons of plant-based oils. Globally, there are 122 million hectares of soybean plantation, 36 million hectares of canola plantation, 25 million hectares of sunflower plantation and 14 million hectares of palm oil plantation.
“CPO production is 65 million tons with productivity of four tons per hectare. Meanwhile, soybean oil production is 45.8 million tons with productivity of 0.4 ton per hectare, sunflower is 15.9 million tons at 0.6 tons per hectare and canola is 25.8 million tons at 0.7 tons per hectare,” Enggartiasto said.
Foreign Ministry director of trade, community and intellectual property, Tri Purnajaya, said that Indonesia would wait for the EU’s decision before making any official decision regarding a complaint to the World Trade Organization (WTO). “A complaint will be submitted to WTO once the policy is officially legalized,” he said.
Indonesia has filed disputes to WTO several times and won as it can prove the presence of obstructive policies that violates free trade principles.
Asian Agri corporate relations director Fadhil Hasan said that Indonesia should have followed Malaysia’s move a long time ago of placing special envoys on palm oil matters in a number of countries. The special envoys are tasked to approach palm oil stakeholders in the countries or regions.
Involve farmers
Farmers must be involved as the spearheads of palm oil diplomacy in the face of a trade war. Indonesia Palm Oil Farmers Association (APKSI) secretary-general Rino Afrino said that farmers owned 45 percent of the country’s 14 million hectares of palm oil plantations.
Muchtar Sinaga, the chairperson of My Palm Oil My Future (Samade), a farmers’ organization in Simalungun regency, North Sumatra, said farmers understood prevailing problems in international forums, including environmental issues.
Council of Palm Oil Producing Countries executive director Mahendra Siregar said that, in the past, exports mostly benefited large companies. Since 2017, the main priority is on growth that prioritizes the increasing of small farmers’ productivity.
Apart from improving its diplomacy, Indonesia must also accelerate the improvement of its oil palm plantation management. Thus far, palm oil plantations have contributed to various local conflicts and lead to environmental problems.
In general, based on the Agrarian Reform Consortium’s (KPA) Year-End Report in 2016, 450 agrarian conflicts occurred in 2016, a jump of almost two-fold from 2015. Conflicts involve 1.26 million hectares of land or three times the size in 2015. Conflicts throughout 2016 involved 86,745 families. In 2015, 108,714 families were involved.
Most conflicts, namely 163 cases or 36.2 percent, occur in plantation sector, followed by property, forestry, mining, coastal area, marine area, oil and gas and agriculture.