CPO and New Economic Diplomacy

KOMPAS/PRIYOMBODO

Workers covered Crude Palm Oil (CPO) during loading and unloading at Kapal Kencana 89 in Tanjung Priok Port, North Jakarta.

The Office of the Coordinating Maritime Affairs Minister has just proposed the use of a 20 percent crude palm oil (CPO) fuel mix to strengthen the rupiah exchange rate. However, vegetable oils have a wider role in reducing global warming, specifically in the use of CPO as an instrument for reducing global pollution from carbon dioxide emissions. Furthermore, vegetable oils play a part in global nutrition and global food security as none other than global commodities. This gives CPO a dual role as a private good for consumption and as a global commodity.

Projections on the production and consumption of several vegetable oil-based food and non-food products show significant changes in the products’ contributions. The OECD/FAO projection links vegetable oil development to world population growth until 2050.

While the production of several vital vegetable oil sources stopped growing in 2015, soybean oil and CPO have continued to be developed. In terms of productivity, CPO has the highest production rate among all vital vegetable products. The annual production of CPO per hectare is 5.58 times the annual productivity of sunflower oil and 9.84 times that of soybean oil. This means that, in this context, CPO is the best vegetable oil.

The European Union has suggested that vegetable oils be used to replace 10 percent of fossil fuels by 2020. Its research team has encouraged the inclusion of this issue among agricultural public goods.

EU agricultural policies have long offered subsidies for agricultural exports, but the WTO has demanded the abolition of these export subsidies. Public goods issues open an opportunity for the EU to transform it into a global policy that supports agricultural interests. The EU has thus cleverly utilized this opportunity in the use of renewable energy sources from agricultural products to support its efforts to mitigate global warming. This has become the new foundation for public policies in the agriculture sector and is also used to maintain the vitality of the agriculture sector, as in the case of the EU agricultural export subsidies.

Couldn’t CPO, as a product of tropical countries like Indonesia, be used in a similar argument with regard to the role of CPO as a global public good in reducing global warming? This should be used among the world’s CPO-producing countries as a new tool for trade diplomacy.

Transformation to public goods

The EU agricultural policy refers to the public functions of the agriculture sector, such as supporting a healthy global environment, the availability of water for agriculture, land fertility and global food supplies. Even though agricultural lands are generally privately owned, these lands are deemed to have other public functions as mentioned above.

The greatest attention has been given to the EU territory. The reason for this is similar to the provision of export subsidies for agricultural products to sustain the EU’s agriculture sector, which guarantees food supplies both locally and globally. However, if the subsidies were previously paid directly to the farmers that exported their products, today they are a part of the government budget.

CPO has the potential to meet the people’s food needs, which may appear to be a private need at a glance but is, at the same time, a global source of renewable energy. In aggregate, the private need for food becomes a collective global need when viewed in terms of adequate availability. This is where the EU utilizes its public policies on agriculture that relate to global food issues.

In terms of CPO’s function, the private need for food products have changed, in aggregate, into global public goods to maintain global food security. The use of CPO as a fossil fuel substitute has directly reduced global warming by functioning as global public goods.

Materially, the EU agricultural export subsidies contradict the international trade criteria. This space is used creatively to transform export policies into instruments for environmental policies and global food security. In this case, the CPO issue can be viewed as an analogy, wherein the products meet the world’s food needs and are also used as a renewable energy source to support the reduction of global warming.

There are still other advantages, in that much less land is needed to produce 1 ton of CPO than other vegetable oils. This has great significance for EU countries that are facing a land shortage. These countries’ have reached their capacity to produce alternative vegetable oils, while the need for vegetable oil will continue to increase until 2050 – which can be met by CPO from tropical forests. However, a minimum of tropical forests must be preserved for increasing biodiversity.

In this context, a balanced consideration is needed in addressing the opponents of CPO, both concerning the allegations about its unhealthy content, the issue of underage workers, land clearing that does not comply with environmental regulations and low wages. One thing that can be learned from the transformation of the EU’s agricultural export policies into global public policies is that it is able to fulfill its original purpose while meeting the WTO criteria, despite its use of different instruments.

It is clear that CPO has the potential to fulfill a double role as private goods and as global public goods. This is what remains neglected.