November 26, 2021
Indonesia and the European Union are normally close partners on many fronts, but this time around they are suing each other for “unfair trade practices” at the World Trade Organization (WTO). Indonesia is demanding the EU scrap its plan to ban palm oil imports from Indonesia, while the latter insists that Indonesia cancel its decision to bar nickel ore exports.
Many Indonesians perceive that Europe loves to “preach” to developing nations on how to behave and act in accordance with the universal values of human rights, democracy and environmental protection. But they tend to forget the history of their “colonial cruelty” in the past and set a double standard when their own preaching directly affects their economic and political interests.
President Joko “Jokowi” Widodo has reiterated that he will not back off from the decision he made in January 2020 to ban nickel ore exports, and that his government is fully prepared to face the EU’s challenge at the WTO. Earlier, the President vowed to go ahead with a plan to file a lawsuit with the WTO against the EU’s ban on Indonesian palm oil. For the President, this is a matter of the sovereignty of Indonesia, the world’s largest producer of nickel and palm oil.
The government prohibits nickel ore exports to force mining companies to develop the downstream metal industry so that they export semi-processed products. The ban will also be expanded to bauxite in 2022 and copper in 2023. In the past, European countries imported cheap, raw forest products such as rattan from Indonesia but later on demanded that Indonesia export only certified and processed products.
In November 2019, the EU filed a complaint against Indonesia’s nickel ore prohibition. Indonesia retaliated by suing the EU on its palm oil ban plan one month later. The European Commission said oil palm cultivation had caused massive deforestation and therefore should not be included in the renewable energy targets.
Indonesia should address the claims because it is undeniable that the expansion of the palm oil industry has not only resulted in huge foreign exchange revenues and the creation of many jobs, but also massive forest loss and, hence, environmental degradation. But the EU, too, should be honest about the motives behind its lawsuit.
How about the nickel ban? According to the EU, on Jan. 14 of this year, it had asked the WTO to set up a panel in order to cancel the “unlawful restrictions by Indonesia on raw materials necessary for the production of stainless steel, notably nickel ore and iron ore.”
Indonesia’s unilateral act is “clearly inconsistent with the prohibition of export restrictions in Article XI: 1 of the General Agreement on Tariffs and Trade (GATT) 1994”.
The nickel ore ban has affected 30,000 direct jobs and 200,000 indirect jobs. Meanwhile, Indonesia insisted that 3 million palm oil workers were directly impacted and 17 million were indirectly affected by the EU’s unilateral restriction.
Indonesia and the EU are still negotiating the RI-EU Comprehensive Economic Partnership Agreement (RI-EU CEPA). The agreement should be equally beneficial for both parties. To reach a win-win solution, both sides need to make compromises, including on the nickel and palm oil issues.