World Economy

Indonesia Warns European Union of Retaliation

Indonesia and Malaysia jointly account for 82 percent  of global palm oil output.Indonesia and Malaysia jointly account for 82 percent  of global palm oil output.

Southeast Asia’s palm oil exporters have the means to retaliate if the European Union imposes restrictions on the commodity, Indonesia’s trade minister warned in an exclusive interview with the Nikkei Asian Review.

In a discussion that spanned everything from free trade deals to North Korea, Enggartiasto Lukita also made it clear that Indonesia has no interest in joining the Trans-Pacific Partnership unless the US returns to the fold.

Lukita bristled at the European Parliament’s passage of a resolution on palm oil and deforestation back in April. The idea is to reduce indiscriminate clearing of rainforests for plantations by creating a tougher, unified certification program for sustainable palm oil and palm products, while banning the use of the commodity in biofuels.

“You start a trade war, and we can do the same,” the minister said during a visit to Tokyo.

Indonesian President Joko Widodo and Malaysian Prime Minister Najib Razak met in late November and revealed they are considering joint action to counter the restrictions. The two countries account for 82% of global palm oil output.

Though Lukita said a precise course of action has not been decided, he offered a few possibilities for fighting back: “We can stop buying Airbus (planes). We can stop also buying dairy products from Europe. It will affect producers of milk, (just) as palm oil affects our farmers. We can also stop buying other items from Europe.” All these things, he suggested, can be imported from elsewhere.

As for the TPP, Indonesia sees little chance that US President Donald Trump can be drawn back into the deal, and thus the country has little inclination to join anytime soon. The TPP “is nothing without the US,” Lukita said.

Looking to save the deal after Trump withdrew in January, Japan and the other 10 remaining countries in early November agreed on key principles for moving forward.

In the past, Indonesia had hinted it would consider participating, and Lukita said his country would “study” the matter if America returns to the fold. But he does not see this happening for at least another “four to five years”—in other words, not during Trump’s current term, and perhaps not after the next election. “So why do we have to study it in a hurry?” Lukita asked.

Instead, he said Indonesia is “concentrating” on another multilateral trade framework: the Regional Comprehensive Economic Partnership. The proposed deal includes the 10 Association of Southeast Asian Nations states along with Australia, China, India, Japan, New Zealand and South Korea.

Lukita said the grouping “consists of 3.4 billion people,” making it “more attractive.”

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