Indonesia, the world largest crude palm oil producer, has formed a special team to identify various kinds of trade barriers that hamper its commodity exports, particularly CPO, to the European Union (EU).
"We hope we can finish soon the identification of the trade barriers and overcome them so that our exports to Europe would not face constraints. The team has begun working now," Trade Minister MS Hidayat said after attending an ASEAN-EU Business Summit at the Jakarta Convention Center (JCC) on Thursday.
With the results of the verifications on the trade standards imposed by countries grouped in the European Union (EU), industry at home is expected to adjust its products so that Indonesia’s exports to the European Community would be smooth. Yet, Indonesia also hopes that the European Union would also make adjustments as the trade standards it is imposing on Indonesian products are too high.
"They set a relatively high standard. They do not want to accept CPO which is produced from plantation on peat land. I think it is an old issue but could be overcome because we do not export CPO produced from plantation on peat land areas," the minister said.
He said that the trade barrier Indonesia felt so far on its export products was non-tariff one. This includes non-tariff barrier imposed on its crude palm oil exports.
The non-tariff barrier being faced by Indonesia’s CPO was the inclusion of the environment issue into the verification standard, like the history of the oil palm plantation from which the CPO is produced. This is further worsened by recent black campaign against the imports of CPO into Europe.
The negative campaign on Indonesian CPO was associated with the land clearing and environmental degradation. It has an impact on CPO exports to Europe in the first quarter of this year.
The union has imposed the Registration, Evaluation, Authorization, and Restriction of Chemicals or REACH regulation since June 1 2008 to protect the environment and air from the contamination resulted from the chemical substances at the imported products.
Executive Director of the Indonesian Oil Industry Association (GIMNI) Sahat Sinaga was quoted recently by New Business Idea Website as saying that in the first quarter of this year palm oil exports amounted to 4.6 million tones.
The figure was down from the realization of the same quarter of 2009 which amounted to 4.8 million tones. "It dropped because of the negative campaigning. They divert supplies to other products," he said.
Minister Hidayat said that the trade standard imposed by EU on its CPO import was too high. This because the EU rejected CPO which is produced from plantation on peat land. Virtually, CPO exports to Europe are not too big if compared with those exported to the countries in Asia, Africa and the United States.
"Yet, no matter how small the barrier is, it should be overcome together in order to guarantee the prospect of our CPO at home," Hidayat said.
The European Union, which groups 27 European countries, is the second largest trade partner of Indonesia with a bilateral trade amounting to Rp253 trillion annually. Indonesia’s exports to all European countries accounted for Rp177 trillion while those shipped to European Union totalled Rp75 trillion.
Increasing its CPO exports to the Union would help expand its bilateral trade. With total oil palm plantations now recorded at 7.3 million hectares, Indonesia could produce 21.5 million tons of crude palm oil.
In 2020 the country expects to increase its annual production to 40 million tons. Therefore, Indonesia is the most potential CPO supplier for Europe in the future. At present, crude palm oil industry is the country’s second biggest foreign exchange earner after the oil and gas sector.
To secure more European CPO market in the future, the Indonesian government recently through the agriculture ministry launched an oil palm green product campaign in Europe, Spain and France in particular.
According to Agriculture Minister Suswono the oil palm green product campaign was designed to convey information and communicate the policy and efforts to develop the national oil palm industry by paying attention to the principle of sustainability.
"The campaign was held in the forms of seminars and meetings with the related officials of Indonesia, Spain and France," the minister said.
Minister Suswono said, he conveyed the Indonesian government commitment in the implementation of the Indonesia Sustainable Palm Oil System and concern on the environmental criteria listed in the Renewable Energy Directive (RED) that has potential as a Non-Tariff Barrier in the trade.
"The French government understands the Indonesian concern and expects inputs from the results of palm oil research which can be used as an evaluation of policies related to the use of palm oil in the country," Suwono said.
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