JAKARTA – Indonesia is pressing the European Union to adhere to a World Trade Organization (WTO) ruling concerning discriminatory policies impacting Indonesian palm oil exports, following the expiration of a 12-month implementation period on Tuesday.
Trade Dispute Escalates
Trade Minister Budi Santoso confirmed the finish of the “reasonable period of time” (RPT) granted by the WTO dispute settlement panel for the EU to revise regulations deemed inconsistent with global trade standards. Jakarta is now preparing to evaluate any adjustments made by Brussels, with a particular focus on the EU’s Indirect Land Use Change (ILUC) rules within the Renewable Energy Directive II (RED II).
“We urge the EU to immediately comply with the WTO panel ruling so that market access for Indonesian palm oil products in the EU can be quickly restored,” Minister Santoso stated on February 24.
WTO Findings
The WTO determined that EU policies unfairly disadvantaged biodiesel produced from Indonesian palm oil, offering more favorable treatment to similar products originating from the EU and other nations. This constituted a violation of the WTO’s principle of nondiscrimination. Indonesia has been monitoring the EU’s progress toward compliance since the WTO ruling was adopted on February 24, 2025.
During a WTO Dispute Settlement Body (DSB) session on January 27, the EU acknowledged that its policy adjustments to align with the ruling were not yet complete. Indonesia has prepared “various scenario options” in the event of continued non-compliance.
The Indonesian government is coordinating with domestic business associations to ensure legal clarity for the palm oil industry. Minister Budi emphasized Indonesia’s commitment to sustainability but asserted that environmental concerns “cannot justify protectionist measures.”
The EU currently imposes countervailing duties ranging from 8 to 18 percent on Indonesian biodiesel, alleging unfair subsidies. But, the WTO found that Indonesia’s palm oil export duties and levies do not qualify as subsidies and that the EU failed to demonstrate material harm to European biofuel producers.
Following its WTO victory, Indonesia established a 6.7 percent growth target for biodiesel exports to the EU in 2026, aligning with the average growth rate of the past four years.
Frequently Asked Questions
What is the core of the dispute?
The dispute centers on EU policies that the WTO found unfairly discriminated against biodiesel made from Indonesian palm oil, treating it less favorably than similar products from the EU and other countries.
What happens now that the RPT has expired?
Indonesia will now assess whether the EU has eliminated its discriminatory rules, evaluating any regulatory changes, methodological adjustments, and their impact on trade flows.
What is Indonesia’s export target for biodiesel to the EU?
Indonesia has set a 6.7 percent growth target for biodiesel exports to the EU in 2026, consistent with the average export growth recorded over the previous four years.
How will the outcome of this dispute affect the broader landscape of international trade and sustainability policies?
Worth a look