Indonesia: Power struggle over nickel and palm oil

Indonesia is reluctant to join a European Union (EU) push to use a stopgap appeal mechanism to resolve their World Trade Organisation (WTO) disputes, a standoff experts say reflects a broader power struggle over nickel and palm oil amid an impaired WTO dispute settlement mechanism.

The disputes concerned EU import duties imposed on Indonesian biodiesel and stainless steel that a WTO panel ruled inconsistent with global trade rules.

Both cases are now in limbo, as the rulings in favour of Indonesia cannot be enforced due to the bloc’s appeal.

Edi Prio Pambudi, undersecretary for coordination of international economic cooperation at the Office of the Coordinating Economy Minister, said Indonesia was not inclined to participate in the multi-party interim appeal arbitration arrangement (MPIA), stressing that the country preferred to follow the trade body’s established mechanisms.

“We are a member of the WTO. Even if we are invited, it is not certain we will join. We must first examine what the issue entails and consider its consequences,” Edi told reporters last Thursday.

Edi added that Indonesia remained committed to multilateral rules and had, like many members, sought answers from the United States over its long-running block on new WTO adjudicators, a move that had hobbled the system since 2019.

With no functioning appeals bench, disputes can be stalled though a tactic that has become known as “appealing into the void”, leaving WTO panel rulings unenforceable. In 2020, the EU, China, Japan and dozens of other WTO members created and joined the MPIA as an alternative arrangement to adjudicate appeals of WTO panel rulings.

Although the MPIA was established outside the WTO’s formal institutional structure, its awards are enforced through the WTO framework, bringing cases to their final resolution.

EU ambassador to Indonesia Denis Chaibi said Brussels had invited Jakarta to join MPIA, so the stalled disputes could move forward. The bloc was aware that the appellate body was not functioning, he added, which was why it urged Indonesia to use the alternative mechanism, so both sides could “find a way forward” on the two issues.

“The panel found that the EU, in calculating the anti-dumping rates for these two products, had not used what it considered the right method,” Chaibi told reporters.

“The EU thinks differently and believes some of the WTO panel’s conclusions should be corrected, which is why we have appealed. We need to resolve this through the instruments available.”

He noted that the WTO cases were “entirely separate” from the Indonesia-EU Comprehensive Economic Partnership Agreement or I-EU Cepa, a landmark deal both sides signed in September, adding that “a dispute on a specific item does not put the Cepa into question”.

Under the newly signed trade pact, Indonesia, the world’s largest palm oil producer, aims to boost exports to the EU, its third-largest market for palm oil products including biodiesel.

The EU has been charging countervailing duties of 8% to 18% on biodiesel imported from Indonesia since 2019, thereby protecting European companies that mainly produce rapeseed-based biodiesel, which is more expensive than palm oil-based fuel from Indonesia.

On stainless steei, the EU imposed antidumping duties of 9.3% to 20.2% since 2021, later adding countervailing duties of up to 21.4%.

The measure targets what Brussels claims to be unfairly priced or subsidised imports, protecting European steelmakers in a saturated global market.

Home to the world’s largest nickel reserves, Indonesia has positioned itself as a major global exporter of several stainless steel products following its 2020 ore export ban, part of its mineral downstream policy to promote investment in domestic processing.

Tags: dispute, World Trade Organisation, Indonesia, European Union, biodiesel, palm oil, imports, duties, nickel