Indonesia poised for end to EU’s discriminatory palm oil rules as WTO deadline passes

Trade Minister Budi Santoso confirmed the expiry of the reasonable period of time (RPT) that the WTO dispute settlement panel had granted to the EU to amend regulations inconsistent with global trade norms.

Jakarta is now poised to scrutinise Brussels’ policy adjustments, specifically regarding the bloc’s controversial Indirect Land Use Change (ILUC) rules in the Renewable Energy Directive II (RED II), as well as related implementing regulations.

“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,” Budi said in a statement on Tuesday.

The WTO ruling, issued on January 10 last year in dispute case DS593, found that the EU policies unfairly discriminated against biodiesel made from Indonesian palm oil, determining that they treated Indonesian biofuels less favourably than similar products from the EU and other countries and thereby violated the WTO’s principle of nondiscrimination.

Jakarta had been monitoring developments in Brussels over the 12 months to implement the WTO ruling, adopted on February 24, 2025.

As the RPT has now expired, the government will assess whether the EU has eliminated its discriminatory rules. This evaluation will cover any regulatory changes, methodological adjustments and tangible impacts on trade flows.

The trade minister noted that during a regular session of the WTO’s Dispute Settlement Body (DSB) on January 27, the EU admitted that its policy adjustments to accommodate the ruling were incomplete at that time.

“Indonesia has prepared various scenario options if, upon the expiration of the RPT, the EU has not demonstrated full compliance,” Budi said.

“The Indonesian government is ready to discuss with the EU to ensure legal and technical readiness, should further steps be required.”

The government is coordinating with business associations and stakeholders to ensure legal certainty for the domestic palm oil industry.

Budi stressed that the country was committed to environmental sustainability and the global energy transition, but these “cannot justify protectionist measures”.

“Sustainability policies cannot be used as a basis for implementing measures that contradict the fundamental principle of nondiscrimination in the multilateral trading system,” he said.

The EU, the third-largest destination for Indonesian palm oil products and a major market for Indonesian biofuels, has imposed countervailing duties of 8 to 18 per cent since 2019, alleging that biodiesel producers in Southeast Asia’s largest economy benefited from grants, tax incentives and below-market raw material prices.

According to the Trade Ministry, the WTO assessed that Indonesia’s palm oil export duties and levies could not be categorised as a subsidy, while the European Commission had failed to prove that Indonesian biodiesel imports posed a “threat of material harm” to European biofuel producers.

Following the country’s legal victory at the WTO last year, the government set a 6.7 per cent growth target for biodiesel exports to the EU in 2026.

Djatmiko Bris Witjaksono, the ministry’s director general of international trade negotiations, said at the time that this year’s target aligned with the average export growth for biodiesel recorded over the past four years.

“If possible, we will maintain that figure going forward,” he said in Jakarta on August 28, 2025, as quoted by Bloomberg Technoz.

The Jakarta Post/ANN