EU-Indonesia Trade War: Nickel Ore Ban & Palm Oil Tariffs Disputes Filed in the WTO

Written by | Wednesday, December 25th, 2019

When the nickel smelters started springing up in Morowali, a global hub for nickel ore mining, on Indonesia’s Sulawesi Island in around 2013, the local health clinic saw a sharp increase in the number of the town residents with respiratory infections in need of medical treatment. Notwithstanding this trend, Indonesian government policy aims to triple the number of nickel smelters nationwide between 2020-21. Also palm oil production is important to the Southeast Asian country’s economy, as Indonesia is the world’s biggest producer and consumer of the commodity, providing about half of the world’s supply. In 2016, Indonesia produced over 34.5 million tons of palm oil, and exported nearly 73% of it. Now Indonesia’s ban on nickel ore exports and the EU’s tariffs on palm oil imports have prompted both sides to sue each other in the World Trade Organization (WTO).
Brussels says it is worried about deforestation and recurring toxic haze across Southeast Asia due to forest fires blamed partly on Indonesia’s palm oil industry and also its effects on European companies involved in the making of biofuels. And as disputes over palm oil and nickel head to the WTO, the Indonesian government expects buyers to dwindle while affected residents say they feel trapped. Millions of Indonesians involved in both nickel ore mining and palm oil industries have seen their lives changed – for better and worse – since their country became the world’s top producer in both fields. The future of their livelihoods will now depend on the outcome of the trade disputes over the two commodities at the WTO, while both the 28-country bloc and Indonesia tussle to protect their own economies.
The EU and Indonesia have been trying to strengthen trade between the two economies since talks began for a Comprehensive Economic Partnership Agreement some four years ago. But the escalating conflict between the two sides over nickel and palm oil shows that it will be no smooth sailing. The EU Trade Commission filed a complaint with the WTO last month, slamming Indonesia for its ban on nickel ore exports, accusing it of breaking free trade rules by providing unfair benefits to its domestic nickel industry. Nickel is used most commonly in stainless steel production and increasingly in the production of batteries that power modern electric vehicles – an industry that the bloc currently seeks to develop to counter the fierce competition from China. Indonesia has now, in turn, decided to fight back against the EU’s imposition of tariffs on Indonesian palm oil-based biofuel by filing a lawsuit with the WTO earlier this month.

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