Sustainability or protectionism in palm oil trade: The case (DS593) of Indonesia vs. the EU

Abstract

This paper examines the case DS593 to understand whether the developments in question represent an attempt to further well-justified policy objectives relating to sustainability or represent protectionism in disguise. DS593 came as Indonesia’s reaction to the EU Renewable Energy Directive II (RED II) that limits and bans palm-oil imports for the “foreseeable future”. Indonesia’s strong economic dependence on palm oil exports led it to look at the justification of RED II critically and thus to highlight some inconsist- encies. These inconsistencies center around the EU’s definition of high and low Indirect Land Use Change (ILUC) risk biofuels. A review of already existing literature on the subject, in combination with the actual WTO agreements were studied to query the issue. It is argued that further deliberation is needed on the side of the EU on what constitutes high or low ILUC risk and on other biofuels apart from palm-oil which are considered unsustainable for EU regulations to not be considered protectionist. Keywords: biomass fuel, palm-oil, WTO, international trade. JEL Classification: Q2, Q270.