BRICS Opens Opportunity for Fairer Palm Oil Trade in New World Order

Palm Oil Magazine
The five founding countries and current BRICS members - Brazil, Russia, India, China, and South Africa - have from the outset asserted that their economic and demographic power and influence are underrepresented in world institutions, especially the World Bank and the International Monetary Fund (IMF).

Economy has always been at the forefront of this organization. Basically, BRICS is a collection of developing countries that want to maintain and enhance economic cooperation. The demand for global reform is due to the disproportionate representation of BRICS members in global financial institutions.

Although many analysts in the developed world see BRICS expansion as a step into an uncharted path, with new actors having diverse interests, a larger BRICS will increase its role projected as a geopolitical alternative to global institutions dominated by the West.

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Indonesia, developing countries and BRICS members have been disappointed and frustrated by the EU’s ambition to regulate the industry and trade norms of important commodities produced by Indonesia and many BRICS members, such as palm oil. The EU is also introducing non-tariff barriers and protectionist measures, which will directly affect exports to EU countries.

Also Read : Indonesia Should Struggle in WTO About Biodiesel Return Duty by EU

There are at least five trade barriers between Indonesia and some BRICS members and the EU.

First, additional tariffs on steel, which are assumed to be related to the ban on nickel ore exports. Currently, Indonesia’s appeal against the WTO decision is being examined at the WTO Appellate Body.

Second, additional tariffs on biodiesel exports, which is currently under dispute complaint process at the WTO.

Third, non-tariff barriers to palm oil on health grounds, due to the presence of contaminants that are also found in other vegetable oils.

Fourth, tariff and non-tariff barriers in the form of Carbon Border Adjustment Mechanism (CBAM), for cement, iron and steel, aluminum, fertilizer, electricity, and hydrogen.

Finally, non-tariff barriers in the form of the EU Deforestation Free Regulation (EUDR), for soy, beef, palm oil, timber, cocoa, coffee, and rubber.

All cases of EU-imposed trade barriers contradict WTO rules, which prohibit additional rules, tariffs, or non-tariff barriers, although the WTO allows exceptions.

While the EU has failed miserably in adopting and embedding an ethical trading system in all international trade agreements, BRICS is better positioned in embedding a fairer trading system, especially for commodities produced by members and countries of the South. Therefore, BRICS is expected to be a correction and revision of the free trade principles campaigned by the West.

The more inclusive and mutually beneficial principles of BRICS by respecting the socio-political diversity of developing countries, will make this forum continue to develop and grow as one of the most influential global forums.

Also Read : CPOPC and Solidaridad Collaborate to Promote Sustainability in Smallholders Palm Oil Plantations

The development of BRICS will further spur Indonesia’s socio-economic development, especially in the palm oil sector and minerals essential for renewable energy, two of the most important commodities and sources of state revenue for Indonesia and countries in Africa and Latin America.

BRICS is also expected to develop a new platform for a fairer trading system for palm oil and other commodities that should be based on full compliance with national laws, environmental sustainability and social responsibility principles to help producers achieve sustainable and fair trading relationships.

For Indonesia, the emergence of BRICS and our current cases against the EU at the WTO are not meant to be a trade war. Rather, Indonesia seeks a fairer trading system that respects the rights of developing countries while respecting the EU’s concerns on environmental, social and good governance principles throughout the supply chain.

While the BRICS is growing in relevance, the EU is losing its luster.

Can the EU realize the twilight of its existence as the world’s dominant economic power and adapt to change the mentality of First World arrogance in front of the South?

Majapahit stood for approximately 250 years. No one at the time thought that the great empire that defeated Kublai Khan would end when new powers emerged in Java and the archipelago.

By : Agam Fatchurrochman and Edi Suhardi

The writers are sustainable palm oil analysts.

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