Indonesia has requested authorisation from the World Trade Organization (WTO) to suspend trade concessions towards the European Union (EU) after the bloc failed to comply with a WTO ruling related to restrictions on palm oil-based biofuels, the Jakarta Globe wrote.
Trade Minister Budi Santoso said the request had been submitted to the WTO’s Dispute Settlement Body following the EU’s failure to meet the 24 February deadline to adjust its policies in accordance with the ruling in the DS593: EU–Palm Oil dispute, the 7 March report said.
“The suspension of concessions will focus on the goods sector but remains open to other sectors,” Santoso said in a statement in Jakarta on 7 March.
The move by Indonesia – the world’s largest producer and exporter of palm oil – would allow it to seek approval to impose retaliatory measures. If authorised by the WTO, Indonesia could legally take trade action against the EU, increasing pressure on the bloc to revise its palm oil restrictions, the Jakarta Globe wrote.
The dispute stemmed from the EU’s Renewable Energy Directive II (RED II), which classified palm oil as a ‘high-risk’ biofuel feedstock for indirect land use change (ILUC), which must be phased out from counting towards EU renewable energy targets in transport by 2030.
In January 2025, a WTO panel had found that elements of the EU’s policy discriminated against palm oil-based biofuels. The ruling said the EU’s delegated regulation under RED II was inconsistent with international trade rules as it singled out palm oil as high-risk, while allowing competing biofuels to continue benefiting from the bloc’s renewable energy policies.
The panel also determined that certain national measures, including tax incentives in France that favoured biofuels derived from rapeseed and soyabeans, rather than palm oil, were discriminatory, the report said.
However, the WTO panel also acknowledged that the EU had the right to pursue environmental and climate objectives through renewable energy policies.
The dispute came as both sides moved towards finalising the Indonesia-EU Comprehensive Economic Partnership Agreement (CEPA), the report said.
In September, the two nations announced the “substantive conclusion” of negotiations after nearly a decade of talks, which had faced several setbacks.
The agreement, expected to eliminate tariffs on many products, was now undergoing legal review, and Indonesia aimed to sign the deal by May, the report said.
“We will carefully calculate the amount of losses and ensure the case is handled effectively while continuing to maintain bilateral relations with the European Union,” Santoso said.
According to the minister, the step is consistent with Article 22.2 of the WTO’s Understanding on Rules and Procedures Governing the Settlement of Disputes, which allowed the winning party in a dispute to request permission to suspend trade concessions if the losing party failed to implement the ruling.
Indonesia claimed that the EU had not fully adjusted its palm oil-related policies or offered balanced compensation for the economic impact caused by the restrictions, the Jakarta Globe wrote.
“Indonesia can request authorisation from the WTO’s Dispute Settlement Body to suspend concessions in order to protect its rights in the future if the EU fails to comply with the panel’s ruling,” Santoso added.
According to officials, the financial losses to Indonesian producers were significant due to reduced export opportunities caused by the EU’s policies.
