Retalism mechanism in Indonesian and European Union trade disputes regarding CPO commodity exports

Abstract

In 2019, the European Union Parliament made a policy to stop the use of Crude Palm Oil (CPO). The decision was taken after the European Union Parliament agreed to use environmentally friendly renewable energy as stated in the “Report on the Proposal for a Directive of the European Parliament and the Council on the Promotion of the use of Energy from Renewable Sources”. This policy makes Indonesia one of the largest CPO producers with the potential to lose its market. This policy makes Indonesia conduct a counter attack (retaliation) by using the World Trade Organization (WTO). Previously the President Republic of Indonesia, Joko Widodo also conducted retaliation in the form of a boycott products from the European Union such as airplanes from the French manufacturer, Airbus. The retaliation is considered effective because Indonesia accounts for 5.7% of the Airbus market in Asia Pacific with a valUni Eropa of US $ 42.8 billion. This amount is still far greater than Indonesia’s CPO exports on the European Union market which is only worth US$ 4 billion. Its means that if this retaliation occurs, Indonesia will have a better bargaining than the European Union, so it is hoped that the European Union can soften and end trade disputes between the European Union and Indonesia.