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EFTA deal ‘first step to European market’

The Indonesian government and the European Free Trade Association (EFTA) signed on Sunday a Comprehensive Economic Partnership Agreement (CEPA) in Jakarta, paving the way for greater access for Indonesian products, such as crude palm oil — a controversial commodity in the European market — to non-members of the European Union

Marchio Irfan Gorbiano (The Jakarta Post)
Jakarta
Mon, December 17, 2018

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EFTA deal ‘first step to European market’

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he Indonesian government and the European Free Trade Association (EFTA) signed on Sunday a Comprehensive Economic Partnership Agreement (CEPA) in Jakarta, paving the way for greater access for Indonesian products, such as crude palm oil — a controversial commodity in the European market — to non-members of the European Union.

EFTA member countries are Iceland, Liechtenstein, Norway and Switzerland. They are not members of the EU, but participate in the EU’s single market, which guarantees the free movement of goods, capital, services and people.

Sunday’s deal followed the signing of a joint statement on Nov. 23 in Geneva, Switzerland, which marked the conclusion to 15 rounds of negotiations between Indonesia and EFTA member countries that started in early 2011.

In terms of trade in goods, the trade deal will allow Indonesia broader market access to sell palm oil, fisheries products, textiles, furniture, electronics, tires and coffee to EFTA countries. EFTA countries, meanwhile, will be given greater access to Indonesia for medicinal products, textiles, tankers and perfumes, among other products.

Trade Minister Enggartiasto Lukita acknowledged that palm oil was one of the thorny issues between both parties during negotiations, adding that the deal secured market access for Indonesian crude palm oil into EFTA countries, with certain conditions for Switzerland’s market.

He was referring to a previous discussion in which Indonesia and the EFTA needed to settle 15 tariff rates and the prickly issue of Indonesian palm oil exports to Norway. The Norwegian parliament announced a plan in April to cut off all palm oil imports, including from Indonesia, after a 2018 report by the Rainforest Foundation Norway showed that palm oil production methods were as environmentally destructive as burning fossil fuels.

At that time, Enggartiasto responded by threatening to ban all Norwegian fish imports, a move that could have cost US$237.7 million in annual revenue for Norway.

However, Indonesia’s threat was not aimed at Norway but the EU, which had ratified a similar ban on palm oil imports. The EU’s ban may cost Indonesia 2.4 billion euros ($2.71 billion) per year in palm oil export earnings — representing 14.7 percent of the country’s total palm oil exports.

Johann N. Schneider-Amman, Switzerland’s federal councillor and head of the Federal Department of Economic Affairs, Education and Research, said the EFTA had “found a solution” with its partners in Indonesia. “It’s a principle that says that we only want to deal with sustainable products and services.”

Iman Pambagyo, the Trade Ministry’s director general for international trade negotiations, said Indonesia would continue persuading EFTA countries to accept sustainability standards under the Indonesia Sustainable Palm Oil certification scheme, although it “could not happen overnight”.

Enggartiasto also noted that the deal with the EFTA would be a stepping stone for Indonesia to conclude the long negotiation process on CEPA with the EU.

Shinta W. Kamdani, deputy chairwoman for international relations at the Indonesian Chamber of Commerce and Industry, voiced a similar opinion in a statement on Sunday, in that the deal with the EFTA offered a “good opportunity” to conclude the negotiations with the EU on CEPA.

Indonesia and the EFTA posted a trade value of $2.4 billion last year, data from Statistics Indonesia shows. Indonesia exported $1.31 billion worth of goods to EFTA countries, including jewelry, gold and optical devices, among other goods.

Meanwhile, Indonesia’s imports from EFTA countries stood at $1.09 billion over the same period, mainly for pharmaceutical products, fertilizers and industrial raw materials, among others.

Enggartiasto said the deal with the EFTA would allow Indonesian workers preferential treatment and mutual recognition in certain professions, while also further increasing investment from both parties. EFTA countries would be invited to invest in certain sectors, such as agriculture, manufacturing as well as energy and mining. Last year, investment from EFTA countries stood at $621 million.

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