18/03/2026 (Jakarta Globe), Jakarta - Indonesia has stated that it is willing to consider tariff cuts and other forms of compensation provided by the European Union or EU in their biodiesel dispute at the World Trade Organization (WTO).

In 2019, Indonesia sued the EU at the WTO for its discriminatory REDD II climate policies. The regime classifies palm oil-based biofuel as being high-risk of causing indirect land use changes, leading to a gradual phaseout. Last year, a WTO panel backed Indonesia and gave the EU time until Feb. 24, 2026, to implement the rulings. As the request fell on deaf ears, Indonesia — the world’s largest palm oil supplier — plans to notify the WTO’s Dispute Settlement Body of possible retaliation against the EU in a move better known as “suspension of concessions”. Djatmiko Bris Witjaksono, a senior official at the Trade Ministry, signaled Tuesday that Jakarta was open to options other than retaliating with tariff hikes.

“We want to reserve our rights at the WTO as the EU failed to meet its commitment within the deadline. So we are doing everything that we can, including suspending concessions,” Djatmiko said in Jakarta.

“But [concession suspension] does not have to be tariff increases — for instance, if they are willing to give compensation,” Djatmiko said.

The Jakarta Globe asked Djatmiko what sort of compensation would Indonesia find attractive. Djatmiko said that it could be “all kinds of things”, while recalling a past US dispute as an example.

“Washington once failed to comply with the panel recommendation. So they compensated by giving us tariff reductions on goods that we have requested via the Generalized System of Preferences [GSP].”

The Globe then asked what sort of EU-bound goods Indonesia was hoping to get import duty cuts on, if the European bloc decided to take a similar path. Djatmiko replied that the government had not decided on the details.

According to the WTO website, the concession suspension — or sanctions — should be equal in value to the damages caused by the EU’s challenged policies. Jakarta, however, can only proceed with the retaliation if the dispute settlement body agrees. The organization wrote additional tariffs as one of the most common forms of concession suspension practised so far, the organization wrote.

It was unclear which US dispute Djatmiko was referring to that led to Jakarta gaining the GSP. 

The WTO database shows that Washington has come face-to-face with Indonesia several times at the trade court.  Washington won the legal battles several times, but had lost in a decades-old case related to its decision to transfer collected anti-dumping duties to affected domestic producers. Indonesia had lodged the lawsuit in a joint complaint with other economies, including Australia, Brazil, Japan, and South Korea. Tokyo pursued tariff hikes on the grounds that the US did not implement the rulings within the deadline. In 2005, Jakarta reached a mutual understanding with Washington and would not seek retaliation. 

Under the aforementioned GSP, the US had eliminated duties on thousands of products from Indonesia and other eligible developing nations. The duty-free system expired in 2020.

Staying Friends

Trade Minister Budi Santoso has previously stated that Jakarta would tread with the plan carefully to avoid straining its EU ties.

“The suspension of concessions will be focused on the goods sector, but we are open to other sectors. We will make sure that the losses are carefully calculated, while effectively handling the [WTO] case in parallel to maintain our ties with the EU,” Budi said, not long ago.

Only time will tell whether the retaliation will deal a blow to Jakarta’s free trade agreement with the EU. It took almost a decade before both sides could arrive at the accord. Jakarta expects to sign this comprehensive economic partnership agreement (CEPA) by May. Palm oil — a mainstay in Indonesian biodiesel — is also expected to gain an export duty-free quota when entering the EU market once the treaty takes effect next year.

https://jakartaglobe.id/business/indonesia-open-for-tariff-cuts-in-eu-palm-oil-biodiesel-dispute