How Palm Oil Exports Predictions to United States under Biden’s Policy?
The United States is one of export market destination for Indonesian palm oil. The export share in 2019 reached 3.9 percent. The export performance of Indonesian palm oil and its derivative products to the United States also shows a positive trend from year to year.
Amid the sluggish demand due to the Covid-19 pandemic, the United States has become one of the export market destinations for Indonesian palm oil, which shows an increasing trend compared to the previous year. The export-import data from BPS shows that Indonesian exports of Refined rePalm Oil (RPO), refined Palm Kernel Oil (PKO), and oleochemical products to the United States in the January-November 2020 reached USD 975.24 million. If we compared with same period in 2019, shows that the total export value of these three products was only USD 777.51 million.
The increasing in the performance of palm oil exports to the United States occurred in line with the increasing popularity of palm oil in that country. Even the share of palm oil in the US vegetable oil consumption structure has increased, on the other hand, the share of soybean oil, which is produced domestically, has decreased. One of the factors making the increased consumption of palm oil in the country because its competitive price. This condition cause competition between these two vegetable oils.
The export performance of palm oil and its derivative products from Indonesia to US (as well as other exporting countries) will be greatly influenced by political-economic policies. In the election for President of the United States at the end of 2020, Joe Biden was officially elected as the 46th president to replace Trump. The replacement of the president with his policies will affect US international trade (export-import) performance with its trading partners, including Indonesia.
Based on the politic campaign, it shows that Biden is anthithesis of Trump, especially in policies related to the environmental. President Trump has the prespective about contribution for reducing global warming and other environmental issues is a threat to the United States economy, such as a decrease in GDP and employment. With this perspective, the United States has officially removed from the Paris Agreement.
In contrast to Trump, Biden in his campaign said he would return to bring US to join with other countries to implement the Paris Agreement. He’s also promoting an ambitious plan by budgeting two trillion dollar to achieve the emissions reduction that are written in that agreement.
Experts have also predicted President Biden’s policies during his tenure, one of which policies is in favor of low-emission renewable energy. This policy implication is tightening of environmental standards, so that it has the potential to create trade barriers that will be faced by commodities that are considered to be contributing of emmissions increased, such as fossil-fuel and palm oil.
Apart from the issues of environment, labor issues will also concern Biden. This shows that palm oil trade and fulfillment of the criteria for sustainable palm oil that address environmental and social issues in palm oil industry, may receive more serious attention than during the Trump goverment.
Although Biden has not been officially inagurated as US President, global palm oil industry players shocked by the policy was implemented by US goverrment which prohibits imports of crude palm oil (CPO) from a Malaysian company, namely Sime Darby Plantation since December 2020. The ban on imports of palm oil is due to indications of a forced labor system to allegations of human right labor violations in plantations such as physical and sexual violence, intimidation and threats, deductions in wages, and excessive overtime that occurred on all of their plantations.
Palm oil’s import ban on Sime Darby is the second case after the import ban was also imposed on another Malaysian company, namely FGV Holdings in October 2020. It;s also due to indications of worker harassment that was occured in their plantation company.
The ban was triggered by a petition filed by NGOs and law firms, following investigations by The Associated Press (AP) into alleged labor abuses and exploitation of workers on plantations in Malaysia and Indonesia. AP’s investigation was also quoted by a Democratic parliamentarian from the US House Committee on Ways and Means, who called for the US Government to be more firm with the Malaysian and Indonesian palm oil industries.
What happens to Malaysian oil palm plantation companies and Biden’s policy will affect the export performance of Indonesian palm products, given that we have been a major exporter of palm oil that is imported by the United States since 2016. This needs to be watched out by producers and exporters of palm oil and its derivatives and also Indonesian Government. These trade barriers not only argue for the movement to reduce greenhouse gas emissions or protection of labors, but also as a protectionism against soybean oil produced by the United States.
This will have the potential to disrupt Indonesia’s palm oil export performance, thereby reducing export foreign exchange and threatening Indonesia’s trade balance surplus. However, GAPKI is still optimistic by saying that Indonesia’s palm oil exports to US will increase reach around 1 million tons to fulfill of food and energy needs under President Joe Biden’s leadership.
President Biden’s perspective related pro-environmental and social issues (including labour) has become a signal of alignment with its allied countries who had been giving barrier/obstacles to palm oil products, such European Union. Currently, Indonesia is filing a lawsuit to the WTO regarding the EU policies that are considered to discriminate against palm oil. Biden’s alignment with the EU has the potential to become a big “stumbling rock” for Indonesia’s lawsuit to stop the palm oil phase-out plan in the European Union market by 2030.
However, it’s hoped that the concerns of Indonesian palm oil industry regarding the performance of palm oil exports to the United States during President Biden’s government will not be realized. On the contrary, the election of President Biden has brought “fresh air” to the United States’ trade relations with its trading partner countries, including Indonesia. So that good relations between the two trading partners can produce a gain of trade that brings benefits both for the two countries.
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