Referendum Decision: Swiss Voters Have Given The “Green Light” To Trade Deal With Indonesia (IE-CEPA) And Palm Oil Imports
As a country with an open economy, Indonesia tries to develop international trade (export-import) of goods and services, as well as optimize the flow of investment capital into the country so that can increasing economic welfare and growth. This is can be achieved through a comprehensive economic partnership agreement (CEPA) with a country or several countries (regional). One of the CEPA schemes that Indonesia has built together with Iceland, Liechtenstein, Norway, and Switzerland is within the framework of the Indonesia-European Free Trade Association CEPA (IE-CEPA).
After being signed in December 2018, only three countries (apart from Switzerland) have completed the ratification of the agreement and approved Indonesia as an important trading partner. Swiss Parliament was scheduled to ratify IE-CEPA in December 2019, but previously the parliament was given an opportunity to their community to share an opinion about this agreement. This opportunity was used by the NGO Unittere and farmer unions in Switzerland to propose a referendum rejecting imports of Indonesian palm oil, which is become a key point in the IE-CEPA. Background argument of rejection due to palm oil considered damaging to the environment.
Even though the sustainability requirements and other requirements for palm oil import have been regulated in this agreement, but NGOs and farmer groups that are submitted the referendum still reject palm oil imports into Switzerland and they don’t believe in the implementation of sustainability requirements. Ultimately, however, these community groups are honest about their concern for the impact of imported palm oil, where domestic vegetable oils such as sunflower oil and rapeseed oil won’t be able to compete in terms of price and productivity with palm oil.
Although it has been admitted that the rejection or boycott of palm oil in Switzerland due to trade competition, the referendum process or public voting to determine the sustainability of IE-CEPA and the fate of palm oil imports will still be carried out on March 7, 2021.
The referendum result shows that 51.6% of voters who are Swiss citizens agree with the IE-CEPA economic cooperation. Guy Parmelin, President of Switzerland stated that the referendum decision to support IE-CEPA and palm oil trade is not an economic choice over human rights and environmental issues. The Swiss government also hinted that it would include clauses on sustainability and environmental and social protection in the cooperation agreement and support Indonesia in producing sustainable palm oil.
Something is interesting about the results of the referendum, as many as 48.3% of voters rejected the IE-CEPA and imports of palm oil to Switzerland. This slight difference shows the high level of negative public opinion towards palm oil, even though the Swiss government and representatives of the Indonesian government in Switzerland have been campaigning for palm oil and its sustainability for several months. Most of the opposing voters are residents who work as farmers.
The implication of “winning” palm oil in the Swiss referendum is an import tariffs reduction by around 20-40% and providing import quotas with a volume of 10 thousand to 12.5 thousand tons per year. The benefits of this trade will be obtained by Indonesia if the palm oil sustainability standards can be met. On the other hand, the Swiss industry that produces consumer goods such as margarine, biscuits, chocolate, cosmetics/makeup, toiletries, and other products containing palm oil, will also benefit from the IE-CEPA scheme, due to lower raw material prices and availability of guaranteed supply. This shows the large potential gain of palm oil trade that can be felt by the two countries.
Apart from market access to palm oil in Switzerland and the large potential gain of trade, a much bigger and important implication of the referendum result for Indonesia is that the IE-CEPA scheme is an entry point for international market acceptance for sustainable palm oil.
It is hoped that the “opening of the door” will become an incentive for national palm oil industry stakeholders consisting of farmers and plantation companies, downstream industries, and the government to collaborate in developing a sustainable national palm oil industry that can produce palm oil and palm oil-based derivative products with guaranteed sustainability standards. So that not only the “doors” of EFTA countries will be open, but the market “doors” of Europe, the United States, and other countries will be open to receive sustainable palm oil from Indonesia.
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