Zurich, Switzerland—Switzerland votes Sunday on a free trade deal with Indonesia but the agreement, which opens up a vast potential market, could slip up over the issue of palm oil imports.
Under the deal, tariffs would be gradually removed from almost all of Switzerland’s biggest exports to the world’s fourth most populous country, while the Swiss would abolish duties on Indonesian industrial products.
Anyone importing Indonesian palm oil must prove that it meets certain environmental and social standards.
But the controversy around palm oil and its sustainability fueled enough concern in Switzerland to trigger a public vote.
Two separate polls in February put support for the deal at 52 percent, with 41 to 42 percent against.
The agreement was signed in 2018 and approved by the Swiss parliament in 2019, but opponents were especially critical of Bern’s move to reduce import duties on palm oil.
The deal contains exceptions for agricultural products, notably to protect Switzerland’s sunflower and rapeseed oil production.
For palm oil, customs duties will not be removed but instead reduced by between 20 percent to 40 percent.
These reductions will only be granted on a volume limited to 12,500 tons per year—and importers will need to prove that the palm oil has been produced in a sustainable manner.
Campaign posters backing the economic partnership agreement show a Swiss bear hugging a tiger, while those against show an orangutan and baby clinging to a tree trunk, surrounded by flames.
The agreement aims to boost ties with Indonesia, which despite its population is only Switzerland’s 44th biggest economic partner, and only its 16th biggest export market in Asia.
In 2020, Swiss exports to Indonesia amounted to just 498 million Swiss francs ($540 million, 450 million euros).
“This is the first time that the people will be called upon to vote on a trade agreement,” Swiss President Guy Parmelin said during a press conference on the vote.
Switzerland relies on around 30 such agreements which do not normally pose a problem, he said.
However, Parmelin called the vote an opportunity not only to respond to “legitimate concerns” but also to “de-demonize free trade.”
He said such deals were of “paramount” importance for an export-led economy like Switzerland, which lacks both significant natural resources and a large domestic market—and draws almost half its national income from abroad.
Without an agreement with Indonesia, Swiss companies would be put at a disadvantage, the president insisted, noting that the European Union is also negotiating a deal with Jakarta.
fIndonesia is a growing economy with an increasingly affluent middle class, offering considerable potential for Swiss firms.