UK-Indonesia: A Roadmap to Nowhere?

The UK and Indonesia were set to issue a new pact – known loosely as the Indonesia UK Roadmap – earlier this month.

Sources indicate that the signing has effectively stalled. Given how much stock the UK had put into the bilateral relationship, what happened?

Unsurprisingly, it’s palm oil.

Jakarta’s objections were broadly simple: the UK position on palm oil and the recognition of the country’s certification system – ISPO – retained too much of a hangover from the EU-style precautionary approach, and not enough forward-looking ambition.

On the face of it, this is odd for several reasons.

The UK government has on multiple occasions in public and in private expressed its desire to move away from the EU’s protectionist trade policies, including on palm oil. This Roadmap is a clear opportunity to turn those claims into reality, but it seems the UK is unable to walk the talk.

Also, both sides agreed in April that there would be: “two-way sustainable trade based on mutual respect of national legislation and mutual understanding of standards and certification.” What has happened to this commitment?

It begs the question of whether DIT  – the UK’s Trade Ministry – is being out-maneuvered by more protectionist elements such as DEFRA (the Environment Ministry). Or whether the change in Trade Minister has made a difference: sources confirm that the former Trade Minister Liz Truss (now Foreign Minister) led a strong push for UK-Indonesia ties. This was warmly welcomed in Jakarta. Her successor Anne-Marie Trevelyan appears to have stalled this momentum, and the Roadmap as a result is now in danger of being shelved entirely.

There’s a surprising amount of naivety – or willful ignorance? — coming out of London in recent weeks when it comes to palm oil.

So, here are some quick reminders.

First, as we’ve pointed out several times before, palm oil is Indonesia’s largest agricultural export and one of its largest exports overall. This cannot be ignored or wished away.

Second, the ISPO certification is and will continue to be the certification scheme that is used by smallholder farmers and by smaller palm oil operations. RSPO certification, as ideal as it may be for some, has very little uptake by smallholders.

Third, President Jokowi made a point at the Glasgow climate meeting – i.e. a major meeting in the UK – that Indonesia’s sustainable development goals, sustainability certification and respect for Indonesian sovereignty are all completely linked. Here’s what he said:

“Certification and production standards must be accompanied by market incentives, so as to encourage sustainable forest management, not trade barriers. Certifications, methodologies, and standards should be based on multilaterally recognized parameters, not unilaterally imposed and capricious. Certification must be fair, so that it has an impact on welfare, especially small farmers. Certification must also take into account all aspects of the SDGs, so that forest management is in line with poverty alleviation and community empowerment.”

Fourth, Indonesia was arguably the most important supporter of UK FACT (Forest and Agricultural Commodities Trade) dialogue.

Fifth, the UK was a member of the EU when the ASEAN-EU dialogue fell apart in 2019 precisely because of the palm oil issue. It was also a member of the EU when the bloc’s FTA negotiations with Indonesia hit an impasse because of palm oil.

The UK government therefore shouldn’t be remotely surprised that palm oil and acceptance of Indonesia’s sustainability standards is absolutely vital.

Finally, the UK’s trade officials must surely recognise the opportunity here. With the EU stalled, the UK can leap ahead in its relations with a G20 country of over 250 million people in one of the most geopolitically important regions in the world. To risk losing this because you’re worried about NGO reactions on Twitter, does not speak well of ‘Global Britain’.

So, is there anything that can be done at this point?

The UK made overtures on recognition of palm oil certification as part of its secondary legislation for its ‘illegal deforestation’ laws. It needs to follow through on this with ISPO.  This will serve several functions.

It will immediately put London ahead of Brussels when it comes to trade. The UK is attempting to pitch itself as a ‘global’ force following Brexit and show that it has moved beyond the EU’s protectionist trade approach. This will inevitably move beyond the Indonesia relationship and lead – potentially – to better relationships with other ASEAN members, particularly Malaysia and Singapore.

What few European observers might realise is exactly how far ahead Jakarta is moving with other deals: negotiations with Canada, UAE, Russia (under the Eurasian Economic Union) among others have already commenced. And it’s also worth remembering that the RCEP agreement covering ASEAN, China, Japan, South Korea, Australia and New Zealand came into force in January.

The UK is not a major export market for Indonesia. It imported USD1.2 billion in goods from Indonesia last year, putting it on par with Bangladesh and Saudi Arabia as a market. By way of comparison: Japan hit USD13 billion; China hit $31 billion.

In other words, if the UK is serious about trade with Indonesia and ASEAN and getting deals done quickly, it needs to accept the palm oil question and focus on the future, not the tired old EU-NGO complaints of the past.