- Jokowi signals EU-Indonesia relationship at risk with new Deforestation Regulation
- ASEAN neighbors like Malaysia are likely to weigh in, which could signal wider trade conflict with the bloc
- EU Governments will have to decide what matters to them
EU-Indonesia relationship at risk: At last week’s EU-ASEAN Summit, Indonesian President Jokowi made comments that signal an erosion of trade and cooperation between the two blocs, including Indonesia, if Brussels moves ahead with its Deforestation Regulation.
In remarks, Jokowi sent the EU a clear warning: He warned the EU should not attempt to dictate its standards to ASEAN if it wants to maintain its relationship with Indonesia going forward, noting, “There must be no coercion, no more parties who always dictate and assume that my standards are better than yours.”
Indonesian Foreign Affairs Minister Marsudi doubles down: Minister Retno Marsudi made clear the Regulation will “hinder trade” and is “discriminatory in nature”, warning this would “hamper Indonesia’s commodity exports.”
EU Governments now in a precarious position: The growing discontent presents the Council – made up of 27 EU Governments who all want to export to Indonesia’s growing market – with some difficult choices ahead of its final agreement, expected early next year. Will they convince the Commission and Parliament to reconsider? Or will they forge ahead with the Regulation and risk alienating Indonesia and ASEAN for good?
Risk to European exports: The EU believes they have the upper hand in dictating policies over developing countries like Indonesia and Malaysia. In reality, it is Europe’s business model – exports – that stands to lose, in terms of future market access to ASEAN. Indonesia is already fostering new relationships and announced last week it will negotiate a new FTA with the EAEU, opening strategic access to new markets for both parties. Indonesia is also building deeper economic and strategic ties with the U.S.
What’s next? Undoubtedly, the EU will continue to face pressure from Indonesia, but what about Malaysia, another major palm oil exporter and trade partner? The new Malaysian leadership is likely to support Jokowi’s position. It will then fall on the Council to make a decision between escalating the trade conflict between ASEAN and the EU or convincing their EU counterparts to reconsider Brussels’ discriminatory policies.