- EU ‘copy pastes’ EUDR response to Indonesia at WTO
- Smallholders team up with Indonesian Foreign Affairs
- Indonesian Diplomats underline “consistent rejection” of EUDR
- ANALYSIS: Will the EUDR have a ‘blowback’ on EU firms?
Following last week’s protest against the EU Deforestation Regulation in Jakarta, Indonesia’s small farmers met with representatives from Indonesia’s Foreign Ministry to discuss the country’s diplomatic initiatives on the new EU law.
The Foreign Ministry officially issued a strong and clear statement on the EUDR:
“The Indonesian Government has consistently voiced its rejection of the EUDR through various diplomatic efforts since this regulation proposal was rolled out at the end of 2021.”
As protesters were out in force outside the EU embassy, pressure was also mounting against the regulation at the World Trade Organization.
As last week’s Committee on Agriculture meeting in Geneva, India, Brazil, Paraguay and Indonesia launched into the regulation. A common thread from the countries asking questions was the risk benchmarking that the EU is proposing.
However, the EU’s response to Indonesia’s questions were notable for a few reasons.
First, the EU officials appear to have copy-pasted their response to India to the Indonesian delegation:
“For a more detailed analysis of the EU green deal and WTO compatibility, the EU also invites India to consult: the Report from the Commission to the European Parliament and the Council.”
Second, EU officials – bizarrely – have attempted to argue back to Indonesian officials that Indonesia’s smallholders support the rules:
“Several smallholders’ organisations, notably from Indonesia, have expressed support to the regulation and, in particular, geolocation and traceability.”
Perhaps they should have spoken to Indonesia’s genuine smallholder organisations, particularly those that represent the vast bulk of the country’s smallholders and are in close contact with the government.
POM has written before about the lack of local-language capability among some of the EU’s senior staff in Jakarta; if the EU’s bureaucrats do not have a clear understanding of the situation on the ground, how are they meant to report back clearly to Brussels?
It’s precisely this situation that has led to a cooling of EU relationships in the region and a general perception that the EU is out of touch.
Both responses – the mixing up of Indonesia and India, and the ‘we know your smallholders better than you do’ – are sloppy, arrogant or both, and precisely what the EU’s head of the diplomatic serve Josep Borrell has been attempting to rectify.
ANALYSIS: Will the EUDR Have a Blowback?
UK trade publication The Grocer last week hit on a point that has generally been absent from the conversation on the EUDR: the impact on EU manufacturers.
The premise is as follows: exporters and importers of palm oil will struggle to meet the data requirements of the EUDR. Although the EU somewhat disingenuously says that this burden is on the importers, the collation of the data still needs to take place at the export end – requiring significant cost and introduction of new systems.
Many companies will face a choice as to how they respond, which includes a potential exit from the EU market. It’s understood that there are plenty of companies that are RSPO certified that will not at this stage be able to provide the data.
If those companies exit and choose instead to focus on other markets, this could result in a shortage of traceable oil in the EU market, pushing up prices.
A point often made is that EU manufacturers will switch to sunflower for some products. However, sunflower in Europe still remains constrained by the war, and if palm oil stays out of the mix it will still put upward pressure on prices in Europe.
In this exit scenario, it’s EU consumers and companies that will end up paying higher costs for manufactured food, and EU food exporters will lose some competitive edge in global markets.
This will add to a series of woes for the EU food manufacturing sector, with some commentators predicting a decline over the next 12 months. Part of this is the crimping of EU agricultural output because of the Farm to Fork strategy, which a USDA study says may cause 12 per cent fall in output across the bloc.
That strategy has already cause significant upheaval in the EU, with a new farmer party in the Netherlands winning record seats in March elections – after protests against EU farming and food policy.
Still, as we’ve seen in the past, the most likely scenario is that EU companies – particularly the large ones — simply pass costs on producers. And despite potential prices rises in the EU, this remains the main concern of developing country exporters.