- Indonesia will halt trade negotiations unless Brussels softens approach
- Impasse creates new headaches for EU in the ASEAN region beyond palm oil
- Joint delegation on the EUDR now a pivotal moment for palm oil cooperation
- EU officials and journalists missed obvious signs in lead-up to new trade spat
Officials from Indonesia have stated they will stall trade negotiations with the European Union unless regulators ease requirements under the EU Deforestation Regulation for palm oil small farmers.
The new impasse emerged as senior officials from the region met their EU counterparts in Brussels this week as part of a joint mission to discuss the EUDR.
Minister Hartarto told the Financial Times that the negotiations have been going for seven years and that “Indonesia can wait another seven.” It also comes after a negotiating round of the Indonesia-EU FTA in May that insiders described as ‘slow’. Hartarto was also prepared to connect the approach on the EUDR to the EU’s other Green Deal measures, including on steel.
This is a new headache for Brussels, and not just on EUDR. The EU, and Member States, have well-publicised trade and geostrategic objectives in the ASEAN region. Resolving the palm oil question is now central those ambitions – precisely what the EU did not want (Brussels’ preferred approach is to address palm separately via toothless talking shops, while making progress on other issues).
It’s worth remembering that, combined, Indonesia and Malaysia represent more than 50 per cent of Southeast Asia’s GDP, and they’ve hosed down the EU’s ambitions in the past.
But there’s additional significance with the joint mission. It is the first time that substantive joint action – focused on the EU’s discrimination against palm oil – has taken place at a high level of both governments. The symbolism of Indonesia and Malaysia cooperating on this issue clearly indicates to Brussels that the EU will not easily get its way in the region.
High level meetings with the EU’s High Representative Josep Borrell (effectively the EU’s foreign minister) and Executive VP Frans Timmermans – the second-most powerful politician in the Commission – also showed the EU leadership taking very seriously the joint visit. Timmermans also stated he will visit the region again shortly.
To capitalise on this success it is vital that both countries – and others – don’t simply consider this a ‘one and done’ effort. The next two years and beyond will be vital for EUDR implementation, and some inevitable new threat on palm. As we’ve seen with palm over the past decade or more, if exporters break through one trade barrier, Europe will be immediately erect a new one.
Jokowi Takes the EUDR to Task
The mission received significant media coverage in their home countries. But European media was largely absent in the lead-up to the event.
This is now a disruptive trade spat that might result in a significant undermining of European strategic goals in Southeast Asia. Surely that’s of interest?
There were clear signals from Indonesia’s President and Ministers that the EUDR problem is of interest at senior levels. And European journalists missed all of them.
President Jokowi had a bilateral meeting with Ursula von der Leyen on May 21 in Tokyo on the sidelines of the G7 meeting. The statement issued after the event concerned two things. First, the conclusion of the Indonesia EU FTA negotiations, and second, the EUDR. The President was more than happy to get into the technical detail on the EUDR, stating:
“The benchmarking process with a cut-off date starting 2020 must be truly transparent and objective. For the record, Indonesia’s 2019-2020 deforestation rate has dropped 75 percent to 115,000 hectares. This is the lowest rate since 1990 and it continues to decline.”
This was an obvious direct linking of the FTA conclusion to the implementation of the EUDR and how Indonesia will be treated under any risk benchmarking system.
President Jokowi also called for like-minded commodity exporters to form OPEC-style arrangements on palm oil and nickel. Although these ideas have been floated at several points before, Jokowi was prepared to put them forward at a G7 meeting. Making reference to colonialism, he stated quite clearly:
“Discriminatory policies against developing country commodities must also stop. The right to development of every country must be respected … Is it fair for a resource-rich country like Indonesia to be prevented from enjoying the added value of its natural resources? Prevented from processing their natural resources domestically? I hope the G7 countries can become partners in downstreaming this industry and it is time to form a kind of OPEC for other products such as nickel and palm oil.”
It’s worth remembering these statements were made within the past two weeks, in the presence of European leaders. The choice of commodities mentioned – palm oil and nickel – both the subject of WTO disputes between the EU and Indonesia, was deliberate.
In other words, this had already been escalated.
Is the European press corps that inward-looking that it considers something significant only if it’s the subject of gossip on Place du Luxembourg?
In addition, Foreign Minister Retno Marsudi made a direct appeal to her European counterparts at the recent EU Indo-Pacific Forum in mid-May. During her press briefing she outlined that:
“[She] also asked for [EU Presidential] support regarding the importance of eliminating discriminatory policies including from the European Union and the immediate completion of Indonesia’s negotiations to encourage trade cooperation.”
Sources in Jakarta have noted that the words the Foreign Minister used privately were significantly stronger, and much more in line with the “EU boot” image that caused a diplomatic headaches for EU staff in Jakarta and elsewhere.
The calling out of EU official statements that have clearly been wrong has forced Brussels to reassess its approach to the region.
But howlers remain; at the beginning of this week, the EU’s official page for Josep Borrell still had the wrong names for the visiting Ministers listed.
This is, in our view, symptomatic of how much work Brussels has to do, if it is serious about repairing the relationship with palm oil producing nations.