- The EU does not want to negotiate on the EUDR, but Jakarta is broadening the front
- Indonesia has drafted more international support
- Brazil has called the rules ‘an affront’, Paraguay says the EU’s approach is ‘unacceptable’
- Jakarta’s demands on benchmarking and certification are a path for Brussels
Reality is Getting in the Way for Brussels
The Joint Task Force meeting that took place last week has raised significant interest from all commodity exporters in Indonesia and Southeast Asia. From the meeting room itself, sources close to POM have indicated that the EU was seeking to completely narrow the discussion to how the EU would implement the Regulation.
The underlying message they were pushing was this: this is not a negotiation. It’s a classic Brussels approach, and it’s very easy to mistake Brussels’ ‘talk shop’ approach for something meaningful.
Many officials are wise to this, and as much as the EU might like to take a ‘EU way or the highway’ approach, Indonesian officials have made it reasonably clear that the EUDR is going to impact pretty much every interaction Brussels has with Jakarta.
And Jakarta is seeking to broaden it further.
Zulhas Recruits Likeminded Countries
Last week Trade Minister Zukifli Hasan (known as Zulhas) – in the lead up to the Joint Task Force meeting – gave an indication to local stakeholders of how broad the battle will be, looking to garner further support against the measure globally through other forums. In November last year, Indonesia gathered 14 like-minded countries to push back against the EUDR at the WTO. And it’s doing the same again.
“We are currently drafting a second letter with 19 other countries. Our target is to get as much as possible to strengthen Indonesia’s position.”
“This deforestation law will really disturb Indonesia. Whether it damages the environment or not, you have to get certification. How can farmers in the village always take care of certification? It’s impossible, right? And coffee also comes from Lampung, from Java, right? Mixing which one complies, and which one does not, is not easy.”
“Cocoa is the same way, it’s small farmers, of course, that’s why we will fight it. We will fight so that it doesn’t harm Indonesia.”
“In 2022, exports to the EU of palm oil, cocoa, rubber, coffee, and timber were worth almost US$7.2 billion, with nearly 8 million small-scale farmers. We realize that the struggle is not easy, but the Trade Ministry is striving to protect our national interests, including protecting smallholders.”
It’s also worth mentioning at this point that Brazil and the other member countries of Mercosur (Argentina, Paraguay and Uruguay) are taking a similar stance.
This week Brazil’s agriculture minister Carlos Favaro said the EUDR is ‘an affront’ to Brazil and that it violates WTO rules.
Mercosur Members Call the EUDR ‘an affront’
Like Indonesia, Brazil has also made it clear that the EU’s action threatens the broader diplomatic relationship with the region – not just Brazil.
“If the EU doesn’t want to understand this and wants to make his own rules, [including Brazil] with certification, guarantee of origin, and although that is not enough, a new bloc will be created, strengthening the BRICS.”
Also this week, Paraguay’s new president Santiago Pena articulated the frustration that developing country interests are feeling with regards to both the EUDR and trade agreements more broadly. To remind, the EU’s agreement with Mercosur – like the agreement with Indonesia – is at risk because the EU has placed additional environmental conditions in the trade deal, but refuses to discuss the EUDR. Pena said:
“The EU’s approach is unacceptable. The EU must clearly indicate whether or not it wants to go ahead with this agreement. Today, I question their interests … The EU’s request in the EU-Mercosur trade agreement is considered to kill Paraguay’s soybean plantations.”
Even talks with Australia are stalling over farm products.
Does the EU Economy Make its Approach Untenable?
At the heart of this dilemma is the fact that the EU economy is sclerotic; consumption is falling alongside wages, inflation is making goods more expensive – yet the EU continues to play protectionism. Its exports are losing globally to countries like China, Japan and Korea – all of which have open trade arrangements with countries like Indonesia.
The path forward? Indonesia has made its position on the EU FTA quite clear. And it’s also apparent that it wants two things from the EUDR: recognition of ISPO, and a low-risk designation.
Brussels will be seeking to shoot these demands down – but the bloc’s engine room, Germany, is desperate for new markets. Indonesia posted 5.1 per cent GDP growth in the last quarter. The eurozone hit 0.3 per cent, which was, apparently, cause for celebration.
If the EU wants to carve itself any kind of economic niche in the region, it had better start negotiating.