- The EU pushed to keep risk benchmarking out of Joint Task Force discussions
- Indonesia and Malaysia pushed back
- Transparency on benchmarking has been raised by Brazil and others
As we noted last week, the Joint Task Force (JTF) meeting between the EU, Indonesia and Malaysia was a significant event for potential cooperation between commodity exporters and the EU on the Deforestation Regulation (EUDR).
Sources have, however, indicated that despite reaching an agreement on the terms of reference, there was some friction in the meeting, specifically over benchmarking. Although the EU tried to have it excluded from the JTF discussions, Malaysia and Indonesia were adamant that including it is essential to address their concerns around the Regulation.
Benchmarking will determine whether countries are considered ‘high’, ‘standard’ or ‘low’ risk.
The Regulation indicates that the three primary factors that the EU Commission will consider are the rate of deforestation and forest degradation; rate of expansion of agriculture land for relevant commodities; and production trends of relevant commodities and of relevant products. But the EU will also take into account information from the country concerned, as well as other stakeholders, any bilateral cooperation on forestry, and land tenure issues, among other things.
The rate of deforestation factor is particularly significant for Indonesia as the Guardian recently highlighted research from Global Forest Watch (GFW) and the World Resources Institute (WRI) on Indonesia’s success in reducing deforestation. The report concluded that Indonesia has reduced its primary forest loss by 64 per cent since 2020, leading the world in terms of reducing deforestation.
On the contribution of palm oil to this, Arief Wijaya from the WRI told the Guardian:
“From the perspective of the government of Indonesia or Malaysia, palm oil is no longer a driver of deforestation. The EU should be much more careful in trying to implement the regulations. In my view, the palm oil sector is no longer a major driver.”
Liz Goldman, from GFW, said:
“From a data point of view, I think Indonesia and Malaysia should be included as success stories. They have been for a number of years now, ever since the 2015 fires [inked to the El Niño]. We’re really seeing government and corporate actions coming together to have a positive influence there.”
This data underlines that Indonesia should be considered a low-risk country, if – and this is a big “if” – the EU is developing the criteria based on the latest independent data and analysis.
With this in mind, stakeholders in Indonesia and other likeminded countries are seeking transparency on the benchmarking methodology, which is currently being developed. The EU insisted at the initial JTF meeting that it would not share the methodology or commit to transparency – sources tell us that the EU committed to essentially nothing beyond sharing information about technical compliance efforts.
This concern around benchmarking has been raised by several countries over several months. At the WTO almost 12 months ago, Brazil raised questions about how benchmarking would work:
“Brazil considers that the benchmarking system is discriminatory and distorts trade. The proposed country benchmarking system, with its tiered classification, will not contribute to fighting deforestation and forest degradation. On the contrary, it will only promote trade diversion in favour of highly subsidized producers.”
“The proposed regulation and, more specifically, the benchmarking system, appear to be inherently discriminatory, with the potential to severely limit and distort trade. Furthermore, a significant number of other provisions contain elements of arbitrariness and discrimination, ranging from the scope of the measure to the monitoring and enforcement mechanisms set out in it.”
Argentina also raised concerns at the same meeting:
“Argentina shares Indonesia’s concern about the classification of countries according to an alleged “risk of deforestation” (benchmarking), bearing in mind the characteristics of the system envisaged for its implementation based on the principle of due diligence.”
If the EU is not willing to use the Joint Task Force as a genuine discussion on benchmarking, the likelihood increases that it will instead be forced to do so at the WTO.
Indonesia – and the palm oil sector more broadly – are acutely aware of how opaque and arbitrary measures from EU implementation can impact an industry. The Renewable Energy Directive’s (RED) arbitrary nature continues to single out and penalise palm oil products and impose an effective ban on palm oil biodiesel in the European Union.
It’s worth remembering that at the time the EU ignored its own legal advice on how measures like the RED could disrupt trade between Indonesia and the EU.
Is the EU going to repeat its mistakes, with the EUDR?