- EU officials have gone into damage control over the Deforestation Regulation
- Ambassadors in the region have admitted they have “explaining” to do
- But they also appear to have zero flexibility – a bad sign for the relationship
EU officials appear to have gone into damage control in response to the palpable anger from Indonesia and Malaysia in response to the Deforestation Regulation.
It appears to have dawned on EU officials that they face a diplomatic freeze in the region because of what the regulation will do to palm oil exports.
This is despite clear, ongoing signals from many countries in the region that the regulation represents a “red line” for Indonesia and Malaysia’s largest export.
Earlier this week, EU Ambassador to Indonesia Vincent Piket said:
“We have lots of explaining to do, to the media and officials, [so they are] convinced that the deforestation law can be made to work … Indonesia’s track record to stop deforestation is marked. The cut-off date was December 2022 [sic], and there are also no penalties for what happened in the past.”
There are two clear problems with Piket’s statement.
First is that, if the EU should be doing anything, it is listening to its trade partners. This is precisely the ill-considered approach that Josep Borrell – the head of the EU’s diplomatic service – warned his colleagues against last year.
Second is that the statement attempts to treat the Indonesians as though they are fools. Indonesian officials are well aware that the cut-off date – on its own – does not present problems for its exporters.
Rather, the problem is in the additional compliance burden that will be required from its exporters going into the future. Why will compliance be tougher? Because EU officials will be adamant that Indonesia is a ‘high risk’ country for deforestation.
In addition, Indonesia’s smallholders will have significant problems meeting the compliance requirements, even if they are given an exemption for being smallholders.
But EU officials are also sending mixed messages on the importance of deforestation rates and certification.
EU Ambassador to Malaysia, Michalis Rokas, recently noted that some ASEAN countries have “nothing to fear” because of strong deforestation pledges and high levels of certification.
The strategic importance of the EU’s ASEAN relationships has, however, become very clear with comments by EU Ambassador to ASEAN, Igor Driesmans, who said that the EU diplomatic machine would use “channels of all levels” to overcome any trade problems and seek to prevent the deforestation regulation becoming “an irritant” for its bilateral relationships.
But here’s a news flash for Driesmans: the EU’s approach to palm oil has been an irritant in both Jakarta and Kuala Lumpur for more than a decade.
Every time an EU official attempts to argue that the Renewable Energy Directive “is not a ban” on palm-based biodiesel, hackles go up in Jakarta. Every time the Commission cedes to industry demands on tariffs on biodiesel from Indonesia, someone in the vast Indonesian palm oil producing and refining community gets irritated.
Ambassador Driesmans also said that the EU would “double down” on its negotiating efforts with regards to its FTA with Indonesia:
“In the context of [the] evolving geopolitical landscape, the EU has adopted a new Strategy for Cooperation in the Indo-Pacific … The EU intends to increase its engagement with this region, in which we have a major existing stake and which we want to be peaceful and prosperous.”
Here’s another news flash for the Commission: if you double down on the “Green Deal” elements of FTAs and don’t demonstrate flexibility with a country like Indonesia, then you will have absolutely no stake in the region.
Even worse, the news coming from Jakarta is that the EU is seeking to include provisions in its FTA with Indonesia that would allow it to impose unilateral measures against Indonesia on sustainability issues, particularly around labour.
This begs the question, what’s the point of the FTA? Brussels seems to have trouble remembering that trade deals are supposed to remove trade barriers, not increase them. Europe wants it both ways. It wants strategic influence and to set the rules, but refuses to give up anything in return. That may have worked before 1945, but it won’t fly in 2023.