June 19, 2023
JAKARTA – Businesses have expressed worry that Indonesia’s fight to soften the European Union’s stance on deforestation may affect negotiations on the comprehensive economic partnership agreement (CEPA) between the country and the bloc.
Shinta Kamdani, newly appointed chairwoman of the Indonesian Employers Association (Apindo), told reporters on Thursday that businesses needed the trade agreement, pointing out that it would greatly leverage the country’s competitiveness by entering the European market.
She urged the government to find ways so negotiations on the upcoming EU Deforestation Regulation (EUDR) did not disrupt the entry that businesses needed.
“Yes, that is what we are concerned about. We suggest the government find a way so that the negotiations [on the EU CEPA] can be separated [from the EUDR],” Shinta said.
The EUDR, which will tighten rules on trading commodities associated with deforestation, has rattled Indonesia and Malaysia, the world’s two largest palm oil producers, as the regulation is perceived to likely hammer the industry.
In addition, commodities such as cocoa and rubber, among many other products, will also be subjected to the law.
Reuters reported that Indonesia claimed the EU was conducting “regulatory imperialism” with its new deforestation legislation, but both sides would still engage in talks on the free trade deal, a senior minister said on June 8.
Coordinating Economic Minister Airlangga Hartarto confirmed that Indonesia would continue negotiations for the CEPA with the bloc, alongside separate consultations to resolve disputes on the EU’s deforestation rules.
Jakarta expects to close a deal on the free trade agreement (FTA) soon, after seven years of deliberations, according to Airlangga.
However, Airlangga said Indonesia “can wait another seven years” if the EU was unwilling to recognize existing export standards, such as those on sustainable palm oil and wood products, stipulated under the deforestation rules.
Meanwhile, Malaysia has said that the dispute over the EU law would have no bearing on its stalled EU FTA negotiations.
Despite the worry, businesses assured that they remained in support of the country to stand its ground against the EU deforestation law. “Indonesia cannot stand still,” she said, adding the country should not let itself be pressured by the bloc.
The EU Ambassador to Indonesia Vincent Piket told The Jakarta Post on June 9 that the EUDR does not discriminate against any countries, including Indonesia, and is offering “technical and financial support” to help upgrade the country’s smallholder farmers.
Piket insisted that Europe “wishes to maintain the palm oil trade,” and is keen to help Indonesia and Malaysia acclimate to the new regulation.
“The EU is a steady importer of palm oil. It is an important commodity for our agro-food and consumer products. Allegations that we wish to replace palm oil with vegetable oils produced in Europe are baseless and inconclusive,” he asserted.