Deforestation law risks pushing Indonesia toward China

Anchal Vohra is a Brussels-based international affairs commentator.

When Austria’s ministers of agriculture and economy called on the European Commission to delay the implementation of its European Union Deforestation legislation (EUDR), exporters in the Indo-Pacific and Latin America sighed with relief.

The EUDR is part of the EU’s ambitious Green Deal, and it hopes to put an end to the felling of trees at home and abroad that are down to consumption in Europe. Between 1990 and 2020, an area larger than the Continent was deforested, and the EU is considered responsible for 10 percent of global deforestation.

However well-intended, though, the directive has rattled producers in Europe and its allies in the developing world — particularly those in the Indo-Pacific region, where the EU hopes trading partners will derisk from China. Several stakeholders and experts told POLITICO the EUDR wasn’t well thought-through and, at this stage, perhaps far too demanding to actually work, imposing too heavy administrative and financial burdens without offering sufficient details regarding compliance .

“It was pushed through quite quickly,” said Bernd Lange, chair of the European Parliament’s Committee on International Trade. “It’s a massive (administrative) exercise,” concurred Giorgio Indarto, an Indonesian expert in environmental law. “And too expensive.’’

Speaking to POLITICO from an Indonesian district that exports palm oil to Europe, Indarto noted that the biggest problem was the lack of trust the EU displayed in the legislation, which left Jakarta feeling belittled and angry. “The EU only wants its own standards and mechanisms ’’ to trace the origin of products, he said.

And the EU’s imposition is now pushing his country closer to China, even though Jakarta prefers to remain neutral, he warned.

But this isn’t surprising. There must be, “no coercion, no more parties who always dictate and assume that my standards are better than yours,” Indonesia’s former President Joko Widodo said in the past. And current President Prabowo Subianto went even further while campaigning last year, saying Indonesia could easily shun European markets.

“When the politicians say we have more markets, we don’t need Europe — of course, they mean China,” Indarto said.

According to Chris Humphrey, executive director of the EU-ASEAN Business Council, the EUDR has caused particular anxiety in Indonesia, and while it’s good that the country was discussing issues in a joint task force with the EU, its producers may well take their business elsewhere. “Whether the EU likes it or not, they may sell to other markets,’’ he said.

For example, as the world’s third biggest democracy and its fourth largest population, Indonesia has massive reserves of nickel — an essential element used in batteries for electric vehicles. And experts argue expanding relations is “an important building block for the de-risking from China that the EU is striving for.’’

Yet, three years since EU High Representative Josep Borrell’s last visit to Jakarta — where he expressed hopes to move beyond trade and toward stronger security relations — a lethal mix of protectionism and deforestation legislation has strained relations. Additionally, the EU has also imposed what Indonesians believe to be a tone-deaf law, dragging Jakarta to the World Trade Organization (WTO) for banning the export of raw nickel.

The idea behind the law is to trace the origins of products like palm oil, rubber and cocoa to the smallest of plantations, and ensure they aren’t produced on land deforested after December 2020. | Aditya Aji/AFP via Getty Images

Meanwhile, China has increased its trade with the country, and invested in Indonesian smelters processing nickel.

According to Tetyana Payosova, who’s currently representing Indonesia in a dispute related to palm oil-based biofuel at the WTO, “Businesses in the EU and in third countries are required to show complete compliance with the EUDR by next year, so their products can enter EU markets. However, there are still open questions that they don’t have answers to.’’

The idea behind the law is to trace the origins of products like palm oil, rubber and cocoa to the smallest of plantations, and ensure they aren’t produced on land deforested after December 2020. However, this doesn’t factor in the reality that small-time farmers have fewer means to provide the data the EU seeks and will likely be pushed out of business by bigger traders who can outsource documentation.

Small farmers produce in small quantities, and their product is then bought by traders who store it in warehouses along with thousands of tons from other farmers. This is all transported onto trains carrying even more goods, and is then shipped to Europe via containers. “How can we segregate coffee beans of one small farmer from another?’’ asked a diplomat from a forest-rich region speaking to POLITICO.

Indarto says when it comes to the EUDR, there are currently two groups in Indonesia — one arguing against engaging with the EU altogether (and the position favored by the current president), and one backing negotiations with the bloc in order to develop a cooperative framework.

However, forest-rich tropical nations like Indonesia find it unfair that European nations haven’t had to pay any price for their glaring abuse of nature, while they’re being denied a chance to improve the lives of their people and grow their economies. “They’ve already chopped their forests and developed their economies,’’ the diplomat said. “Much of our forests are still natural.’’

Less than 4 percent of forests in Europe are “primary and old-growth,’’ according to the European Environment Agency, while nearly all the rest were replanted. But that’s hardly an argument to repeat the same catastrophe twice.

Plus, there is still a way to implement the law and save the environment while also keeping trade flowing. For instance, Humphrey claimed Malaysia has already figured out a way to save small farmers and secure the information the EU requires. “Malaysia is addressing the middle man,’’ he said, “making him responsible for compliance.’’

For this to work, however, the EU will have to climb down from its high horse, stop scolding its partners and adopt an inclusive approach.