Saturday, June 15, 2024

Deforestation law risks pushing Indonesia toward China

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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.

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