The European Union's new deforestation regulation (EUDR) has ignited a diplomatic spat with Indonesia, as the Southeast Asian nation responds with discontent over the EU's refusal to offer further concessions. The regulation, designed to curb deforestation and encourage sustainable practices in the palm oil industry, directly impacts Indonesian exporters. With palm oil constituting a significant portion of Indonesia's export economy, the regulation threatens to disrupt the livelihoods of smallholder producers and strain the broader bilateral relationship between Brussels and Jakarta.
The EUDR mandates that suppliers ensure their goods are not produced on land deforested after 2020. This poses a significant challenge for Indonesian smallholder producers, many of whom are unlikely to meet the compliance requirements in time. Officials and producers in Indonesia's Jambi province have expressed concerns that smallholders will struggle to adhere to the new standards, potentially affecting hundreds of thousands of producers.
Indonesia, a major palm oil producer responsible for approximately 40% of global production, relies heavily on the EU market, which accounts for about 70% of its palm oil exports. The recent regulation has been criticized by some for being overly stringent and lacking adequate support mechanisms for smallholder producers. Analysts and diplomats have warned that the ongoing dispute risks damaging the broader bilateral relationship between the EU and Indonesia.
The EU's inflexible stance on the EUDR has provoked strong reactions from Jakarta, emphasizing the potential economic implications for Indonesia. The regulation not only threatens the country's economy but also jeopardizes the livelihoods of countless smallholder producers who may find it challenging to transition to sustainable practices without further assistance.