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EU ‘moving the goal posts’ with new timber requirement, Indonesia says

Rainforest timber awaiting transport and processing in Indonesia. Illegally logged timber can enter supply chains at any stage. Image by Rhett A. Butler for Mongabay

  • In 2011, Indonesia began the process of ensuring that its timber exports to the European Union met strict legality verification standards, which the EU duly recognized in 2016.
  • Now, a new bill threatens to undermine this progress by revoking the “green lane” access for imports of Indonesian timber and subjecting them to addition checks for deforestation links.
  • “You can’t suddenly change your mind by saying ‘I’m not willing to accept [Indonesian timber products] because they’re not sustainable enough,’” says Arif Havas Oegroseno, the Indonesian ambassador to Germany.
  • The official adds that Indonesia is willing to take the matter to the World Trade Organization — a move that other tropical forest countries, including Brazil and Ghana, have also hinted at.

BERLIN — Indonesian officials have slammed the European Union’s proposal of a regulation that they say negates more than a decade of progress by the Southeast Asian country to comply with EU sustainable timber rules.

Under a voluntary partnership agreement, or VPA, signed in 2011, Indonesia developed a system, known as the SVLK, to verify the legality of its timber exports to the EU. The EU recognized Indonesia’s SVLK in 2016, allowing the country to issue what’s known as Forest Law Enforcement, Governance and Trade (FLEGT) licenses for EU-destined timber products.

To date, Indonesia is the only country with this formal recognition out of the 15 countries that have a timber legality agreement or are in the process of negotiating a VPA with the EU.

The system is supposed to favor Indonesian timber products destined for the EU market, granting them “green lane” access that exempts them from a separate due diligence process at European ports.

But a bill introduced by the European Commission in November 2021 threatens to undo all that progress by once again subjecting Indonesian timber imports into the EU to stringent checks upon arrival.

Arif Havas Oegroseno, the Indonesian ambassador to Germany, said the process of getting Indonesian timber exporters to comply with the SVLK requirements had been arduous, and that critics of the system might now feel justified in their opposition to it.

“There are some people who disagreed with that, [they] will say ‘Look at that, the government is being duped by the EU, so now they have a new standard. So why do we have to go with the SVLK if there are new due diligence standards?’” Arif said during a recent event in Berlin.

He called the EU’s pivot a classic case of shifting the goal posts. He added that the VPA is a legally binding agreement that commits the EU to providing Indonesia with green lane access to EU timber markets once the country’s timber legality system has approved by the EU.

“Because this is a legal commitment, a legal obligation, I think the EU needs to implement that legal commitment and legal obligation,” he said. “So the EU due diligence regulation for me is a violation of the commitment. They say that they accept and recognize the FLEGT VPA, but at the same time they’re introducing new standard.”

Wiradadi Soeprayogo, deputy chair of HIMKI, the association of Indonesian furniture and craft producers, also lambasted the EU proposal, saying it would unduly burden Indonesian producers without any real benefit.

“It’s not like we wanted to follow the SVLK, but it’s the Indonesian government that was being friendly with the EU and imposed it on us,” he told Mongabay. “We’ve shouted [our disagreement] numerous times. But we’ve accepted the SVLK as it is [now]. And now there’s this new EU regulation. Is this a privilege or do they want to kill us?”

He called on Indonesian officials not to be dictated to by the EU.

“Don’t let us follow the desire of Europe, which gives us additional rules that don’t ease [the timber businesses in Indonesia], but put a heavier cost burden on us,” Wiradadi said.

A log yard at a timber processing facility. Image by Rhett A. Butler/Mongabay.

‘It’s legal, but not sustainable’

The EU deforestation bill governs the import of deforestation-free forestry products into the bloc.

This week, the European Parliament, the European Council and the European Commission will start tripartite meetings, called trilogues, to discuss the bill, with the aim to agree the final text of the regulation. The bill is expected to be passed before the end of the year.

The bill requires importing companies to verify whether the products they sell within the EU market are produced in deforested areas, including areas deforested legally under the origin country’s laws. This marks a crucial difference from the FLEGT regulation, which only prohibits European companies from bringing illegal timber and timber products into the EU market, but doesn’t address those products sourced from deforested areas.

That means that once the new regulation is passed, FLEGT licenses will no longer exempt Indonesian timber imports from due diligence processes when they enter the EU, as these only satisfy the legality requirement but not the deforestation requirement.

“You can’t suddenly change your mind at the [EU] level by saying ‘I’m not willing to accept [Indonesian timber products] because they’re not sustainable enough,’” Arif said. “If someone in the EU changes their mind by saying, ‘Well, this is legal [timber], but it’s not sustainable,’ then sit with us again to renegotiate the treaty.”

He said the failure by the EU to sufficiently engage with Indonesia could erode the latter’s trust.

“So then the question is, if we have an agreement already signed on procurement and the EU does not implement that, then why would we trust EU on other issues on procurement itself?” he said.

Adrianus Eryan, head of forestry and land at the Indonesian Center for Environmental Law (ICEL), a Jakarta-based think tank, said the deforestation regulation throws up a “new trade barrier.”

“It has the potential to hamper the implementation of the VPA,” he told Mongabay. “The FLEGT VPA is like a toll road for Indonesian timber products to enter the EU market. If the EU deforestation bill is enforced, there will be a new checkpoint on the toll road. So the process will be longer.”

This could give Indonesia grounds to pursue a complaint at the World Trade Organization — a possibility that Arif raised.

“My personal note is that it can be taken to the WTO,” Arif said. “My next initiative would be to have a seminar like this, discussion like this, but specifically looking at the legal aspect, what legal avenue Indonesia can take, where the EU does not want to implement the FLEGT.”

He added there’s a strong enough basis to take the matter not just to the WTO, but also other dispute settlement mechanisms, like the European Court of Justice.

But Adrianus noted that a WTO complaint would be a last resort, given that the timber legality agreement calls for Indonesia and the EU to first address any dispute bilaterally. If after two months there’s no resolution, then the matter should be brought before the Joint Implementation Committee that oversees the VPA.

If after two months that too fails, then the parties may seek mediation by a third party, including the WTO, Adrianus said.

Lowland rainforest in Indonesia. The forests of Indonesia, Malaysia, and Papua New Guinea store vast amounts of carbon but are being destroyed and degraded by demand for timber, wood pulp, and palm oil. Photo by Rhett A. Butler.
Lowland rainforest in Indonesia. The forests of Indonesia, Malaysia, and Papua New Guinea store vast amounts of carbon but are being destroyed and degraded by demand for timber, wood pulp, and palm oil. Image by Rhett A. Butler/Mongabay.

‘Differences between expectations and reality’

Arif said Indonesia had other grievances over the EU’s handling of the FLEGT VPA, including what he called its failure to abide by the requirement to promote Indonesian timber products in the EU market.

“Now on the EU side itself, I can say that implementation is still very patchy, there’s a lot of gaps in the implementation, there’s a lot of uncertainty,” he said. “There are countries who specifically refuse to implement [the requirement to promote legally harvested Indonesian timber] that provide the basis for FLEGT as a product that should be given priority. They simply refuse to do that.”

A study commissioned by the Indonesian government and carried out by the University of Freiburg in Germany and Gadjah Mada University in Indonesia showed important gaps in terms of the practical implementation of the VPA. It attributed this mainly to inconsistent implementation and enforcement of the EU timber and FLEGT regulations across the 27 EU member states and the U.K.

“We also find several examples where illegal timber and timber products continued to be traded on the EU market, which suggests shortcomings,” University of Freiburg researcher Laila Berning said at a discussion of the study in Berlin.

Trade data also indicate that FLEGT licensing has had little impact on boosting the share of Indonesian timber products in the EU market. The FLEGT mechanism also suffers from a lower profile than better-known forest certification schemes under the Forest Stewardship Council (FSC) and the Programme for the Endorsement of Forest Certification (PEFC), according to the EU-funded FLEGT Independent Market Monitoring (IMM).

The Freiburg-Gadjah Mada study also shows that Indonesian timber producers haven’t benefited as expected from the timber legality agreement with the EU, with producers increasingly dissatisfied with the EU’s lack of action in promoting FLEGT-licensed products. A third of producers surveyed for the study said the reason they complied was to gain greater access to the market and be able to premium prices for their timber products.

However, only 3.4% said they got what they felt was a premium price, while only 6.9% said their company image had improved; 8% said they’d seen no significant benefits, and 16.1% said they enjoyed better market access.

“This really tells us the difference [between] their expectations and the reality,” said Ahmad Maryudi, a professor of forest policy and governance at Gadjah Mada University who was involved in the study.

Wiradadi, from the furniture producers’ association, agreed that timber producers hadn’t benefited much from the VPA with the EU.

“They promised that they would give a premium price, but that’s bullshit,” he said. “I told the president [Joko Widodo] about this when we were summoned for a meeting at the State Palace. I personally told him that it was all a lie.”

A FLEGT expert from the EU who’s familiar with the deforestation regulation said Indonesia is justified in raising the issue of lack of implementation of the VPA by the EU, given that market incentives for Indonesian timber still haven’t been developed. One example is that FLEGT-licensed wood products don’t have a label, unlike FSC-certified products, according to the expert, who requested anonymity as they were not authorized to comment publicly on EU policy.

Indonesian timber exports to the EU in 2016, the year it obtained FLEGT approval, were valued at $1.11 billion, according to FLEGT IMM. In 2019, this increased by a fifth to $1.33 billion. Arif said this was still a paltry figure compared to the $8 billion in timber products that the EU imported from China — a country with which it has no timber legality VPA.

Timber being harvested in Riau Province. Photo by Rhett A Butler
Timber being harvested in Riau Province, Indonesia. Image by Rhett A Butler/Mongabay.

Other countries also eyeing WTO option

Indonesia isn’t the only country to have taken issue with the EU’s new deforestation regulation, which, in addition to timber, also covers other products historically associated with tropical deforestation, including soy, beef, palm oil, cocoa, coffee, poultry, corn, rubber, charcoal, and printed paper.

Earlier this year, Indonesia joined 13 other producer countries, including Brazil, Ghana and Malaysia, in sending a joint letter to European authorities over the regulation that they deemed was rushed and drafted without proper consultation with trade partner countries.

In their letter, the producer countries said they “regret that the EU has chosen the option towards unilateral legislation instead of an international engagement to deal with these shared objectives reflected in the Paris agreement and [Sustainable Development Goals], to which we have all subscribed.”

They called on the EU to “entertain further consultation with third countries, particularly developing producing countries before the final approval of the proposed legislation.”

They also suggested that this lack of proper consultation with trade partners constituted a violation of global trade rules: “[T]he proposed regulation poses a significant challenge to the fundamental WTO rules and should be brought by the EU into compliance with the multilateral regime system.”

Agus Justianto, an official at the Indonesian Ministry of Environment and Forestry, said the deforestation regulation puts the mutual trust between producer and consumer countries “in limbo.”

“There’s a critical need for consistency on both sides to implement the stipulations of the agreement,” he said at a recent event in Berlin.

Arif, the Indonesian ambassador, also questioned how the EU could implement the new deforestation regulation when it hasn’t been able to hold up its end of the timber VPA with Indonesia.

“Now, if on the issue of FLEGT they said they don’t have enough people [to implement it], I don’t know how they can have enough people on the EU due diligence [deforestation] regulation [to implement it],” he said. “So it’s very sketchy argument.”

HIMKI’s Wiradadi, went further, saying the furniture producers’ association had never been invited for consultation by the EU, and had been left with no say in the matter.

“This is like the behavior of colonizers,” he said. “They don’t guide us as citizens that have the rights to live, trade and develop in our own country.”


Banner image: Rainforest timber awaiting transport and processing in Indonesia. Illegally logged timber can enter supply chains at any stage. Image by Rhett A. Butler/Mongabay.


Editor’s note: The reporter traveled to Berlin as a guest of Kaoem Telapak and Environmental Investigation Agency. Both Kaoem Telapak and Environmental Investigation Agency do not have any editorial influence on this or any other story Mongabay produces.


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