Historically, diplomatic relations between ASEAN and the EU have been formally established since 1977. And in 2020, the relationship began to evolve in a deeper direction when the EU and ASEAN decided to upgrade their relationship to a strategic partnership. This means that in this relationship, both parties discuss not only political relations but also economic relations, trade, investment, development, security, and defense.
In the dynamics of cooperation, Indonesian Foreign Minister Retno Marsudi said at the ASEAN-EU Post Ministerial Conference (PMC) in July 2023 that ASEAN-EU cooperation is tested by the state of the world, which is facing enormous challenges, so it is necessary to increase inclusive cooperation in various fields to maintain cooperation. In the meeting, Foreign Minister Retno conveyed two important things, namely, maintaining an inclusive regional architecture and enhancing mutually beneficial cooperation. Foreign Minister Retno Marsudi also stated that there is great potential between ASEAN and the EU as the two organizations are similar in terms of being the third largest trading partners and having integrated economies. In this case, she emphasized that for smooth trade cooperation between ASEAN and EU, there should be no trade policy that could become an obstacle and damage the potential of cooperation.
In the statement, Foreign Minister Retno Marsudi mentioned policies that are considered barriers to trade between ASEAN and the EU, such as the European Union Deforestation Regulation (EUDR) and the European Union Enforcement Regulation (EUER). Regarding the EUDR, some ASEAN countries have complained about the policy, which they believe has hindered the entry of ASEAN products into the EU. So the question is, how can the EUDR become an obstacle to trade cooperation between ASEAN and the EU?
About European Union Deforestation Regulation (EUDR)
The European Union Deforestation Regulation (EUDR) is an EU-implementing regulation that addresses the issue of deforestation and forest degradation caused by the production and trade of certain goods. The regulation came into force on June 29 and aims to ensure that products marketed in the European Union do not contribute to deforestation. About various commodities commonly associated with deforestation issues, these include livestock, cocoa, coffee, palm oil, rubber, soy, timber, and derivatives. In terms of commodities, this includes a range of products that have been or are being made with materials associated with the EUDR.
Under the EUDR, companies that use commodity products listed in the EUDR in the EU market are required to do several things, including conducting due diligence to ensure that the products they market do not cause deforestation, and submitting annual due diligence reports to the relevant EU member states to ensure that the company is complying with the EUDR, in which case large companies have 18 months to comply and medium and small companies have 24 months. Penalties for non-compliance include a fine of at least 4% of annual turnover, seizure of goods, and a temporary ban from participating in EU procurement or tender procedures. The EU will continue to improve its monitoring of this regulation, including by customs authorities, to ensure compliance with the EUDR.
EUDR Impact of ASEAN-EU Cooperation
Despite these efforts to ensure that the consumption of products in the EU is free from the main cause of global deforestation, it is considered to have created a trade barrier for several countries, including some in ASEAN. Several ASEAN countries have expressed concern about the implementation of the EUDR policy, as it has directly created barriers to entry into the EU market of products directly related to some of the commodities defined in the EUDR. For ASEAN countries, the policy is expected to lead to a decline in exports to the EU as a result of complying with its requirements; countries such as Indonesia and Malaysia, which have palm oil and rubber as their main producers, as well as Vietnam and Thailand, which have coffee and timber as their production materials, may feel a significant impact from the implementation of the policy.
Most ASEAN countries have smallholder farmers who rely heavily on commodities such as palm oil, cocoa, and coffee. The various provisions of the policy are seen as burdensome and detrimental to a large number of farmers who may not have the capacity to meet EUDR requirements. Reduced exports and increased production costs may also lead to a reduction in the agricultural and forestry workforce, which will inevitably affect the livelihoods of rural communities. This will certainly create new problems in some ASEAN countries.
Thus, it is feared that the various impacts of the EUDR policy on some ASEAN countries may create a separate obstacle to the harmony of ASEAN-EU cooperation relations. Countries affected by the EUDR policy may start to leave the EU export market and switch to alternative export markets, which will automatically lead to a decrease in ASEAN-EU trade activities. In terms of trade negotiations, ASEAN countries may engage in more intensive trade negotiations with the EU to reach a mutually beneficial agreement. EUDR may become an important issue in future trade negotiations between ASEAN and the EU.
Conclusions and Solutions
Since 2020, the cooperation relationship between ASEAN and the EU has undergone significant development and the two organizations decided to upgrade their relationship to a strategic partnership covering various areas. However, in the trade sector, the ASEAN-EU trade cooperation relationship is facing a challenge where with the enactment of the European Union Deforestation Regulation (EUDR) by the EU, most of the ASEAN countries are facing barriers in the entry of their products into the EU market. This is because most of the products produced by ASEAN countries are directly related to some of the commodities regulated by the EUDR.
At the national level in ASEAN, the impact of the EUDR policy itself is directly related to the lives of farmers in several ASEAN countries. The various regulations and requirements in the EUDR are considered to have made it difficult and marginalized most of the farming community who may not have the capacity to meet them. It is feared that a decrease in exports and an increase in production costs will lead to a reduction in the workforce in the agricultural and forestry sectors. Meanwhile, internationally, the impact of the EUDR policy is feared to affect the harmony of ASEAN-EU cooperation relations. Countries affected by the policy may begin to leave the EU export market and switch to alternative export markets, which in this case will automatically result in a decrease in trade activities between ASEAN and the EU.
However, efforts to maintain cooperative relations will continue. In terms of future trade negotiations, the issue of EUDR may become a frequent topic of discussion, as well as the push for establishing the ASEAN-EU Free Trade Agreement as a solution to the problem. In this case, although the EUDR policy aims to reduce products directly related to deforestation, it may also be an obstacle to improving trade relations between ASEAN and the EU.
