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Indonesian civil society urged the Government to be cautious in taking position in Indonesia-EU CEPA negotiations related to Omnibus Law

Photo from Indonesia for Global Justice

Indonesia for Global Justice - 30 August 2021

Indonesian civil society urged the Government to be cautious in taking position in Indonesia-EU CEPA negotiations related to Omnibus Law
By Muslim Silaen & Rachmi Hertanti

Since it was launched in 2016, European Union Comprehensive Economic Partnership Agreement Indonesia (EU CEPA I) has resulted in 10 rounds of negotiations. Indonesia For Global Justice (IGJ) together with the Coalition for Economic Justice (KMSKE) held a dialogue with negotiators from the Trade Ministry, specifically the Directorate General of Negotiations Sub-directorate of Europe which was conducted on Thursday, 19 August 2021 via digital platform. Some of the attending civil society organizations were : IGJ, Institute for Ecosoc Rights, The People’s Coalition for Food Sovereignty (KRKP), Indonesian Peasant Union (SPI), Indonesian Forum for the Environment (WALHI), FairWear, CNV, The People’s Coalition for The Rights to Water (KruHA).

The outbreak of the pandemic has made the process of negotiations running quite slow, of which since 2020, the 10th negotiation for CEPA IEU could only be conducted in February of 2021. The 11th round which should be conducted in July 2021 must be postponed because COVID-19 cases were significantly increasing in Indonesia due to the spread of the Delta Virus Variant. However, at the moment the negotiators are looking for a time of which it is targeted to be conducted at the latest in the fourth quarter of 2021 ; either in September or October 2021. Yet it seems that the completion of IEU CEPA negotiation is still far from the target, seeing there are several matters needed to be considered realistically, especially regarding issues that still need to be discussed. Moreover, the condition in the course of the pandemic brings more challenges to conduct such intensive negotiation.

General Development

The Trade Ministry, represented by Lusyana Halmiati, the Head of the European Union Department, Directorate of Bilateral Negotiations, conveyed several general developments from the results of the negotiations in the 10th round. There were around 19 negotiating issues discussed, except the Sanitary and Phytosanitary (SPS) Chapter and the Economic Cooperation and Capacity Building (ECCB) Chapter, due to the negotiations were almost over. The development of other chapters remains ongoing and is still being discussed carefully.

For the ongoing issues and have not progressed yet, such as in the Intellectual Property Rights (IPR) chapter, many issues have not been agreed upon. Indonesia tries to be consistent with its position to fight for the national interest. For instance, it is related to the protection of local varieties, then the extension of patents, hence it will not interfere with access to medicines. The negotiation in the Investment Chapter, especially the Dispute Settlement issue related to the Investment Court System (ICS), Indonesia still wants to see ICS being practiced by the European Union and to what extent the ICS concept can be implemented in Indonesian domestic regulations.

Whereas the chapter on Trade and Sustainable Development (TSD) is experiencing dynamics of negotiations, especially in the issues of climate, labor, and other economic interests. In the TSD chapter, Indonesia wants barriers to Indonesian products which already meet Sustainable standards. Meanwhile, other issues regarding Energy and Raw Materials chapter are more related to procedural issues. There is no special discussion related to certain raw materials ; procedural for licensing and maintaining transparency. Indonesia tries to keep it not to deviate from its domestic regulations. Then, for the E-commerce chapter, the proposal that the EU proposes is still being discussed in general terms, yet some issues need further discussion. For instance, the draft bill on the protection of personal data ; transmission of cross-border data flows, etc.

The Omnibus Law & The EU Green New Deals : Its Impact on IEU CEPA Negotiations

In the process of developing negotiations, there are new policies issued by the two countries, such as the Job Creation Law (Omnibus Law) which was passed by Indonesia in 2020, and the EU New Trade Policy which was issued in February 2021, and these policies seem to have an impact on the IEU CEPA discussion. As examples, several chapters will be affected, such as the investment chapter, the renewable energy, and raw materials chapter, the TSD chapter, and many more.

In the explanation from the Trade Ministry, it was stated that in March 2021 a Special Session was held, which was specifically implemented by both parties to explain new policy developments in the two countries. The Trade Ministry further stated that to be able to include new proposals of new policies in the IEU CEPA negotiations, it is still difficult due to many derivative regulations are still in the process of being finalized in both countries, both from the Omnibus Law and from the EU Green New Deals and the EU New Trade Policy. Therefore, it is still uncertain which points will then be discussed specifically and become the commitments in the negotiations.

This is also related to the EU policy regarding Carbon Border Adjustment Measures (CBAM). Many questions about this from CSO representatives, especially about how Indonesia will respond to the EU’s policy on CBAM. The Trade Ministry’s response only stated that the Government was still studying the derivative rules which then would be enforced by the EU, considering that the process was still ongoing and there was information that there would be some changes regarding this very issue when it entered the European parliament. However, the Government claims that the presence of this green policy must ultimately be able to provide tangible benefits, especially related to the aspect of recognizing Indonesian products which are already sustainable.

In a matter of fact, when we talk about the Omnibus Law concerning investment issues, it seems that it will be very open how the commitment to access the investment market and the service sector will refer to the new Job Creation Law. Muslim Silaen from IGJ questioned several aspects of investment and service liberalization and to what extent this would be in line with the Omnibus Law. The negotiator explained that in terms of the service sector, market access would also be related to the list of investment priorities that have been regulated in the revision of the Investment Law under the Omnibus Law.

IPR Chapter : Farmers’ Seed Sovereignty & No TRIPS Plus

The crucial issue in the IEU CEPA negotiations is also related to the monopoly aspect of Intellectual Property Rights in the IPR chapter and its impact on Indonesian farmers’ seeds sovereignty. This issue has become a priority for civil society groups in Indonesia and must become a negotiating position that is non-negotiable.

In the draft text of the IPR chapter published by the European Union, one of the regulations to be negotiated is related to patent issues and its relation to biodiversity issues, including the exclusivity of data related to biodiversity aspects. According to the Indonesian negotiator, the EU did propose that its partners join UPOV91, however, regarding this issue, there are still differences in position and cannot be agreed upon. In particular, the issue of IPR is under the authority of the Director-General of Intellectual Property, the Law and Human Rights Ministry, by discussing it with the Agriculture Ministry.

Said Abdullah from the People’s Coalition for Food Sovereignty (KRKP) reminded Indonesian negotiators that the IEU CEPA does not regulate anything regarding Indonesia’s obligations to become a member of UPOV91 (International Union for the Protection of New Varieties of Plants). This is due to UPOV91 will have a major impact on the farmers’ seeds sovereignty, including the potential to eliminate local biodiversity considering that UPOV only wants seeds having the same standard. This will destroy local seeds and the role of local farmers as the main actors of plant breeders and guardians of Indonesia’s biodiversity. Said further emphasized that strengthening the seed protection system, it should only be done by strengthening the National Law by providing strong recognition to the rights of plant breeders without having the obligation to join as members of the UPOV. Moreover, there is no need to re-amend the Law under the UPOV agreement. This is definitely against the mandate of our constitution.

The same matter was conveyed by Lutfiyah Hanim, Senior Researcher at IGJ, who emphasized that the Government should not agree to the EU’s insistence that Indonesia joins a certain international organization, especially UPOV91. Even if Indonesia wants to become a member of a certain international organization, then that interest should not be tied up in an FTA, especially the IEU CEPA. This is due to Indonesia’s participation in international organizations is not based on promises previously bound in an FTA, but must be based on our national interests.

In terms of guaranteeing the protection of farmers’ rights, Afgan Fadila from the Indonesian Peasant Union reminded that Indonesia has participated in supporting and agreeing to the Declaration on the Rights of Peasants and other People Working in Rural Areas. For this reason, in the IEU CEPA discussion, the Declaration of Peasants’ Human Rights should be the main reference, especially in guaranteeing and ensuring the protection of farmers’ sovereignty. Moreover, Indonesia has already had a Law on the Protection and Empowerment of Farmers, which should be a reference for negotiators in drafting a negotiating position.

Another important note in the discussion of the IPR Chapter in the IEU CEPA was conveyed by Indonesia for Global Justice (IGJ), by Agung Prakoso, regarding the dangers of the TRIPS Plus regulation if it was agreed upon in the IEU CEPA. He emphasized that the TRIPS Plus rules, for instance, the extension of the patent period and data exclusivity should be applied and agreed upon in the IEU CEPA considering that these are contrary to the Indonesian domestic law. This will surely be difficult for us. Furthermore, Lutfiyah Hanim also emphasized that the TRIPS Plus agreement which may have been regulated in other FTAs ​​should not be copied and pasted in the IEU CEPA.

Trade & Sustainability Issues

In terms of more detailed discussions about the development of the Trade and Sustainable Development (TSD) Chapter negotiations, many issues were conveyed, especially related to several issues such as labor rights issues, palm oil issues, and many others.

Regarding labor issues, Samuel Gultom from CNV explained that Indonesia has ratified many ILO conventions which will not be difficult for Indonesia to participate in approving the TSD chapter. Especially considering that changes in Indonesian labor regulations under the Omnibus Law also increasingly question the government’s commitment to truly protect workers’ rights, since the standard of protection is lower than the ILO convention itself.

Based on this perspective, the Trade Ministry explained that labor issues cannot be seen from just one side issue, but must be set more generally in one TSD chapter. There are other issues as well in the TSD Chapter such as environmental and biodiversity issues. Negotiators claim that in the TSD discussion, Indonesia genuinely wants sustainable trade and production, and how the outcome of the agreement will bring benefits.

Furthermore, a researcher from the Institute for Ecosoc Rights, Prasetyohadi, also asked what the Indonesian government’s target in the next negotiations on palm oil is and its relation to the issue of sustainable trade. In this case, the Indonesian negotiator explained that Indonesia’s target in the negotiations was to eliminate barriers to access to the palm oil market, considering that palm oil is a major export commodity and affects the lives of Indonesian people, including its smallholders. In Europe, there is indeed a lot of negative sentiment towards palm oil products, and this issue is still an in-depth discussion for both parties and they try to find the solution.

From the environmental aspect, the discussion in the TSD chapter is still stagnant. Referring to developments in the European Union, Rachmi Hertanti from IGJ reminded that there is a recommendation from the European Union Parliament which states that the TSD Chapter in the EU CEPA must be binding and has strict sanctions, especially regarding EU commitments in the UNFCCC. Moreover, on the Indonesian side, it also wants binding sanctions should the provisions in this TSD chapter be violated, especially when there are trade barriers for trade products that have been recognized as sustainable.

In line with that, Yuyun Harmono from WALHI, also questioned Indonesia’s position in the TSD Chapter negotiations, especially looking at the link between climate issues in the TSD Chapter and EU policies regarding Carbon Border Adjustment Measures (CBAM). Furthermore, in line with Yuyun, IGJ researcher, Parid Ridwanudin, also said that Indonesia’s commitment to a sustainable trade agenda is still very low. This can be seen from the various regulatory changes in the Omnibus Law which still facilitate and legitimize fossil energy in its economic development.

Responding to the aforementioned questions, the Indonesian negotiators stated that the Government’s position regarding TSD and CBAM still had to be reviewed. They want this chapter to be not only normative but also to have real benefits in both countries, including the recognition of Indonesian trade products which are already sustainable. The government claims that they have a high commitment to the trade and sustainability agenda, and this will continue to be studied further. If the impulse is ‘binding‘, it will be reviewed what will be re-arranged in it. For CBAM, the EU would just issue its derivative regulations and Indonesia is still studying it, including other EU proposals.

Digital Trading Issues

In digital trade issues, the IEU CEPA regulates more rigidly when compared to RCEP. Regarding this issue, IGJ Senior Researcher, Olisias Gultom, highlighted two major points, namely : first, on the cross-border data flow issue. This issue will have an impact on several matters, namely prohibiting local presence and local servers and having an impact on the difficulty of applying the law when a criminal violation occurs. Second, on the source code. We often see this issue as a matter of application. However, this source code is protected in the IPR, and protection of the source code can be anticipated if it is related to taxes, or algorithms that are discriminatory in nature to workers or MSMEs, or related to monopolistic practices.

In response to this issue, the Indonesian negotiator explained that in the negotiations for the title itself, there was no agreement on whether it will be entitled as Digital Trade or E-Commerce. The draft text published by the EU is still open for discussion, therefore none of the aspects have been agreed upon. For the negotiating position, the Government claims that it will try to comply with domestic regulations that are still developing, especially regarding the Draft Bill on Data Protection and Data Localization. Concerning this very issue, we review upon our approval in other agreements.

 source: Indonesia for Global Justice