EU-Indonesia trade agreement will perpetuate social and environmental injustice
FERN | 23 September 2025
Press release: EU-Indonesia trade agreement will perpetuate social and environmental injustice
Today’s free trade agreement between the EU and Indonesia is a win for transnational companies at the expense of forests and vulnerable peoples.
After nine years of negotiations, Indonesia and the EU today signed a Comprehensive Economic Partnership Agreement (CEPA) which will slash tariffs and facilitate European investments in Forest Risk Commodities. A few hours later, Environment Commissioner Jessika Roswall announced that the implementation of the European Union Deforestation Regulation (EUDR) will be delayed by yet another year.
“The deal reinforces an extractive model which has already caused immense harm to Indonesia’s forests. It contains no tangible, foreseen benefits for those who have historically lost out when trade is liberalised – namely, Indigenous communities, smallholders and workers. Instead, it strengthens the already vice-like grip corporations hold over Indonesia’s forests” said Perrine Fournier, campaigner at forests and rights NGO, Fern.
Palm oil and critical raw materials have been at the heart of the trade negotiations since they were launched in 2016. Yet the recently announced delay to the law, combined with slashed tariffs on palm oil, is bad news for forests and peoples.
“It almost defies belief that yet again European governments and companies have missed the boat and are not ready to comply with a law which was passed with an overwhelming mandate in 2023. Today’s decision is an affront to all those who have worked hard to implement traceability systems and taken measures to ensure smallholders can comply with the regulation. Regardless of any IT faults, over the past 12 months, we’ve witnessed a relentless attempt to derail the EUDR. This is part of a wider battle: between those who want to protect the natural world and the life systems which depend on it, and those intent on destroying it, often driven by narrow self-interest. Every day this law is delayed equates to more forests razed, more wildfires and more extreme weather” said Nicole Polsterer, from Fern.
The EU is the world’s third biggest importer of Indonesian palm oil, used mainly for biofuels, cooking and cosmetics. The EU also wants access to Indonesia’s nickel and other valuable raw materials, so as to secure Europe’s clean tech and digital future, including for batteries for electric vehicles and steel supply chains, and to reduce its dependence on China. US President Trump’s imposition of sweeping tariffs on both the EU and Indonesia accelerated the trade talks in recent months.
“The protracted negotiations over critical raw materials and palm oil shows the profound challenge in moving towards a low carbon world, while still following a trade framework that perpetuates the social, economic and environmental injustices of the extractive model inherited from the colonial era,” said Fournier.
The damaging impact of palm oil and nickel extraction on forests and forest-dependent communities are well documented. Palm oil is still the most important driver of deforestation in Indonesia, and other drivers like pulp, and mining for coal and minerals such as nickel, are on the rise.
The destruction of forests for palm oil is often linked to the dispossession of Indigenous Peoples from their land, which has triggered thousands of land disputes. Palm oil and nickel production are also associated with labour rights violations, pollution and the destruction of natural habitats.
These supply chains are dominated by transnational companies and benefits do not trickle down to local peoples. In 2021, palm oil smallholders generated US$17 billion, which is six per cent of revenues in the entire chain, but their share in profits was close to zero.
“Indonesia’s attempt to add value to its local nickel supply chain by banning exports of the raw material and attracting Chinese investments into refining and battery manufacturing had minimal impact on poverty and unemployment. It does not look as if CEPA will change this situation,” Fournier added.
A protocol to enhance trade in sustainable palm oil
Under the deal, Indonesian crude palm oil (CPO) will receive zero tariffs within a specified quota. But the tariffs reductions are not linked to sustainability requirements. A protocol to enhance trade in sustainable palm oil has been concluded and some activities are foreseen to support the improvement of the Indonesian Sustainable Palm Oil (ISPO) certification scheme’s ability to facilitate compliance of operators with relevant EU trade-related sustainability regulatory requirements.
“The new ISPO regulation adopted in 2025 still lacks a cut-off date and therefore does not comply with the EU Deforestation Regulation (EUDR). We hope the Protocol contains adequate cooperation mechanisms to support Indonesia to develop national traceability systems” said Fournier.
Weak safeguards and an untransparent process
The deal does not contain enforceable, actionable provisions to respect human rights, protect the environment and tackle power imbalances. There is no mention of deforestation- and human rights violations-free criteria being a condition of market access, or grievance and compensation mechanisms for impacted communities. Trade Unions, NGOs and organisations representing Indigenous Peoples did not take part in negotiations.
An urgent need for alternative trade and partnerships
In the political guidelines for the European Commission 2024-2029, Ursula von der Leyen announced the Commission would develop new partnerships - such as the clean trade and investment partnerships (CTIPs) - to secure its supply chains and make partnerships mutually beneficial.
“If trade and cooperation partnerships are to reduce inequalities and ensure a just transition towards climate neutrality, inclusive negotiation processes and value addition that works for peoples are essential. Such partnerships should also prioritise the circular economy so as to reduce consumption and waste, and to respect planetary boundaries” said Fournier.
