Indonesia nears trade deal with EU after being classified as a ‘standard risk’ country

Indonesia’s classification as a “standard risk” country under the EU’s deforestation regulation (EUDR) opens the door to a long-awaited free trade agreement with the European Union, The Star reports. The status, announced on May 28, is seen by businesses as a signal for increased exports of palm oil, coffee, cocoa and other commodities, which could help conclude negotiations on a Comprehensive Economic Agreement between Indonesia and the EU, which have been ongoing since 2016.

Indonesian Trade Minister Budi Santoso said the EU’s decision on the classification came at the final stage of negotiations, which are expected to be concluded by mid-2025. “We are getting closer to finalisation and the EU seems to be softening its stance at this stage,” he said on May 21. The deal is expected to boost trade, particularly for the world’s largest palm oil producer, which has previously raised concerns about EU requirements for traceability and a ban on imports of products linked to deforestation after 2020.

The EUDR rating system divides countries into low, standard and high risk categories to reduce the EU’s impact on global deforestation. Indonesia is in the standard risk group, while only Russia, Belarus, North Korea and Myanmar are given high risk, Reuters reported on May 23. While businesses welcomed Indonesia’s removal from the high-risk category, many companies said the “low-risk” status could simplify verification procedures and reduce export costs, especially for small producers.

Environmental groups have criticized the EU’s decision to classify only four countries as high-risk. A coalition of 40 NGOs warned the European Commission in an open letter that “premature conclusions could politicize the assessment process.” Nevertheless, Indonesia’s classification as a standard risk country creates favorable conditions for concluding a trade deal that could strengthen its position in the European market and support economic growth.

Tags: Indonesia, EU, palm oil, deforestation, restrictions