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COA Meeting start date 27/03/2023
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Indonesia has been closely following the unfolding development of the EU's Deforestation and Forest Degradation policy. In this regard, Indonesia took note that the EU has adopted Amendments No. 995/2010 on 13 September 2022 and followed by the principal agreement reached between European Parliament, European Council, and European Commission on 6 December 2022 to pass the EU regulation on deforestation-free/Due diligence. This recently passed regulation imposes a set of rules affecting sales of a wide range of commodities presumably associated with deforestation and forest degradation.

Through this regulation, products such as cattle, cocoa, palm oil and its derivatives, soya, wood, leather, chocolate, furniture, rubber, charcoal, and printed products, will be subject to a mandatory due diligence mechanism to discover the origin of these products. Furthermore, business operators will be required to present any relevant documentation to reveal the products origin, including the satellite images, GPS coordinates, and production time, before entering the EU's market. We have also been aware that this mechanism will require the production of this products to comply with human rights and the effort to protect indigenous people.

Failure to perform such obligation and unsuccessful attempt to provide this set of extensive documents and evidence will directly conduce the inability of these products to enter the EU market.

Following our interests to the EU's regulation at issue, Indonesia would appreciate any further information from the EU, particularly on the following matters:

a. While the definition of deforestation could have broad scope and understanding, would the EU provide its interpretation on deforestation, particularly in the context of this policy? Furthermore, could the EU please provide the methodology to determine whether a product be deforestation-free?

b. Could the EU further elaborate the scientific evidence of using the deforestation-free policy as the only approach to achieve its climate-related goal, rather than applying a less trade restrictive approach to achieve the same objective?

c. Since this regulation set strict traceability requirements linking the commodities to the farmland where they were produced, how does the EU ensure that this rule would not generate an unnecessary barrier to trade?

d. Regarding the country's benchmarking system, how does the EU set out the criteria for low, standard and high-risk country set out in the policy?

e. As this policy will impact the agricultural small and medium enterprises (SMEs), have the capacity challenges faced by MSMEs in complying with this regulation been taken into account?

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Answer Full Text

a. The EU deforestation Regulation is based on internationally backed definitions – in particular on the work of the Food and Agricultural Organisation (FAO) – e.g. of "forest" and "deforestation". These definitions are the basis for the obligations for companies and stakeholders in third countries that have commercial relations with the EU, as well as for EU competent authorities. 

'Deforestation-free' under the scope of the Regulation means that no commodities and products in the scope of the regulation would be allowed to enter or exit the EU market if they were produced on land subject to deforestation or forest degradation after the cut-off date of the Regulation (31 December 2020). The proposed date minimises disruption of supply chains and potential negative impacts in partner countries. It corresponds to international commitments to halt deforestation as for example included in the Sustainable Development Goals (Goal 15.2.). 

For more information, the EU invites Indonesia to consult the Europa webpages on the Deforestation Regulation. 

b. The measure proposed is supported by solid scientific evidence spelled out in the Commission Impact assessment "Minimising the risk of deforestation and forest degradation associated with products placed on the EU market" accompanying the EU proposal, available at SWD_2021_326_1_EN_impact_assessment_part2_v2.pdf (europa.eu). 

The Regulation is intended to help fight climate change and biodiversity loss linked to global deforestation by addressing the role of EU consumption. It is designed to apply in an even-handed and non-discriminatory manner, i.e. equally to the most relevant commodities and to products produced inside as well as outside the EU. 

There is no ban against products coming from any country under this Regulation. The rules are designed to make sure that products sold in the EU from any country, including EU member states, comply with the same requirements in terms of preventing deforestation. 

The objectives pursued by the Regulation are the internationally recognized, public policy concerns: the protection of the environment, the fight against climate change and biodiversity loss. The measure adopted is supported by solid evidence as spelled out in the Commission Impact Assessment 

For a more detailed analysis of the EU green deal and WTO compatibility, the EU also invites India to consult:

c and e. This Regulation is an environmental measure, which complements global / multilateral action, developed in compliance with EU's international commitments and WTO requirements. It ensures that products sold on the EU market, whether produced in the EU or imported are deforestation free.  

It is not a trade ban: no country nor commodity will be banned. Products, even from countries with a high risk level can continue to be placed on the EU market as long as the company will go through the required due diligence process proving they are deforestation-free.  

The operators that want to sell products in the EU will have to comply with the due diligence requirements to guarantee that their supply chains are free from deforestation. On the other hand, those operators that meet the requirements will improve their access to the EU market, create confidence in the consumers and guarantee the sustainability of their supply chains in the long term. 

Widespread and free technology for geolocation - essentially mobile phones – will ensure that no technical obstacle gets in the way of smallholders when it comes to selling their products to the EU market. 

The Regulation is expected to boost market opportunities for sustainable producers regardless of their size. The cut-off date aims to minimise the number of smallholders that are caught cultivating land whose produce cannot be sold on the EU market or exported from it. 

Several smallholders' organisations, notably from Indonesia, have expressed support to the regulation and, in particular, geolocation and traceability, as they see increased transparency in supply chains as a clear opportunity for them to have a fair access to the market while using the widely available technology. 

The findings of the Impact Assessment of this Regulation indicate that SMEs are perfectly capable of exercising due diligence to ensure the sustainability of their supply chains - which are often simpler than those of larger corporations or built on longstanding business relationships. 

In addition, SMEs will benefit from a range of special provisions in the regulation (e.g. SMEs will benefit from a 24 months period before the rules start applying to them) and will be assisted in complying with their due diligence obligations. 

A very important point is the strong EU commitment to step up its engagement with partner countries, consumer and producer countries alike, to jointly address deforestation and forest degradation. Partnerships and cooperation mechanisms could support countries to address deforestation and forest degradation where a specific need has been detected, and where there is a demand to cooperate - for instance, to facilitate compliance with the Regulation for companies/ smallholders, or to help partner countries meet their international commitments on halting deforestation e.g. under the Glasgow Declaration or the SGDs. Civil society, indigenous people, the private sector and local communities should be fully involved in this partnership and cooperation exercise. 

Engagement will also include structured dialogues and other actions to support partner countries in making the transition towards more sustainable production and facilitating compliance of relevant commodities and products with the requirements of the Regulation. The EU has notably pledged EUR 1 billion to facilitate protection, restoration and sustainable management of forests in the partner countries, for the benefit of people, climate and environment. 

d. The country benchmarking system operated by the Commission will assign a risk level to countries or parts thereof, considering a range of objective criteria, in particular deforestation and forest degradation rates and the rate of expansion of agriculture land for relevant commodities.

It will be developed by the Commission based on scientific data within 18 months after the entry into force of the Regulation (in line with entry into application). 

The main criteria for the assessment that the Commission must endeavour are: (a) rate of deforestation and forest degradation, (b) rate of expansion of agriculture land for relevant commodities, (c) production trends of relevant commodities and of relevant products. 

As foreseen in the Regulation, the assessment may also take into account other criteria such as information supplied by governments and third parties (NGOs, industry); agreements and other instruments between the country concerned and the Union and/or its Member States that address deforestation and forest degradation; the national laws to fight deforestation and forest degradation and their enforcement; the availability of transparent data in the country; respect of indigenous peoples; international sanctions imposed; etc. 

This assessment will result in three categories of country risk: low, standard and high risk. All countries will be standard risk upon entry into force by default.
 

The Commission will engage in a specific dialogue with all countries that are or risk to be classified as high risk, with the objective to reduce their level of risk.

Follow-up comments

​Indonesia shared the same concern as Brazil, India and Paraguay, and expressed the view that the policy in question was not a preferred means to achieve environmental goals and was contrary to the spirit of SDGs on ending poverty and hunger, achieving health and well-being, and creating education. Indonesia noted that the design and architecture of this regulation was potentially discriminating in terms of the product coverage and national treatment. It would create new trade barriers and impose unnecessary additional controls and measures and was likely to affect small farmers in developing countries, including Indonesia, to market their products. Indonesia reiterated that, as one of the parties to the Paris Convention, it would adhere to its commitment to the environmental protections and the global effort to combat climate change and would remain supportive to the measures and contribution by Members to pursue legitimate objectives. Indonesia reminded Members that their measures should not generate unnecessary restrictions to trade and that the decisions should be taken based on scientific evidence.

Brazil noted that it still failed to understand how the EU intended to reconcile the proposed regulation with both multilateral and environmental regimes as well as the multilateral trading system. In Brazil's view, the draft regulation rested on arbitrary assumptions from the definition of the first station to the prescription of third parties' obligations. It discriminates against developing countries, as it was clear on the selection of controlled commodities and in disproportionate demands on certification. Brazil observed that very little differential treatment for the developing world and that the costs of adaptation were to be borne by producers within a very tight schedule. Brazil noted that the draft regulation had clear trade distorting effects, potentially disruptive for many producers, and it still lacked material ground, both commercially and scientifically, to justify such a drastic blow. Brazil asked once again for the due consideration of this discussion at the European Parliament and Commission. Brazil also invited the EU to clarify the following questions: (1) how could a regulation apply exclusively to a basket of items produced by a limited number of countries, all in the developing world, was considered non-discriminatory?; (2) How the replacement of the Paris Agreement indices by the EU's unilateral arbitrary goals would not represent extraterritorial jurisdiction entry?; and (3) How to justify a commercial measure as conservation of exhaustible natural resources, when in practice it applied selectively to equatorial tropical forests, ignoring others?​ 

The EU noted that, at the COP 26, world leaders pledged to end deforestation by 2030, which was among the main drivers of climate change and biodiversity loss. The EU highlighted its contribution to the objective by consuming a significant share of products associated with deforestation and forest degradation and was committed to the responsibility to end deforestation. The EU also underscored their strong desire to address its consumption and production linked to deforestation, given the strong call from its citizens. In EU's view, every WTO Member has the right to set up its standards, especially as these are necessary to achieve the commitments in terms of climate and biodiversity, provided that certain conditions are met. The EU noted that its proposed regulation would introduce new diligence requirements to ensure that products do not come from deforested areas when the new rules enter into force. All relevant companies would have to conduct strict due diligence if they operate in EU's market or export from it. Commodities such as palm oil, cattle, soy, coffee, cocoa, timber and rubber as well as derived products had been chosen on the basis of a thorough impact assessment which identified them as the main driver of deforestation due to agricultural expansion. The EU stated that once the draft regulation becomes law, operators and traders would have 18 months to comply with the new regulations and smaller companies would have 24 months to adapt. The regulation sets out requirements for placing relevant commodities and products on the EU internal market, regardless of whether they are produced domestically or in third countries. This ensures that they are treated equally in line with the principle of non-discrimination. The EU also highlighted that transparency and consistency with international commitments, such as halting deforestation under the SDG's, were other key principles enshrined in the regulation. The EU welcomed the consideration of similar measures by other partners such as the planned US Forest Act and the UK Environment Act. The EU expressed its commitment to engage with its partner countries, especially developing countries, to assist producers where necessary, and noted that support would depend on specific situation such as the existing NDC country allocation and partner demand in each country, and would aim at protection, restoration and sustainable use of forest, as well as sustainable agriculture, supply chain transparency and other relevant areas. The EU added that, once adopted, the deforestation regulation will translate the political commitment undertaken by all WTO Members to halt and reverse deforestation and forest degradation in practice. Finally, the EU stressed that the deforestation regulation did not fall under the Agreement on Agriculture and the Committee on Trade and Environment (CTE) was the relevant forum to discuss environmental measures. Noting that its deforestation proposal had already been presented and discussed several times in the CTE, including very recently in the week of 13 March, the EU informed Members of its plan to organize an information session on technical provisions of the regulation during the WTO Environment Week in June.

AGCD To Complete
Keywords
Collapse Market accessMarket access
Collapse Tariff and other quotasTariff and other quotas
Transparency issues
Tariff quota fill
Product/tariff line coverage
Country-specific allocation
Allocation of licences to importing entities
Period of importation and licence validity
Other administration arrangements
ST Annex 5
Autonomous tariff quota access
Other
Collapse SSGSSG
Transparency issues
Trigger calculations
Perishable and seasonal products
Other implementation issues
Link with TRQ commitments
Other
Collapse Other import policiesOther import policies
Scheduled tariff commitments including tariff renegotiations
Import licensing
Import prohibitions and restrictions (including quantitative restrictions)
Minimum import/reference prices
State trading enterprises
SPS and TBT
Other
Collapse Domestic supportDomestic support
Collapse Transparency issues (including Table DS:2)Transparency issues (including Table DS:2)
Transparency issues (including Table DS:2)
Collapse Annex 2 (Green Box)Annex 2 (Green Box)
General services: research
General services: pest and disease control
General services: training services
General services: extension and advisory services
General services: inspection services
General services: marketing and promotion services
General services: infrastructural services
General services: other
Public stockholding for food security purposes
Domestic food aid
Direct payments: decoupled income support
Direct payments: income insurance and income safety-net programmes
Direct payments: payments for relief from natural disasters
Direct payments: structural adjustment assistance provided through producer retirement programmes
Direct payments: structural adjustment assistance provided through resource retirement programmes
Direct payments: structural adjustment assistance provided through investment aids
Direct payments: payments under environmental programmes
Direct payments: payments under regional assistance programmes
Direct payments: other
Other
Collapse Article 6.2 (Special and Differential Treatment / Development Programmes)Article 6.2 (Special and Differential Treatment / Development Programmes)
Investment subsidies generally available to agriculture
Input subsidies available to low-income or resource-poor producers
Support to encourage diversification from growing illicit narcotic crops
Other
Collapse Article 6.5 (Blue Box)Article 6.5 (Blue Box)
Payments based on fixed areas or yields
Payments based on 85 per cent or less of the base level of production
Livestock payments made on a fixed number of head
Other
Collapse Current Total AMS (Amber Box)Current Total AMS (Amber Box)
Scheduled commitment level
Constituent data and methodology (AGST)
Market price support
Market price support: Eligible production
Other product-specific AMS/EMS
Non-product-specific AMS
Negative support amounts
De minimis
Excessive rates of inflation
Other
Collapse Classification of measuresClassification of measures
Classification of measures
Collapse Export competitionExport competition
Collapse Export subsidies subject to reduction commitments (Article 9.1)Export subsidies subject to reduction commitments (Article 9.1)
Transparency issues
Product coverage/scheduled commitments
Incorporated products
Special and differential treatment (Article 9.4)
Government involvement
Downstream flexibilities (Article 9.2)
Other
Collapse Circumvention of commitmentsCircumvention of commitments
Unscheduled export subsidies
Export credits, export credit guarantees, insurance programmes
International food aid
State trading enterprises
Other measures with circumvention potential
Quantity of total exports
Other
Collapse Export restrictions and prohibitionsExport restrictions and prohibitions
Collapse Transparency issuesTransparency issues
Timely notification
Special and differential treatment
Provision of information justifying the measure
Other
Collapse Importing Members' food securityImporting Members' food security
Importing Members' food security
Collapse ConsultationsConsultations
Consultations
Collapse NFIDCNFIDC
Collapse Quantity and concessionality of food aidQuantity and concessionality of food aid
Quantity and concessionality of food aid
Collapse Other forms of assistanceOther forms of assistance
Other forms of assistance
Product Categories
All agricultural products
Collapse <b><b><b><b><b><b>Live animals</b></b></b></b></b></b>Live animals
Bovine
Swine
Sheep and goat
Poultry
Horses
Other
Collapse MeatMeat
Bovine
Swine
Sheep and goat
Poultry
Horses
Other
Collapse DairyDairy
Milk
Milk powders
Butter
Cheese
Other
Collapse Other animal productsOther animal products
Eggs
Hair, Shells, bones, etc.
hides and Skins
Other
Collapse Fruit and VegetablesFruit and Vegetables
Fresh vegetables
Processed vegetables
Roots and tubers
Fruit
Nuts
Processed fruit or nuts
Fruit and vegetable beverages
Collapse Coffee, tea, spicesCoffee, tea, spices
Coffee
Tea
Mate
Spices
Collapse CerealsCereals
Wheat
Corn
Rice
Malt
Coarse grains
Collapse Starches, inulin, gumStarches, inulin, gum
Wheat
Corn
Processed vegetables
Roots and tubers
Other
Collapse <b><b>Oil seeds, fats and oils</b></b>Oil seeds, fats and oils
Seeds
Vegetable oils and fats
Fats/Oils of animal origin
Other fats and oils
Collapse Residues of processing industryResidues of processing industry
Wheat
Corn
Animal feed
Alcohol residues
Oilcakes and solid residues
Other residues
Collapse Plants and vegetal materialPlants and vegetal material
Live trees and plants
Cut flowers
Animal feed
Gums, saps and resins
Seeds
Medicinal/perfumery plants
Sugar
Other
Collapse SugarSugar
Cane or beet sugar
Other
Collapse <b><b>Cocoa</b></b>Cocoa
Cocoa beans/powder/butter
Other
Collapse Food preparationsFood preparations
Cereal
Oils
Coffee
Tea
Other
Collapse BeveragesBeverages
Waters
Alcoholic
Other
Collapse TobaccoTobacco
Tobacco
Cigars, Cigarettes
Other
Essential oils, fatty acids and alcohols and other chemicals
Collapse FibresFibres
Cotton
Silk
Wool
Other
Collapse <b>non-Annex 1 products</b>non-Annex 1 products
non-Annex 1 products
Live animals,Bovine,Swine,Sheep and goat,Poultry,Horses,Other,Seeds,Vegetable oils and fats,Cocoa beans/powder/butter,Other ,non-Annex 1 products
Question Summary
EU's Deforestation And Forest Degradation Strategy
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