Writing in The Jakarta Post this week, Fadhil Hasan, Head of Trade and Promotion for the Indonesian Palm Oil Association (IPOA/GAPKI), discussed the EU’s Deforestation Regulation proposal currently being considered and described the adverse effects it would have on small farmers, the Indonesian palm oil industry and the EU’s relationship with reliable trade partners like Indonesia.

Hasan noted how, as written, the proposal puts four million Indonesian small farmers in a position where they “face the risk of being cut out of supply chains completely because the EU refuses to take their needs into consideration and refuses to be flexible on the criteria required for its regulation.”

The EU regulation is demanding that fully segregated palm oil be proven for every shipment, an idea that sounds feasible to MEPs in Brussels boardrooms but is “not possible to implement in the real world,” says Hasan.

Given the size and scale of smallholder operations, with Indonesian smallholders operating on two to four hectares of land on average, they cannot sell directly to palm oil mills and instead have to sell to a number of dealers who collect from a number of smallholders and mix their harvests before sending them to be processed. This creates a situation where smallholders who may operate sustainable farms are unable to verify if their product was mixed with oil palm fruit bunches from a plantation that is not certified by the EU’s preferred certification scheme, RSPO.

“This is not the only problem with the draft regulation. Other Indonesian businesses in the palm oil value chain will also be adversely affected, especially by the lack of flexibility and cooperation when it comes to certification,” explains Hasan.

The solution? Exempt smallholders of a certain size from the impossible traceability requirements in the Deforestation Regulation proposal and ensure domestic certification schemes like ISPO are accepted as a form of compliance in any final EU regulation. Additionally, Hasan suggests, “partner governments and affected sectors, such as the Indonesian palm oil industry, should be fully involved in the consultation process for the EU’s implementing legislation.”

If the EU does decided to push forward with the current proposal, it could potentially lead to “one of the largest trade barriers ever erected against Indonesian farmers.” With this outcome looming, Indonesia would be justified in a “targeted and trade-focused response” against the EU. In the end, the harmful, protectionist policies currently under consideration “will increase poverty, decrease sustainable development, and undermine decades of progress for rural communities across Indonesia,” Hasan concludes, adding “The EU used to say that it supports sustainable development – if this exclusion of small farmers is confirmed, no-one will ever believe that again.”