The not-so-clean trade deal between the EU and Indonesia

• By Julie Zalcman, trade campaigner for Friends of the Earth Europe, and Rachmi Hertanti, Researcher at the Transnational Institute. This opinion piece first appeared in Sustainable Views.

In the global rush for ‘critical’ raw materials, the EU hopes to conclude a Comprehensive Economic Partnership Agreement with Indonesia, the world’s biggest nickel producer. 

Critical raw materials such as nickel are necessary for the energy transition, but their exploitation should never happen at the expense of human rights and the environment. That is however where these free-trade negotiations appear to be heading.

The EU seems set on forcing Indonesia to open market access for European companies to its resources, and secure Europe’s supply chain for nickel, a key mineral used for electric vehicles batteries and stainless steel.

But the increasing demand for nickel has triggered a new wave of extractivism, with dire impacts on the environment and human rights.

Mining activities create toxic waste and have already polluted Indonesian seas and rivers, reducing fish stocks, threatening coral reefs. 

Nickel mining is causing skin infections in children, threatening the livelihoods of farmers, fishermen and Indigenous communities and forcibly displaced local people. 

The expansion of nickel mining is also a major driver of deforestation, with nearly 80,000 hectares of forest already cleared to extract nickel. Half a million additional hectares of forest are within nickel concessions, putting them at high risk. 

If you’re thinking the EU Deforestation Regulation will be there to protect Indonesia forests, you might have to think twice. It does not cover minerals, meaning that those imports are allowed into Europe without any controls with regards to deforestation. 

And it’s not only about forests. The trade deal would also have a negative impact on climate. According to the Sustainability Impact assessment, conducted by the European Commission, the agreement would lead to an increase of greenhouse gas and CO2 emissions in both the EU and in Indonesia. 

Perpetuating neo-colonial trade relations

The Indonesia-EU trade deal also risks eroding Indonesia’s economic sovereignty and its potential to develop its own industry.  

Forcing Indonesia to open the ‘critical’ raw materials sector to global markets and foreign corporations will undermine the country’s policy of limiting minerals exports to process them domestically. It will prevent Indonesia from creating local jobs and supporting value addition.

To make matters worse, the proposed deal would not allow Indonesia to oblige foreign companies and investors to transfer technology to Indonesian companies

The EU’s desire to secure essential minerals for its own industrial development will only perpetuate extractive business practices, as usual, deepening development inequalities. 

More privileges for multinationals at the expense of Indonesia sovereignty 

The EU is pushing hard in these trade negotiations for an Investment Chapter that will shield multinational corporations, allowing foreign investors to sue Indonesia for unlimited compensation if new laws or regulations negatively affect their expected profits. 

Indonesia has already been threatened with arbitration by mining companies Freeport and Newmont Mining. This trade deal risks increasing the number of new arbitration cases brought forward by mining multinationals.

The inclusion of an Investment Court System, which is merely a rebranding of traditional Investment-States Dispute Settlement (ISDS) mechanism, will undermine the Indonesian state’s capacity to respond to public demands to implement social and climate policies, once again threatening its sovereignty.

The EU has actually recently decided to exit the Energy Charter Treaty after several ISDS cases against EU members, yet is still promoting similar investment provisions in its new trade deals. 

A partnership of equals is still possible

The EU must move towards a truly equal partnership with Indonesia, which does not force Indonesia to liberalise its raw materials exports or give up its sovereignty to set prices. It must support Indonesian value addition and sustainable economic development. 

Europe could invest in and support cleaner and more responsible processing capabilities by paying a fair price for resources and ensuring that all cooperation and trade is based on the highest environmental and human rights safeguards. 

Local communities and Indigenous Peoples’ free, prior and informed consent must be granted and their decisions respected.

Before rushing to extract ever more resources from a finite planet, the EU should first question its demand for raw materials by adopting consumption reduction targets and be serious about its approach to trade, ensuring any future agreements are partnerships of equals, based on resource justice and energy sovereignty.