EU and Indonesia Sign Trade Deal as Palm Oil Faces Deforestation Scrutiny

According to Deutsche Welle, Indonesia and the European Union have signed the Indonesia–EU Comprehensive Economic Partnership Agreement (IEU-CEPA) in Bali, marking a new chapter in trade relations. Palm oil exports were one of the most contentious issues during negotiations. EU officials stated that palm oil production is a major contributor to deforestation and pollution. Both sides aim for the agreement to take effect in 2027, allowing around 80% of Indonesian exports to enter the EU duty-free.

Starting in December, the EU will enforce the Deforestation Regulation (EUDR), a new legal framework aimed at combating global deforestation. Exporters, including those from Indonesia, must conduct due diligence and provide documentation proving their palm oil does not originate from recently deforested areas. While large corporations may be able to meet these certification requirements, smallholders—who manage more than 42% of Indonesia’s palm oil plantations—could face exclusion from the supply chain due to compliance challenges.