Faux greenery cannot get in the way of free trade

Something big and benign happened last month, and I bet you missed it. Indonesia formally applied to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). It deposited its official letter of application just as Britain was completing its own accession process. The way is now clear to a much closer commercial relationship between the two G20 nations.

Indonesia has been an under-reported regional success story, both in terms of the bedding down of democratic norms and in terms of its impressive and sustained economic growth. Its accession to the CPTPP is, on its own, a happy and important development in a world where protectionism has been on the rise since 2012.

Airlangga Hartarto, then the Coordinating Minister for Economic Affairs, explained that the membership bid was ‘aimed at driving structural reform in the country and opening markets for Indonesia’s economy’. Given that Indonesia is the fourth most populous state in the world, home to 275 million souls, domestic deregulation will have an effect far beyond the borders of that lush and exquisite archipelago.

The question is how much Britain stands to benefit from Indonesia’s continuing growth. And the answer depends on the extent to which we seize the opportunities now opening up there.

Both countries have recently elected new leaders: Keir Starmer here and Prabowo Subianto there. In both countries, the transfer of power was peaceful and democratic. And, in both countries, the new governments have decided not to revise the successful trade policies that have already been set in motion. The UK Labour Party have celebrated the CPTPP accession negotiated by their predecessors, and President Subianto has declared that the application launched by his predecessors will be kept on track.

All of this is encouraging. Free trade may currently be unfashionable in Washington and Brussels, but it remains the surest way to raise living standards that anyone has yet come up with. Starting from a low baseline, the UK and Indonesia have huge opportunities for mutual investment and freer commerce, increasing choice, lowering prices and generally making everyone better off – especially people on lower incomes.

Britain is a world leader in areas like clean energy, education, financial services and digital technologies. Indonesia is buying what Britain is selling, having embarked on an ambitious and so far successful programme of human development.

Now for the real opportunity. Because the EU has royally messed up its relations with Jakarta, Britain stands to become the chief regional partner to that teeming nation – not just as a fellow CPTPP member, but through closer bilateral links.

Brussels has imposed tariffs and trade barriers on Indonesia’s largest exports, including cocoa, coffee, palm oil, steel and timber. The EU’s ‘deforestation regulation’ (EUDR) has hit Indonesia’s largest farm export – palm oil – and its protectionist tariffs on other palm exports have been found to breach WTO rules. 

It cannot be stressed too strongly that these measures, like almost all tariffs and trade barriers, are essentially protectionist in nature. Who pushed for them? Who lobbied gourmandising Eurocrats in the finest restaurants in Brussels? In no small measure, the producers of European rapeseed oil, who – understandably from their point of view, I suppose – don’t like foreign competition. 

Because it doesn’t quite do to put the argument in such blatantly self-serving terms, they don’t. Or, at least, their lobbyists don’t. Instead, they pretend that their real concern is ecological, and hope that our critical faculties will freeze up if they show us enough pictures of baby orangutans. Be under no illusion. The all-encompassing nature of these tariffs exposes their economic, not ecological, intent.

EU protectionism has created an understandable backlash in Jakarta. The Indonesia-EU FTA, under negotiation for almost a decade, has effectively been paused ever since the EU’s deforestation rules were adopted.

You might be tempted to dismiss Indonesia’s stance as based on sheer national selfishness. But you’d be wrong. The Indonesian position is backed, not just by its neighbours in Southeast Asia, but by most of the world’s large economies, including the US, Canada, India and even Brazil, under Leftie pin-up Lula. It is Europe that is the outlier here.