With its planned free trade agreements with Indonesia and the Philippines, the European Union Is seeking to advance more than just its economic interests. In a world of increasing geopolitical tensions — between the US and China and amid multiple crises — the EU is looking for new alliances, raw materials, and sales markets via bilateral Comprehensive Economic Partnership Agreements (CEPAs). But the promise of “fair and sustainable partnership” is being undermined by asymmetrical power relations, ecological destruction, and deficiencies in democracy.
Alessa Hartmann is an international trade and investment policy consultant at PowerShift e.V.
Global Governance, Not Partnership
Tensions in global trade policy have increased markedly since Donald Trump started his current term as president. The United States’ protectionist agenda, the escalation of its trade war with China, and increasing export controls on strategic goods have led the EU to diversify its economic alliances. Its goal is to reduce its external dependencies (on China above all), develop alternative sources for critical raw materials, and create new sales markets.
The CEPA initiatives are indicative of a broader strategic shift in EU trade policy. In the wake of Donald Trump’s protectionist tariff policies, and in light of China’s growing economic influence in Southeast Asia, the EU is banking on “values-based” free trade agreements that have geopolitical implications. In Brussels, Indonesia and the Philippines are regarded as economically attractive partners — and therefore as alternatives to the supply-chain architecture dominated by China. The planned agreements will serve to safeguard the EU’s economic interests and send a geopolitical signal — not least of all in its competition with China and the US.
The Role of Indonesia and the Philippines
The importance of Indonesia and the Philippines for European trade and climate policy is primarily rooted in the raw materials they possess, particularly as the world’s top two producers of nickel, a key resource for battery production and electric vehicles. Indonesia is home to about 22 percent of the world’s nickel reserves and has established itself as a major global supplier — a fact that the EU is seeking to strategically exploit in its raw materials and climate policy. Shoring up that supply chain is considered an important step for the European Green Deal and reducing dependence on China.
However, this approach contains fundamental contradictions: nickel mining in Indonesia is doing serious social and ecological harm, including deforestation, water pollution, mangrove destruction, and loss of the foundations of Indigenous ways of living. On top of that, there is also the systematic use of forced labour in nickel processing. Particularly paradoxical is the fact that most nickel is processed in coal-powered industrial parks, which significantly worsens its emissions balance and runs contrary to the broader goal of a climate-neutral transport sector.
Similar problems also exist in the Philippines, the world’s second-largest nickel producer. Nickel mining there is often accompanied by displacement, labour law violations, and water pollution.
While the EU is formally pursuing ambitious goals and refers to key international norms, it has not yet integrated any binding dispute resolution mechanisms, clear potential sanctions, or consistent implementation obligations.
Both countries are now pursuing strategies for refining their raw materials domestically. In 2020, Indonesia banned exports on unprocessed nickel in order to lure investments. Similar steps are being discussed in the Philippines. However, these industrial policies conflict with the interests of European corporations, which rely on customs-free access to raw materials.
It should therefore come as no surprise that this subject has become a real bone of contention in the negotiations between the EU and Indonesia. In its free trade discussions, the EU is pressuring its partners to give up their export restrictions and ensure market access — an approach that could prove detrimental not only in terms of development policy, but also with respect to strategy. While Brussels continues to negotiate with Jakarta about opening new markets, China has been investing heavily in Indonesia’s nickel industry for years, both in mining and refinement. As a result, Chinese companies have secured the lion’s share of nickel production, which is crucial for battery manufacturing: for the current year, it is expected that up to 82 percent of that production will occur via Chinese-controlled companies.
Under these circumstances, the EU is said to be banking on a partnership-based strategy with respect to raw materials — one that would not push Indonesia to liberalize its raw materials exports or give up its power to set prices, but rather one that would support the creation of local wealth and sustainable local economic development. This includes investing in environmentally sustainable and socially responsible processing infrastructure as an alternative to what at the moment are often environmentally harmful production sites driven by Chinese capital, as well as paying a fair price for raw materials and equitable technology transfer. Measures like these could help establish a new model for fair and sustainable trade relations.
The Trade Agenda’s Drawbacks
In terms of human rights, the trade negotiations should be viewed with a degree of scepticism, given that the human rights situation in both Indonesia and the Philippines has been the subject of international criticism for years. Both countries exhibit severe structural shortcomings with respect to protecting basic human rights, particularly freedom of assembly, labour rights, Indigenous rights, those concerning environmental and land conflicts, and the safety of civil society actors. It is particularly problematic that the right to consultation and free, prior, and informed consent (FPIC) for Indigenous peoples has not been adequately implemented in either country. For that reason, mining projects frequently result in conflicts over land rights.
The EU’s planned trade agreements with Indonesia and the Philippines ignore known risks to human rights, despite the fact that the sustainability impact assessments (SIAs) commissioned by the EU itself warn about precisely such issues. In the case of Indonesia, the SIA anticipates massive industrial job losses — up to 60,000 in the automotive sector alone — in favour of increased employment in the precarious textiles sector. The report also warns of an increase in jobs in special economic zones, where low wages and weak labour laws prevail. Rather than strengthening industrial development, the agreement threatens to reinforce Indonesia’s position as a low-wage country.
With respect to the agreement with the Philippines, the SIA results present a similarly alarming image: economically weaker sectors like textiles, apparel, and electronics are expected to grow, even though they already have a reputation for exploitation, child labour, and poor working conditions. Women, children, and informal workers would be particularly affected by such changes. Additionally, Indonesian NGOs warn against incorporating elements of Indonesia’s Omnibus Law on Job Creation into the trade agreement because it impairs human rights and labour protections in Indonesia.
Unfortunately, the section on sustainability that the EU has proposed in its negotiations with Indonesia does not adequately address these problems. The draft shows that, while the EU is formally pursuing ambitious goals and refers to key international norms, it has not yet integrated any binding dispute resolution mechanisms, clear potential sanctions, or consistent implementation obligations, making this section politically symbolic and legally weak. A trade policy based on actual human rights and environmental justice requires more than voluntary cooperation formulas — it necessitates enforceable standards and civil society monitoring mechanisms.
Industrial Policy Sovereignty Under Pressure
The partner countries’ regulatory leeway would not only be limited by the regulations on the trade in raw materials and public bidding. The planned agreements would also include comprehensive protections for investments, and the extent to which they will be adopted in the agreement with the Philippines remains unclear at this point.
Provisions concerning investor−state dispute settlements (ISDS) are highly problematic for several reasons. They allow foreign investors to sue states before private arbitration tribunals when political decisions and/or policies reduce their expected profits, which would therefore create the possibility of massive interventions into democratic sovereignty. In the future, Indonesia and the Philippines could be sued by corporations from the EU if, for instance, they should impose new environmental requirements, pass stricter climate protection laws, or take steps to protect Indigenous rights. The prospect of claims for compensation ranging into the billions could even discourage political decision-makers from proposing urgently needed regulations, an effect known as a “regulatory chill”.
A sustainable and just trade policy cannot only serve the interests of European industry.
For Indonesia, which has consciously distanced itself from existing ISDS agreements in the past, reintroducing such a system would be particularly contradictory. Its government had already terminated numerous old investment protection agreements after they were repeatedly invoked contrary to the public interest. In a country contending with massive environmental problems, land conflicts, and social tensions linked to resource mining and palm oil production, ISDS mechanisms would only further restrict the already limited scope of political action.
Time for Fair Trade Relations
Both Indonesia and the Philippines are pursuing their own strategic interests through the planned free trade agreements. For Indonesia, improved access to the EU’s market for processed raw materials (particularly nickel), the allure of direct foreign investment, and a geopolitical reduction of dependence on China are key priorities. The Philippines, on the other hand, regards the CEPA primarily as insurance against its potential removal from the EU’s unilateral Generalized Scheme of Preferences Plus (GSP+), from which it currently benefits. The CEPA is to be used as a tool for promoting electronics, textile, and agricultural exports and utilized as a symbol of an economic policy shift under President Ferdinand Marcos. In both cases, however, there is a tension between governmental industrial policy and critiques emanating from civil society, which warn of risks for human rights, ecological exploitation, and democratic deficiencies.
For its part, the EU wants to conclude the agreement with Indonesia as quickly as possible, while negotiations with the Philippines are still at an early stage. The fact that the EU now wants to move these agreements forward with greater speed is indicative of a trade policy strategy that links economic interests with the safeguarding of geopolitical power.
This strategy serves the goal of securing raw materials for Europe’s green transformation, while simultaneously undermining human rights, ecological standards, and industrial sovereignty in respective partner countries. A just and sustainable trade policy would look different. It would have to enshrine binding environmental standards, labour protection safeguards, and the rights of Indigenous communities — including effective sanction mechanisms. Such policies would also seek to encourage regional wealth creation, technological cooperation, and the reduction of the use of raw materials through recycling and substitution.
One more thing is certain: a sustainable and just trade policy cannot only serve the interests of European industry. What is needed is not a pursuit of unilateral interests, but real partnerships — and those that occur on equal footing.
Translated by Joe Keady and Ryan Eyers for Gegensatz Translation Collective.