RCEP Negotiations Move at Glacial Speed
The most recent round of RCEP negotiations wound up in Singapore on May 8. There has been little information – from anyone – on what happened in the negotiations. This does not bode well; in the case of trade agreements, no news can often mean bad news.
ASEAN leaders have stressed that they wish to see the negotiations completed at the end of 2018, but we have heard this sort of promise many times before since negotiations commenced in 2012.
The key potential gain for palm oil under the RCEP agreement will be greater access to the Indian market.
Is this possible?
In March of this year India raised its applied tariffs on crude palm oil to 44 percent from 30 percent and on refined palm oil to 54 percent from 40 percent.
This brought their applied tariff into line with the ASEAN-India FTA (AIFTA), which has the same applied rates. They are set to be reduced further next year.
Why the change to the applied tariffs? It was highly likely that most exporters were using the lower, WTO applied rates rather than the AIFTA rates.
India’s WTO bound tariff on both is a steep 300 percent. This means that at any point, India can raise the price of palm oil imports. In the early 2000s they were as high as 92 percent.
India’s rate on soybean oil is set at 45 per cent, so as of next year the playing field will be more level. It also means that Indian authorities have less room to tinker with import settings.
But this also highlights the overwhelming need for exporters to make greater gains in the Indian market under RCEP. India’s vegetable oil consumption will continue to increase with its rising wealth; its domestic producers will not be able to meet that demand. India already imports 70 per cent of its edible oil.
The problem now for Malaysia and Indonesia is that India appears to be giving up close to nothing in the negotiations – India is particularly concerned about Chinese access. Some are even talking of going ahead without India. This would be a loss for palm exporters, but a gain for the agreement.
European oilseeds producers go on the offensive …
European oilseed producers have hit out with aggressive statements on the future of European biofuels policy.
The industry has launched a paid advertising campaign on the European Politico site, and has released a series of statements articulating their position.
The European Oilseed Alliance – via Politico – calls on the EU’s biofuels policy to be saved, basically by banning palm oil from the Renewable Energy Directive revision (RED II).
While the EOA can’t point to specific inferior environmental performance of palm oil, they note that palm’s share of EU biodiesel production has gone from 10 per cent in 2007 to 27 per cent in 2017. Palm has genuinely swept the EU market, while also meeting the EU’s sustainability standards.
The Association of the Producers and Use of Biofuels in Slovakia, representing oilseed growers in Poland, Czech Republic, Hungary, Slovakia, Lithuania, Latvia and Bulgaria has called for an outright ban on palm oil.
“Ban on palm oil and all its derivatives
Palm oil drives peatland drainage, and peatland drainage is a far more devastating climate event than any other land use change, including all other forms of tropical deforestation due to soil oxidation, which results in an order of magnitude greater amount of GHG emissions than simple deforestation. We applaud the EP decision to ban palm oil and note that a ban must have a reason in order to withstand any legal challenge. Therefore, we call to clearly state that palm oil is banned based on it being the only biofuel feedstock whose expansion is synonymous with soil oxidation. Accordingly, a policy that aims to limit peatland drainage, will apply also to all other forms of palm (derivatives such as POME and PFAD)”.
The problem with the position – which has clearly been influenced by various NGO positions – is that ‘guilt by association’ doesn’t work in international law: Not all palm oil is produced from drained peatland.
This particular exchange is reminiscent of the EU’s attempt to ban crude oil from Canada’s tar sands in 2012. Greener MEPs pushed the line that oil from tar sands was ‘dirtier’ than conventional crude. Much of the analysis was produced by Transport and Environment, arguably the most vocal NGO supporting the palm oil ban.
… And palm oil producers do the same
The activities of palm oil producers in the Holy See and Italy stepped up this week after meetings at the Vatican in the week prior.
Malaysia, Indonesia and the Holy See held a conference, “Eradicating Poverty Through Agriculture and Plantation Industry to empower Peace and Humanity”.
Officials included Luhut Pandjaitan (Coordinating Minister for Maritime Affairs of the Republic of Indonesia), and Tan Sri Bernard Giluk Dompok (Malaysia’s Ambassador to the Holy See), as well as Governor of Edo State in Nigeria, Mr. Godwin Obaseki.
The key takeaway was simple:
… Oil palm cultivation has contributed significantly towards raising the income level of rural small farmers, addressing poverty, employment creation, and new business opportunities. Besides that, it was also underlined that palm oil is also an important component of the global food supply chain from developing economies in particular among the vegetable oils traded globally, and that the future development of palm oil cultivation and palm oil industry shall be based on sustainable practices that takes into account environmental as well as social considerations in order to create a balance between economic growth, better employment and income for the small holders.
The meeting was held under the auspices of the Dicastery for Promoting Integral Human Development. This is a relatively new initiative, introduced by Pope Francis in 2016.
The Dicastery takes on one of the Vatican’s core missions in relation to hunger and poverty relief. It is overseen by Cardinal Peter Turkson, originally from Ghana.
The Dicastery’s work isn’t particularly new; the Vatican has had a long history promoting agricultural investments and the work of smallholders. It’s also not surprising they are taking on this work in the region; there are 24 million Christians in Indonesia. According to some estimates, this is more Christians than in the UK.