Palm Oil Monitor Weekly Update – 9th March 2020

EU Update: WTO Members Take EU to Task, Again; A RED Relic The EU Takes a Pounding at the WTO

WTO members including some of the world’s largest agricultural exporters have again taken the EU to task for continuing to ignore the concerns of its WTO partners.

At the WTO’s Goods Committee in December, a joint statement from the US, Brazil, Malaysia and some of the world’s largest agricultural goods exporters, stated that they had pretty much had enough of the EU’s approach to the WTO system, and its increase of non-tariff measures, particularly when it comes to chemicals in food.

The statement reads:

“Despite repeated requests in the TBT and SPS Committees over the past four years, the EU has not identified either the level of protection being sought or the specific pathways of exposure or risks that it seeks to mitigate, to justify the trade impact of these restrictions. The EU has not taken into consideration the comments of other WTO Members on draft regulations. It has also ignored requests to complete science-based risk assessments before the implementation of these measures; to take into account risk assessment techniques developed by international organizations and to articulate how risks would be assessed.”

The statement also points out that they’ve raised the issue in the Goods Committee, simply because the EU ignores their comments in other committees.

This should sound familiar to those following the Renewable Energy Directive (RED) debate. The EU did precisely this when it refused to notify or even acknowledge that the RED would present a technical barrier to trade.

This will likely have further implications when the EU’s 3-MCPD regulations go into effect, and palm oil exporting nations attempt to again raise the problem at the WTO. 

A RED Relic

Although the RED debate is now at the WTO, the policy is ultimately the result of decisions that were taken nearly 20 years ago. In 2001, the Commission wrote a communication stating that the EU should move to using biofuels, primarily for security: the EU could not supply its own energy needs.

In 2006, this moved to a directive, which pushed that the EU implement renewable energy targets.

This was the first iteration of the RED. A progress report on the first directive stated:

“European demand for biofuel imports can contribute to improving trade relations with the EU’s trading partners, and provide new opportunities for developing countries which have the potential to produce and export biofuels at competitive prices”.

Clearly the EU hasn’t followed through on this promise.

Will Malaysia’s Upheaval Impact Palm?
The political upheaval in Malaysia over the past two weeks means that Teresa Kok is no longer the country’s Minister for Primary Industries, and that the Minister for Trade, Darrell Leiking is also no longer in office.

At the time of writing, new Prime Minister Muhyiddin Yassin was yet to appoint replacements, although rumours abound.

The bigger question is what a new administration will mean for the country’s approach to palm oil exports and trade policy more broadly.

The Prime Minister has already stated that he is seeking to repair ties with India regarding the palm oil issue, indicating that there is a broader concern for both the industry and for the large number of farmers that have taken the issue to heart.

Other big picture items the new government will confront are: supporting WTO action against the EU regarding the RED DelegatedAct; ; whether it will put forward a strategy on 3-MCPD in Europe that aligns with CPOPC and others; and whether or how it will now engage with anti-palm NGOs and activists that have attacked the dominant regime in Sarawak – Gabungan Parti Sarawak (GPS) — over the past three years. The wrinkle here is that GPS has given critical support the new coalition government.

It’s worth noting that the PM was at various points both trade Minister and agriculture/agro-industry Minister. Under Prime Minister Badawi more than a decade ago, before serving as former PM Najib Razak’s deputy until 2015 when he was fired from the post.

Under both administrations there was generally a positive attitude towards larger agreements such as the CPTPP agreement.

The world has changed since the pro-liberalisation days of the late 2000s, but the PM is likely more than aware of the beginning of the EU’s palm oil wars that commenced in the early 2010s. For a good part of this period, the Ministry of Primary Industries was led by Bernard Dompok, who could be described as nothing less than a fierce defender of palm oil in Malaysia and internationally.

Forgotten Lessons on Deforestation

new study by a consortium of scholars from the US, Australia and Indonesia looks closely at deforestation dynamics across Indonesian Borneo in relation to inactive selective logging concessions. The results appear to surprise the researchers, but are no surprise to anyone who has spent time in Indonesia: deforestation rates go up when logging concessions are inactive.  Around 29 per cent of inactive concessions have smallholder agriculture present.

Why? Because inactive concessions – and any other forest areas — are seen by local communities as an opportunity to establish crops and generate livelihoods.

Although the researchers are examining the impact of land uses on biodiversity and conservation, there still appears to be a general misunderstanding of the interaction between logging, plantations and communities in Indonesia. Much of this was borne out in the reformasi era and there is an extensive body of work covering it; but many of the lessons do not appear to have been learnt.

Synthetic Palm Oil?

The news of the Gates Foundation’s funding of a synthetic palm oil alternative demonstrates beyond doubt how skewed the current policy debate over palm oil has become.

Clearly some basic education is needed: palm oil has more than 5,000 years of use. But palm oil was introduced as an alternative to any number of commodities centuries ago, first as a replacement for existing lubricants and as an alternative to dairy fats in margarine, and then as an alternative to fossil fuels.

But now, apparently, we need an alternative to the alternative.

The work of the researchers is admirable; they are trying to produce a fatty acid or vegetable oil alternative that is produced from waste food. The high levels of food waste, particularly in the Western world, mean this is a problem that should be solved. But coming up with a ‘palm oil alternative’ is likely to be expensive, and could hardly be called ‘natural’.

And it occurs to us that the researchers are actually trying to solve a food waste problem rather than a palm oil problem.

We’ve seen the skewed logic of finding ‘alternatives’ to existing products produce some particularly perverse outcomes in the past – single use plastic bags replacing paper is one of them.