POM Weekly Update – 31 March 2020 | UK Government Funds Anti-Indonesian Campaign

FERN, a UK-Dutch NGO, has published a new report, ‘Detoxifying Palm Oil’. The report in its own words “aims to document and describe existing initiatives and policies in relation to the palm oil trade between Indonesia and the EU … to inform discussions between and within different stakeholders on how the EU can be more pro-active and coherent in its trade, climate, energy, agriculture, development and environment policies when it comes to trade in palm oil with Indonesia.”

But make no mistake, this is a lobbying document, and it has been funded by both the UK Department for International Development (DFID) and the EU’s DG Climate and DG Environment.  

The two major aspects of FERN’s report that we need to consider when analysing it are 1) the FERN report itself; and 2) the funding and politics behind it.

The Report

FERN is seeking to tighten up restrictions on palm oil into the UK & EU. This has been prompted by four things: 1) the review of the Renewable Energy Directive (RED II) Delegated Act; 2) the European Commission’s Communication on the Stepping Up Action to Protect the World’s Forests; 3) the Indonesia-EU Free Trade Agreement; and 4) the expectation of a new trade arrangement between the UK and Indonesia.

First, RED II. FERN is completely supportive of the EU ban on palm-based biofuels in the RED, and the specific ban on palm oil because of the indirect land use change (ILUC) methodology. It also completely dismisses Indonesia’s arguments that the RED II Delegated Act is inconsistent with the WTO Agreements, specifically the TBT (Technical Barriers to Trade) Agreement.  Importantly, FERN wants to see these measures tightened even further to shut out Indonesia, by incorporating subjective human rights and land tenure requirements into certification pathways for ILUC.  

Second, FERN is seeking to use the EU Communication as a platform for introducing a due diligence regime and ‘Voluntary Partnership Agreement’ pathway for Indonesian palm oil.  A VPA for Indonesian timber products already exists. This option for palm oil has been suggested in EU policy documents for several years; but it is now a live option for EU policymakers.  The ‘VPA for Palm’ option is, however, fraught with danger. Establishing the VPA will require an agreement on a standard for palm oil harvesting and production, an export licensing system, and an export and import monitoring system.

This may seem like a workable solution. But there are reasons it is not. The most obvious is the cost. If the EU wants to ‘level the playing field’, such a solution would need to apply to all ‘like’ imports from all territories. In other words, it would need to apply to soybean oil or biofuel from the US, Brazil and Argentina; as well as to sunflower and rape from Eastern Europe.

This will be difficult to accomplish following the Juncker-Trump ‘Cars for Soybean’ deal that was secured in 2019, which gave a fast-lane for US soybean within the RED. It will potentially squeeze exports from Ukraine further, and annoy Russia’s satellites. But moreover, the cost of such a system places exporters at a relative disadvantage to European producers. The next question is the standard, and who gets to determine the standard. The biggest issue is whether it should be a legality standard, as is the case for timber, or a ‘sustainability standard’, which is what NGOs such as FERN are seeking. As we’ve seen in the past, what constitutes ‘sustainability’ for wealthy Europeans is vastly different from developing country producers. What the Russians and Americans will say – and do — in response to new EU sustainability requirements could present an entirely different set of challenges for Brussels.

Third, FERN sees the Indonesia-EU-CEPA trade negotiations as an additional pathway for tougher standards on palm oil imports. They are seeking to have a specific requirement that palm oil does “not have a negative impact on forests and people”, and that the agreement can be suspended if this requirement is breached. In line with this, they are asking that any dispute resolution mechanism on trade and sustainable development be binding, and go beyond the EU-Mercosur Agreement. 

Fourth, the UK is now on its own and needs new trading partners as it looks to globalise its economy outside of the EU. This will require new markets for goods and a winding back of EU-mandated regulations that act as barriers to trade. The Boris Johnson Government will have to ask itself whether it will allow DFID and green lobbyists their wish to block access for Indonesia’s largest agricultural export – which effectively gives them a veto power over the UK’s new trade policy and will leave UK negotiators stuck in the same years of limbo that the EU has occupied in its negotiations with ASEAN countries.

The Funders

Although FERN has dressed this report up as a series of sensible steps for policymakers, it’s worth taking a look at the politics behind FERN and its report.

FERN founder Saskia Ozinga has been a long-term campaigner against forestry and agriculture in developing countries.

The most illustrative case of this is the comments she made to the EU Forestry Committee in 2014:

“We are huge importers of illegally produced soya, palm oil, beef—all those types of products—and they are being imported without any restrictions, so it would be really helpful if there was another EUTR, EUTR-plus, or whatever you call it, that really tried to stop the import of those products.”

FERN has also previously been called out for making unjustified claims against palm oil legality. The politics of this is not surprising; FERN is at its heart a forest conservation organisation, and anything should be viewed through that lens.

But the funding for this report has come from three sources: the UK Department for International Development; the European Union Life Programme and the Ford Foundation.

The European Union Life Programme currently has around EUR1.4 billion at its disposal; it is funded by DG Climate and DG Environment. But what it extraordinary about this project is that EU is effectively lobbying itself. This document will be distributed among bureaucrats and EU Parliamentarians with the sole objective of promoting green protectionist measures that will tighten trade restrictions against Indonesia. Further, it is seeking to undermine any arguments that DG Trade might put forward regarding a strong and open trade relationship with Indonesia.

DFID funding is part of the UK’s Forest Governance Markets and Climate Programme, which has had around GBP250 million in funding over the past decade and was given an additional GBP30 million in September last year.

DFID and Whitehall need to ask themselves a serious question about their presence in Indonesia going forward. The UK has signalled that it wants greater engagement in the ASEAN region; is blocking Indonesia’s largest agricultural export the way to do it? Is funding NGOs to lobby against palm oil imports similarly helpful?

Finally, at what point does Indonesia decide the UK and EU are engaged in a deliberate ‘foreign interference’ campaign, and respond appropriately?

There’s more …

POM has been leaked information about what the UK Government plans to do next on palm oil. Look out for a special edition later this week.