Buttergate or Trade Angst?
The ‘Buttergate’ controversy has hit Canadian headlines over the past month—but what is the controversy?
It’s relatively simple: several bloggers claimed – without basic evidence – that Canadian butter had somehow become harder at room temperature. Other bloggers argued that this was because palmitic acid was being fed to Canada’s cows, and that this was increasing the levels of saturated fat in butter.
Canadian dairy organisations pointed out that palmitic acid has been used in dairy feed for years, and that there was no clear evidence that the consistency had changed.
Nevertheless, media organisations and bloggers went to great lengths to connect dairy feed to any number of allegations against the palm oil industry.
So, why now?
In January, Canada and Indonesia announced that they would be commencing public consultations on a free trade agreement.
There will be lobbying against this agreement from any number of sectors. When the CPTPP was under negotiation, it emerged that a number of products would see their tariffs reduced – including palm oil. But the key ingredient was palm oil derivatives used for feed, which would have their tariffs reduced from 11 per cent to zero.
Malaysia is yet to ratify the agreement, and has not been able to use this new tariff. But Indonesia will likely be given the same tariff reductions. This will put some Canadian feed producers – particularly oilseed meals – at a considerable disadvantage. As we noted last week, Swiss rapeseed producers had been campaigning against palm oil feed since 2017. It seems Canadian farmers are looking for a similar protectionist play. They should note that it did not end well for the Swiss protectionists: the trade deal they opposed was approved in a nationwide referendum last week.
RED Rears Its Ugly Head
Although European palm oil policy has been dominated by the Swiss referendum and potential new deforestation regulations in the European Union, the Renewable Energy Directive (RED) is still making its presence felt on palm and renewables markets everywhere.
Brussels’ newest iteration of the RED will be its revision to meet greater climate targets for the European Union from 2030 onwards.
The feedback period for the revised RED ended last month. Brussels has already committed to phasing out palm-based biofuels by 2030, with no similar commitment for other biofuels such as soy-based biodiesel.
The Indonesian Palm Oil Association stated quite clearly in its submission to the ‘RED III’ consultation that “this is the latest in a long series of EU initiatives aimed to regulate and exclude palm oil imports. The European Green Deal – which pushes for this early RED II revision – is the latest tool from the EU to impose new barriers to palm oil.”
As was pointed out by POM and other outlets, the greenlighting of soybean for the RED was to placate US farm interests, just as rapeseed was greenlit for European domestic interests. The discriminatory and protectionist nature of the measure has been underlined by the fact that there have been precisely zero calls for other crop-based biofuels to be phased out in the consultations.
The only public commentary doing so has come from – surprisingly enough – progressive EU think-tank Friends of Europe. Arguing against continued use of European forest biomass in the RED, they state: “replacing palm oil, which is found in almost 50% of packaged products, with alternative vegetable oils – like soybean, sunflower, rapeseed and coconut – requires more fertiliser and land. Soy in particular requires almost nine times the amount of land to yield the same amount of oil. Further, the boycott of palm oil unfairly impacts smallholder farmers who rely on palm oil exports to survive and shifts demand to countries like China where palm oil is subject to less regulation.”
Palm Oil Monitor publicised that Brussels was well aware that the discriminatory blocking of palm-based biodiesel would disrupt exports from Indonesia. Internal EU documents stated:
“In all scenarios, it is clear that biofuels/bioliquids represent an important end-use for palm oil in the EU, and a measure that would disincentivise it would have a significant impact on trade flows, in particular with South-East Asian countries. Broader impacts on trade relations could also be expected, notably with regard to the possible adoption by palm oil producing countries of retaliatory measures against EU products or risk jeopardising the negotiations for Free Trade Agreements (FTAs) with Indonesia and Malaysia.”
This is just one of the reasons that Indonesia has launched a WTO case against the EU – which Malaysia recently followed after much indecision.
It’s reasonably clear that ‘broader impacts’ on the EU-ASEAN are already being felt in trade relations – but this seems to be spreading, namely the EU’s ability to exercise political influence in Southeast Asia. As we pointed out last week, the EU is falling a distant fifth to influencing the region after China, the US, Japan and ASEAN itself.
Why is the UK Giving Brazil an Easy Run on Deforestation?
Palm Oil Monitor went to great lengths at the end of 2019 to point out that deforestation and fires in Indonesia were no match for those taking place in Brazil and the Amazon region. According to more recent data, deforestation in Brazil hit a 12-month high in 2020. Despite this, Western governments and campaign groups have focused squarely on palm oil and Indonesia.
Will this change? Two weeks ago the UK and Brazil signed a memorandum of understanding on “bilateral trade and economic relations”. But any push on deforestation in Brazil – indeed anywhere across South America is sorely lacking.
In the UK Parliament, a question was recently asked to the government regarding actions against Brazilian forests. The government avoided the question, pointing out the UK’s “committed £259 million in International Climate Finance to programmes on sustainable agriculture, avoiding deforestation, and improving livelihoods in Brazil.” This, of course, failed to note that the program being referred to contains virtually no specific activity for Brazil – but significant activity for Indonesia.
Even worse, there seems to be a wilful blindness to focusing on Indonesia regardless of actually achieving clear and coherent results with existing programs. The UK’s current major Indonesia-specific initiative – based in Papua – has been assessed as having a ‘major’ risk rating and appears to be having trouble connecting to the Indonesian government. The most recent review of the program states, “UKCCU needs to build improved relationship with the Government of Indonesia (e.g. Bappenas, MoEF) for its future programmes, including for any programmes related to Papua and West Papua provinces. UKCCU needs to coordinate with Bappenas’ Papua Desk to ensure that the any future programmes are in-line with the government’s working plan.”
We’ll have more on the UK’s position on palm oil in the weeks to come. However, the questions need to be asked: Why is the UK giving Brazil an easier run on deforestation when it’s clear the problems are significantly worse? Why is the UK targeting Indonesian palm oil and ignoring Brazilian soy?