- The Parliament’s Deforestation Regulation proposal calls for extreme measures on imports;
- Commodities from land that was almost 90 percent bare could be blocked;
- It is seeking to block chemical products that will likely lead to further bans on consumer goods;
- The Commission should push back if it wants to salvage its trading relationships.
The debate – and attention from developing countries on the EU Deforestation Regulation – has centred on three things.
First is the cut-off date for deforestation. The cut-off date proposed by the Commission was the end of 2020; the Parliament is proposing the end of 2019. For many developing countries the difference will not be significant.
Second is the classification of countries according to risk of deforestation in a three-tier system. The highest risk means higher evidentiary requirements for compliance.
Third is the traceability requirements and compliance. This is, in many ways, the crux of the trade barrier that is being presented by the European Union. Most commodity producers will be able to meet the cut off date, but proving this is the case is a completely different matter – especially if the supply chain is complex with numerous layers of cooperatives, dealers, and traders.
At this stage the Commission is seeking to require satellite imagery and specific coordinates. The Parliament, however, wants a more detailed analysis with every shipment, and a much higher bar for clearance.
But the Parliament goes much further on other requirements. Here are some examples.
First, it is seeking to have the scope of the regulation expanded to include preventing other ecosystems for use for agriculture and commodity production, not just forests, specifically bushland, shrubland and other wooded land.
This is problematic. Shrubland falls under ‘other wooded land’ in FAO definitions; it can have a combined cover of bushes and shrubs and trees of 10 per cent or above. The land could be close to 90 per cent bare; but would nonetheless any products grown on it after the cutoff date would be banned.
Second, the Parliament is seeking to have the products covered by the regulation expanded to incorporate cattle, swine, sheep and goats, poultry, cocoa, coffee, oil palm and palm-oil based derivates, soya, maize, rubber, and wood and products, including charcoal and printed paper products.
The inclusion of palm derivatives is even more dangerous. Take stearyl alcohol, for example. The largest exporters of this derivative are Indonesia, Malaysia and the Philippines. The largest importers are China, Japan, the US and Korea, with France at fifth spot. It is used primarily in cosmetics manufacturing and derived from palm kernel oil (PKO).
The traceability requirements for PKO and stearyl alcohol will increase, and drive up their prices in the EU. Korea and the US will not face similar requirements. Large companies can absorb that cost, but they will erode EU competitiveness and profitability for products such as cosmetics.
Do EU authorities then attempt to clamp down on cosmetics imports? Probably. The reviews of the regulation that are to take place in future will inevitably seek to do so.
The question for the Commission is simple: are the grown-ups in the room going to take charge? The regulation is already alienating Europe’s trading partners.
The most straightforward path for the Commission here is to ensure that methods of compliance for exporting countries are jointly negotiated, rather than imposed. The clearest example of this took place when the European Commission approved US soybean’s sustainability standard for inclusion in the EU Renewable Energy Directive, just as it moved to ban palm oil from the EU renewables market. This was a negotiated outcome that can be achieved when Brussels considers a trading partner important enough. Does the EU think this way about Indonesia? It’s time for the Commission to let us know what it really thinks.