This week the third iteration of the Renewable Energy Directive (RED III) moves into its next phase as the EU Parliament, Commission, and Council move into their ‘trilogue’ negotiations.
As we pointed out last week, the EU Parliament voted to accelerate the ‘phase out’ – i.e. the ban – of palm-based biofuels in the EU. The trilogues – commencing today in Brussels – will test whether the Commission is taking the side of the Parliament, or it still considers the largest economies in ASEAN serious trading partners.
We might sound like a broken record, but it’s becoming critical for two reasons.
First, the WTO interim report on the RED and whether it complies with EU rules is due soon. On this, famed US trade lawyer Marc Busch has penned a column pointing out the additional hypocrisy in the EU’s position. This goes beyond ‘one rule for the West, another for the rest’ and into a point of law.
He points out that Malaysia and Indonesia are likely to win their cases on ‘national treatment’ grounds because palm, sunflower and rapeseed oils are ‘like goods’, and that the EU’s ongoing imposition of tariffs against palm oil has undermined its case:
“These [EU] defensive trade actions are about palm oil being “like” rapeseed, for example. And when these decisions are challenged at the WTO, like in EU—Biodiesel (Indonesia) and EU—Biodiesel (Argentina), the term “like goods” is everywhere. This inconvenient fact comes back to haunt Europe’s first submission in EU—Palm Oil (Indonesia).”
He also points out that the EU has weakened its own ‘public morals’ case against palm oil – which it will also likely use for any defense of the Deforestation Regulation.
When the EU attacked the US for using ‘public morals’ to justify its China tariffs, the EU said that the tariffs weren’t necessary nor designed to protect public morals. It was effectively arguing that the interpretation should be narrow, otherwise it becomes open slather.
But Busch writes:
“Now, the EU wants to dramatically lower the bar, if not discard it. In its second submission in EU—Palm Oil (Indonesia), Brussels says it’s using a three-in-one “composite defense” involving public morals, health and safety, and nonrenewable natural resources. It says “[t]his means that the three values-based and science-based objectives are intertwined and […] to fail it would mean that the three justifications should fail together.”
“And there you have it. To help domestic biofuels, the EU is inviting the same abuse of the public morals exception it railed against in US—Tariff Measures (China). In fact, Europe is making things worse by creating a three-in-one exception that is so convoluted it can’t possibly be put to any serious “necessity” test.”
Second, the EU last week indicated that it is getting desperate for new trade deals given the situation in Ukraine. Politico writes:
“Moscow’s invasion of Ukraine has made securing new trade partnerships, especially with more like-minded allies, an urgent mission for the EU. Brussels wants to diversify its trade flows to become less dependent on countries like Russia and, to a lesser extent, China.”
In order to do this, it wants to re-negotiate sustainability texts with partners such as Mercosur and most likely Indonesia, and it also wants to bypass the EU Member States for ratification of trade deals.
But this also shows that the EU is losing leverage in regions such as Southeast Asia. If the mission is ‘urgent’ the Commission needs to show both humility and leadership.
A memo to Brussels: ASEAN is liberalising just fine. Jakarta and other capitals aren’t looking to Europe as a model for open trade. If the EU wants to join the party, it should perhaps look to the ASEAN agreements for guidance, and not the Treaty of the EU.