- What next in the EU’s WTO Palm Case?
- Are activists and journalists finally giving Indonesian palm oil credit?
- MEP: Deforestation regulation should follow UK model
Palm and the WTO: What Next?
It’s no secret that the European Union is currently courting Indonesia. German news outlet DW described European diplomats undertaking a ‘flurry of visits’ to strengthen the relationship between Brussels and Jakarta.
Why the rush now?
In short, the trade and diplomatic relationships between the EU and two of its largest trading partners – Russia and China – have either soured or are looking shaky.
Europe consequently needs two things: new export markets for manufactures, particularly from Germany; and new, reliable sources of energy and agricultural commodities. Indonesia has both of these in spades.
The European Commission is acutely aware of how critical this juncture is in its relationship with Indonesia. As G20 Chair, all eyes are on Indonesia and how it will handle the juggling act between the EU, Russia, China and the US.
But underlying this are two additional spectres.
First is two impending cases at the WTO. One concerns Indonesia’s exports of nickel, with the EU arguing Indonesia’s export ban is illegal under global trade rules. The second – which we have discussed at length – is the EU’s ban on palm oil imports under the Renewable Energy Directive (RED).
Judgements on both cases are due in the next few weeks. Rumours – and these are only rumours – are that Indonesia is likely to win the case on palm oil, but lose the case on nickel. On nickel, Indonesia has already stated it is prepared to wind back the ban and simply increase export taxes – a perfectly legal move.
On palm oil, however, it’s quite likely that Indonesia will go into arbitration with the EU. Here, Indonesia has the upper hand. What is the EU prepared to give up to maintain its ban?
The EU has been quite satisfied in the past to bear the cost of a WTO judgement to please its farmers, as it did with beef from the United States.
If it is not prepared to give up the ban, it will need to look at either ceding further ground to Indonesia in the forthcoming IEU-CEPA negotiations or designating Indonesia as a ‘low risk’ country under the forthcoming deforestation regulation.
But if Brussels isn’t prepared to give up any ground at all, it will need to look for new partners in the region.
Is Palm Oil Finally Getting its Due?
On the topic of low risk, the annual UNFCCC climate conference has, as usual, resulted in a deluge of reports and press releases on emissions and the environment – and forests are often a key topic.
This year, however, Indonesia and palm oil have found themselves on the black side of the ledger.
An event organised by CIFOR – the world’s leading forest institution – decried the lack of progress made on deforestation. However, prominent sustainable landscapes expert Charlotte Streck noted the following:
“So far, we have achieved very little of the announced goals. Global deforestation decreased in 2021 by 6.3%, so it has gone down but not fast enough. In particular Latin America and tropical Africa are not on track. Only tropical Asia is – and it is because of the efforts by Indonesia and Malaysia to significantly reduce deforestation.”
The question is, how much will this count towards Western countries changing their largely unfounded opposition to Indonesian commodities and palm oil more broadly?
To underscore how much of a hang-up palm oil can be at a COP conference, note the following from the Food and Environment Reporting Network, which often acts as a mouthpiece for NGOs.
FERN has run a criticism of a new agricultural roadmap from NGO Tropical Forest Alliance (TFA), which is working with agricultural giants such as Cargill and some of Indonesia’s largest palm oil companies. The piece cites comments from fellow NGOs Mighty Earth and WWF. Palm oil is, of course, the first commodity mentioned by FERN.
But digging deeper into the story, Mighty Earth’s criticisms of the TFA report don’t mention palm oil at all. And WWF ‘commended’ efforts at reducing deforestation by the palm oil industry.
Even Reuters jumped on the bandwagon, noting:
“Among the three rainforest nations, only Indonesia has managed to curtail deforestation since last year – continuing a six-year trend that’s been encouraged by a combination of market forces, business pressure, and improvements to law enforcement and forest management.”
While we disagree with its reasoning here – it is Indonesian policy above all else that has made a difference – perhaps Indonesia is getting its due.
But this begs a question: are environmental journalists only prepared to change the NGO narrative when the NGOs themselves allow?
MEP Praises UK Legality Standard, Urges Brussels to Follow Suit
Writing in London’s MACE Magazine last week, MEP Michiel Hoogeveen praised the UK’s Due Diligence system – a system which has been effective and “frictionless” largely because it is based on a legality standard – and encouraged the EU to study it closely as it considers its own Due Diligence proposals in the coming months.
Put simply, the UK legislation has the “the objective of excluding all illegal deforestation from UK supply chains”, notes Hoogeveen,but its legality standard ensures that the UK works in cooperation with its trading partners by recognizing local laws and regulations as the standard for exporters to meet.
MEP Hoogeveen says the EU, who shares the broader goal of eliminating illegal deforestation from supply chains, would “be better off” adopting a similar system to that of the UK’s. This measured approach would ensure security of supply for critical commodities such as palm oil, would simplify the exporting and importing processes and ultimately encourages deeper cooperation between the EU and developing countries such as Indonesia.
Indonesia has already embraced the UK’s legality-based approached and is primed to increase cooperation with the UK on sustainability and economic opportunities in the future. “The EU could secure similar goodwill and cooperation if we are willing to put forth a system that actually takes into account our trading partners’ needs rather than trying to stifle their valued export industries” Hoogeveen explains.
Unfortunately, the EU has introduced Due Diligence proposals that do not include a legality standard, a decision that would put them at a massive competitive disadvantage to the UK and would harm both European businesses and consumers with sharp price increases. Not to mention the signal the EU would send to Indonesian and other growing economies that shows they clearly intend to target palm oil and other sustainable industries despite them being critical to the European market.
At a time of record inflation, when consumers are depending on their elected leaders to keep skyrocketing cost-of-living numbers from climbing even higher, MEP Hoogeveen urges his EU counterparts to consider a “light-touch and proportionate Due Diligence, based on legality…” An EU Due Diligence proposal with a legality standard modeled after the UK shows that Brussels is capable of recognizing the value in mutually beneficial relationships with sustainable commodity exporters like Indonesia and are committed to keeping costs down for EU businesses and consumers already struggling to make ends meet.
Read the full op-ed from MEP Hoogeveen here.
An Update for Palm Oil Monitor
The Palm Oil Monitor website got a refresh this week. It comes ahead of an exclusive multi-part analysis of the European Union’s programs in Indonesia and Malaysia, which have already caused rifts between Brussels and the ASEAN countries, and threaten to undermine trade and poverty alleviation across the region. Stay tuned!