- The EPP motion that could scrap most EUDR checks for “negligible-risk” countries when it hits the plenary on Wednesday;
- This will collide with WTO rules, forcing Brussels to pick between a complex new risk model or another enforcement delay.
- The Commission could cede to EPP demands and introduce a delay – which would also curry favour with the US
Palm exporters and European capitals have been surprised by a bid by the European Peoples’ Party to effectively reopen the EUDR.
The push was made in the Environment Committee last week, where a proposal by the EPP gained enough support to move a resolution through to the plenary – and there will be a vote on the motion later this week on July 9.
The question is what this means for the future of the legislation, and how it might impact palm exporters.
The EPP has successfully pushed within the Committee for the introduction of a ‘negligible risk’ category for certain countries. Most regulatory obligations for these countries would effectively disappear.
Many exporting nations with low rates of deforestation would welcome this, but it would generally apply to European countries.
This presents a problem. The waiving of regulatory obligations would come into conflict with WTO rules. Read our revised legal analysis here.
And, as usual, the problem is going to be in the Technical Barriers to Trade (TBT) agreement.
If the EU wants to introduce a genuinely risk-based measure, it will have to make the risk assessment and benchmarking much more complex for it to be compatible with WTO rules.
The extremely simple methodology being used at the moment would not adequately reflect the genuine levels of risks of deforestation for particular commodities from different areas. The national generalisations currently being used would not cut it.
With palm oil, for example, a large company that has very precise control of its supply chains through a strong chain of custody system and traceability could also potentially qualify as negligible risk, regardless of national origins.
This will be something of a Pandora’s Box for the Commission if it heads down this path and modifies the EUDR accordingly.
But it also means that the Parliament is taking a significant risk. Here’s why.
Let’s say the Motion moves forward, and the Commission agrees to introduce a negligible risk category. The response from the Commission could be as follows:
- Yes, we’ll introduce negligible risk, but this will require postponing the regulation again;
- In order for us to meet our obligations, we will need to redesign our risk-based assessments;
- This will be significantly more complex, and may not give any protectionist advantage to certain industries, such as beef from Brazil or timber from the United States, or palm oil from Indonesia.
But this underlines a simple fact: the Parliament can’t have it both ways. It can’t have ‘negligible risk’ unless that risk is assessed properly. And a proper assessment of that risk means giving the same treatment to imported products.
For Indonesia, this was brought to a head last week when Indonesia’s Vice Foreign Minister Havas called out the potential negative WTO outcomes with the negligible risk category – and another potential WTO fight with the EU.
The related development here is that Mondelez – the US’ largest snack maker – has called for the EUDR to again be delayed.
Mondelez told media outlets:
“Further regulatory barriers could undermine the competitiveness of a €70 billion industry — at a time when the EU needs to step up its focus on global competitiveness and economic resilience … That’s why we strongly believe there is a need for a further delay.”
The swing factor here could be the negotiations between the US and the EU. If the US is seriously pushing for the EUDR to be delayed again, this could push the Commission to cede to the demands of the EPP – and kick the can down the road once again.
The EPP seems to currently have no qualms about annoying the left side of politics in Brussels, as evidenced by the demise of the greenwashing bill.
And this is something the EU is particularly good at: if a decision is too difficult, just put it off for another year.