Palm oil trade war? ASEAN-EU relations sour over sustainability debate even as UK softens stance

Palm oil trade war? ASEAN-EU relations sour over sustainability debate even as UK softens stance

Palm oil has become a major reason for stalled conversations in the ASEAN-EU Strategic Collaboration joint working group, where up until now not even a conference agenda has actually been authorized.

This is due to the fact that the EU has actually been determined on consisting of the EU Green Offer, which includes its Farm-to-Fork technique. This is seen as being harmful to palm oil-producing nations, so ASEAN has refused to accept it.

” The meeting was very first set for January, then February then April and was considering that delayed once again, with both sides not accepting the agenda the other desires,” Trade Policy Director at consultancy company Article Three and palm oil market specialist Khalil Hegarty told FoodNavigator-Asia

” In addition to talks at the working group not materialising, conversations for the Indonesia-EU FTA have also struck a deadlock due to the fact that the EU has been continuously including things to the sustainable development part of the conversation– so that has stalled too.”

Ironically, regardless of being freely opposed to Indonesia’s biggest product export and identified to cut off among the country’s significant economic lifelines, which would likewise be really detrimental to the economics in the ASEAN area, the EU has likewise been attempting to improve trade relations with the area– which is what brought around the ASEAN EU Strategic Collaboration in the first location. Its inflexibility on sustainable discussions continues to stall progress.

” The EU’s position on sustainability conversations remains an extremely severe danger to the palm oil market,” stated Hegarty.

” It is extremely inflexible in regards to its brand-new policy positions e.g. the New Green Deal– and due to the intricacy of the procedure where any policies require to be associated all 27 member specifies then go to the European Commission before any modifications are made ways that it could take years and years to make any modifications at all.

” So in spite of the improvements and changes made [by the palm oil industry], the truth is at present these issues at the EU are simply going to keep on going and stay a genuine issue for the market.”

The palm oil industry has currently felt the very real impacts of these delays. Previously this year, the Belgian government announced a palm oil restriction start 2022, prompting the Indonesian government’s rage and prompting dangers to carry out a reciprocal ban on Belgian dairy products.

Indonesia ought to consider a mutual ban on Belgian exports, for example milk and dairy products produced by Belgian farmers, also starting in 2022,” stated Member of the Trade Commission in the Indonesian Parliament Dr Herman Khaeron.

” The Belgian Federal government has chosen to start a trade war and this hostile act has effects in our worldwide trading system

According to Hegarty, the Indonesian federal government is naturally ‘ truly irritated’ at this and the trade ministry is losing patience with the back and forth surrounding palm oil sustainability. This might seriously affect trade relations even further with Indonesia– and most likely Malaysia, and perhaps the entire of ASEAN.

” I believe that the Indonesian government is taking this actually seriously, and if they do carry out a ban on Belgian dairy, it would send a genuine signal to Belgium and Brussels– it might not get the restriction withdrawed, but I attempt say it would make them more careful of taking such sweeping actions on palm oil,” he said.

” This is how it would go: Imagine the EU introduces a trade step on palm oil. Indonesia [or Malaysia] retaliates by going sluggish on clearing EU deliveries at custom-mades, say French cognac. What occurs at this moment is that someone from the EU market will call the relevant EU trade attache and say that shipments aren’t being cleared through, and then, finally, word reaches Brussels and then they go nuts.

” So this would be at a smaller scale and the warning would be to Belgium initially, but it absolutely would reveal Brussels too that they require to be more mindful about what they do and the ramifications of their choices.”

Is palm oil gaining an ally in the UK?

The UK used to be among palm oil’s most vocal opposers when part of the EU, however with the introduction of Brexit, it appears to have considerably softened its stance with its eye on ASEAN as a significant trade partner.

The UK was just recently accepted by ASEAN as a dialogue partner and is involved in multiple trade collaborations with either the bloc as a whole or individual ASEAN countries. These collaborations are growing fairly quickly too, offered the nation’s search to diversify trade partners after splitting from the EU.

” The UK has actually currently split from the EU in regards to palm oil opposition in my view– at the very least they have actually already moved away from harder deforestation policies and are revealing greater interest in nationwide accreditation systems such as the Malaysian Sustainable Palm Oil (MSPO) and Indonesian Sustainable Palm Oil (ISPO) plans,” said Hegarty.

” The UK federal government has already embarked on the setting up of a Joint Working Group with Indonesia to go over farming commodities and sustainable production, which is likely to make the accreditation pathway smoother– I didn’t think it would ever happen, however it did.”

National plans like ISPO and MSPO would be various from voluntary schemes such as the Roundtable on Sustainable Palm Oil (RSPO) plan which has taken precedence in international conversations so far, however it appears that nationwide schemes are looking to hold more weight in terms of sustainable accreditation as these would be nationwide standards.

” It would be a government-to-government scenario which truly holds more water than a voluntary circumstance, so these national schemes are increasingly important,” said Hegarty.

” If ISPO is effectively decreasing deforestation, policymakers in the EU and somewhere else will have no factor not accept it. This would similarly imply that the entire certification facilities that has been produced over the past 15 years by [environmental] NGOs and Western business will end up being less pertinent.”

” It is the factor ecological NGOs are now increasing their attacks and pushback on the ISPO since late, as these green groups are fretted the EU could start taking these seriously.”

Light at the end

With green groups seeing and opposing every inch of progress and the EU not showing any signs of flexibility over sustainability policies, the question still remains whether there is any way out of the rut for the palm oil industry.

According to Hegarty, one method would be to continue with nationwide standards such as ISPO and MSPO, as these are the most likely ones that the EU would accept, if it ever loosened its position.

” These national standards are truly the method forward and where Brussels has some genuine latitude over, so bodes better for acceptance at both sides,” he stated.

Another possible ray of light depend on the fact that other nations are now equaling the EU for market share.

” EU’s position in the worldwide vegetable oil trade is even more being overtaken by China and India as their markets increase in size,” he included.

China imported as much vegetable oil as the EU in 2018, and as of this year is importing some two million tonnes (15%) more than the EU, a circumstance anticipated to grow as China’s population continues to increase.

2020 was also the very first year that more palm oil was imported by China than the EU, and 2021 is anticipated to be no different.

” This remains in part a result of Brexit; the UK’s imports are no longer counted against the bloc’s totals. As the UK seeks its own trade path, it is apparent that the EU’s worldwide trade clout has actually been lessened considerably,” stated Hegarty.

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