Key EU strategic goals – such as closer ties with ASEAN, new trade deals, and others – are being rendered unachievable because of Brussels’ obsession with attacking palm oil.
The EU’s protectionist policies on the import of commodities such as palm oil from the developing world, do not operate in a vacuum. This reality is sinking in across Europe and in Brussels.
Writing in the Financial Times this month, trade expert Alan Beattie discusses how a long-standing ideological clash between free-trade supporters and environmentalists in Europe is causing the Eurozone to miss out on strong trade opportunities and mutually beneficial relationships.
The EU needs to source imports that are critical to meeting the demand of the EU’s 450 million consumers; and it needs to find new, fast growing export markets.
Unfortunately, the EU’s internal ideological struggles are preventing them from fostering meaningful relationships with emerging economies like Indonesia. As Beattie writes, “The prospects of an EU agreement with Indonesia have been dimmed for years by the European parliament in effect blocking imports of palm oil because of worries over deforestation — a concern now being extended to restrictions on a whole range of different products.”
“Defensive environmental measures in trade,” as Beattie describes them, are severely limiting the ability of the EU to make progress in diversifying its imports and protecting palm oil and other critical components of their supply chain. These measures have “reduced exports from countries to the EU” but are also beginning to threaten broader European goals in the ASEAN region.
Financial interests, increased trade, regional security and diplomatic relationships are all at risk as the EU’s protectionist policies are barriers to the Europeans achieving these strategic goals.
Last week, Editor-in-Chief of Brussels Report, Pieter Cleppe, echoed concerns laid out by Beattie, noting that in trade deals, the EU “increasingly attempts to introduce all kinds of social and environmental standards.” These standards make it difficult for their partners to agree to terms without feeling as if their own sovereignty and regulatory framework is being trampled on by intrusive Brussels regulators.
In the latest example, the EU is exercising its creativity in imparting its regulations on trade partners with the new Corporate Sustainability Due Diligence (CSDD) directive from the European Commission. The proposal “imposes a whole range of specific regulatory choices under the label of ‘sustainability’, thereby affecting companies importing palm oil, soy and coffee, and threatens to burden them with a whole new set of disproportionate obligations [and] “may worsen deforestation, given how it would force greater use of alternatives that require more land use, like sunflower or rapeseed oils.” writes Cleppe.
The EU does not seem eager to take any of this into account, but a solution may lie just across the English Channel.
Post-Brexit, the UK has applied the principle of “mutual recognition.” Essentially, the UK requires imported products to be in compliance with local regulations for them to meet the UK’s standards of “sustainable”.
For countries like Indonesia, this principle is celebrated as domestic palm oil sustainability certification schemes like the Indonesia Sustainable Palm Oil (ISPO) standard have made great strides in not only meeting even the most stringent environmental and labour standards, but have also brought millions of small farmers into the certification fold. The UK’s mutual recognition principle allows these domestic benefits to remain while also enjoying a reliable relationship between Jakarta and London.
The approach from the UK is also far more practical, as defining “sustainable” becomes difficult when considering the developmental gap between the EU and Indonesia. As Cleppe explains, “Certain labour or environmental standards may not be considered acceptable in Europe, but they may be considered acceptable in emerging economies, where the alternative would be poverty, which is bound to also have a negative impact on social and environmental conditions.”
Applying this recognition as a “guiding principle” should be atop the list of considerations for EU regulators in Brussels. Especially so as Europe will need to build deeper relationships with countries like Indonesia as certain links of the supply chain are strained by a shift away from the import of Chinese products. This will be critical as Brussels hosts its first EU-ASEAN summit in December.
Put simply, if the EU wants to achieve its financial, diplomatic and security goals in the ASEAN region, and keep its relationship with palm oil producing nations healthy, it should consider adopting a model of mutual recognition that has proven quite successful in the UK.