The EU’s war on palm oil is about protectionism, not global warming
The title is Europe is make war on palm oil. But it’s so much bigger than that.
To hear Brussels say it, palm oil contributes to deforestation and global warming, and therefore goes against “public morals” in the European Union (EU). Indonesia and Malaysia disagree. Both have sued the EU at the World Trade Organization (WTO), arguing that Brussels is negotiating palm oil to protect domestic biofuels, including rapeseed and sunflower oil.
The EU will lose this case, and Brussels knows it. Europe’s management of palm oil is no more based on WTO law than on science.
The backstory is that in 2018 the EU Renewable Energy Directive, known as RED II, has come online. It sets renewable energy targets up to 2030 and is “complemented” by Delegated Regulation 2019/807, which defines sustainability and greenhouse gas emission reduction criteria for biofuels, bioliquids and biomass fuels. It is important to note that it distinguishes between forage crops that have high or low value. indirect land use change (ILUC). This is the deforestation angle. The only forage crop identified as having a high CIAS is palm oil.
Indonesia and Malaysia see this as proof that RED II is protectionist. They argue that it violates WTO agreements on technical barriers and trade in goods (subsidies are alleged against France). Europe disagrees, arguing that RED II is not a technical regulation, and that because palm oil is not “like” rapeseed or sunflower oil, there is no violation of most favored nation (MFN) and national treatment provisions. Just in case, however, the EU invoked the first-ever three-in-one exception, “simultaneously” raising affirmative legal defenses on public morals, human health and safety, and non-renewable natural resources.
If RED II is a technical regulation, that gives Indonesia and Malaysia more leeway to argue that it is not science-based and too trade-restrictive. The bet is that it is not a technical regulation. Yet Indonesia and Malaysia will gain in terms of MFN and national treatment if palm, rapeseed and sunflower oil, for example, are “like goods”.
Ironically, the EU gives them ammunition with every anti-dumping and countervailing duty filed against palm oil. These defensive trade actions relate to the fact that palm oil is “like” rapeseed, for example. And when those decisions are challenged at the WTO, as in EU — Biodiesel (Indonesia) and EU — Biodiesel (Argentina), the term “similar goods” is everywhere. This embarrassing fact comes back to haunt Europe’s first submission in EU—Palm Oil (Indonesia).
In this case, the United States also invoked public morality to defend the “Chinese tariffs”. The EU did not have it. Brussels has demanded that the tariffs are not “designed” to protect public morals and are not “necessary” to guarantee them. The EU was right. The bar must be set high for the use of public morals.
Now the EU wants to significantly lower the bar, if not raise it. In his second communication in EU—Palm Oil (Indonesia), Brussels says it uses a three-in-one “composite defence” involving public morality, health and safety, and non-renewable natural resources. It says “[t]This means that the three values-based and science-based goals are intertwined and […] failing it would mean that all three justifications would fail together.
And There you go. To help domestic biofuels, the EU invites the same abuse of the exception of public morality against which it rose up in United States — Tariff Measures (China). In fact, Europe is making matters worse by creating a three-in-one exception that is so convoluted that it cannot pass a serious “necessity” test.
It’s not just the law that’s against the EU. It is also science. Keep in mind that the Paris Agreement bases calculations of greenhouse gas emissions on production, not consumption, and not on an extraterritorial basis.
There is more. A work document speak Kiel Institute for the World Economy considers that the treatment of palm oil with RED II will not contribute to the fight against global warming. In fact, it will hurt. Three times the area of land that would be saved from deforestation will be lost to the production of rapeseed and soybean oil. Worse, while 90 % of palm oil sold in the EU is certified as ‘sustainable’, the same cannot be said for soya oil.
Two weeks ago, the European Parliament vote its final position on RED III. It’s debatable, but RED III could include a palm oil ban. There is also a new EU anti-dumping investigation into palm oil. This outburst of protectionism will hurt the cause of free trade and do nothing to reduce global warming.
Marc L. Busch is the Karl F. Landegger Professor of International Commercial Diplomacy at Georgetown University’s Walsh School of Foreign Service. Follow him on Twitter @marclbusch.