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Key Issues Affecting Palm Oil In The EU And In EU Member States In 2020 And beyond

The following are the key issues affecting palm oil in the EU, in EU Member States and in other European countries during 2020 and beyond.

1. The EU’s Renewable Energy Sources Directive

The key development in 2019, and which will likely continue to play an important role in the 2020 and beyond, is the EU’s revised Renewable Energy Sources Directive (RED II).

Analysis by MPOC Brussels office : It can be expected that, in the coming months, further EU Member States will update their respective domestic biofuel policies in light of the RED II and the Delegated Act. In parallel, the WTO dispute triggered by Indonesia will move forward at the WTO. Malaysia should urgently define its strategy of engagement with the EU and decide how to interact both within the existing negotiating fora and within the framework of WTO dispute settlement.

2. Green Deal

On 11 December 2019, the European Commission presented its much anticipated ‘European Green Deal’, which provides for a number of policy initiatives aimed at making the EU “the world’s first climate-neutral continent by 2050”.

The EU’s Green Deal is poised to re-open a number of energy-related EU policies, which would be updated to adjust them to the new long-term objectives on “climate-neutrality”. In fact, the first policy area listed by the European Commission under the Green Deal is the area of ‘clean energy’, which summarises the EU’s approach to “decarbonise the EU’s energy system”. The document states that “relevant energy legislation will be reviewed and where necessary revised by June 2021”, which would coincide with the transposition deadline of the RED II for EU Member States. The Green Deal’s document on ‘Sustainable mobility’ highlights the European Commission’s objective to “boost supply of sustainable alternative transport fuels” – which, clearly should also include sustainable palm oil. Furthermore, the EU’s Green deal Communication states that, by summer 2020, the Commission would “present an impact assessed plan to increase the EU’s greenhouse gas emission reductions target for 2030 to at  least 50% and towards 55% compared with 1990 levels in a responsible way”.

Analysis by MPOC Brussels office : It can be expected that the European Commission will make proposals in light of the objectives of the Green Deal, which will likely also have implications for palm oil.

3. 3-MCPD

The EU is currently in the process of setting new maximum levels, amending Council Regulation (EEC) No 315/93 of 8 February 1993 laying down Community procedures for contaminants in food, for 3-MCPD-esters in vegetable oils and fats and fish oils, infant formula and follow-on formula, and foods for special medical purposes intended for infants and young children, as well as for glycidyl esters in fish oils.

Analysis by MPOC Brussels office : This issue will likely soon be picked up again by the PAFF Committee and it can be expected that the EU’s new maximum levels will come into effect during the course of 2020.

4. ‘Palm oil-free’ claims, labelling, and marketing campaigns

For years now, the issue of ‘palm oil-free’ claims and labelling, as well as other similarly misleading marketing campaigns, has negatively affected the image of palm oil among consumers in the EU and beyond. The trend started in Belgium and France, but continues to spread to other EU Member States such as ItalyLatvia, the NetherlandsPolandSlovakiaSpainSweden and the UK, and beyond the EU to other European countries, such as Norway. In 2020, the wave of ‘palm oil-free’ claims and labelling has also reached Germany, which, until then, had been relatively spared.

Those claims and labels are, arguably, illegal under EU and EU Member State law, which has been consistently confirmed by administrative authorities in several EU Member States.

Analysis by MPOC Brussels office: Considering the misleading nature of such claims and their illegality, EU authorities should step up the enforcement of EU rules and Malaysia /the Malaysian palm oil industry should consider taking steps to challenge, directly or in cooperation with EU stakeholders having procedural standing, certain specific commercial practices in selected EU Member States in order to establish administrative precedents of a stronger and more systemic value.

5. EU policy on forests and deforestation

In past months, the EU has been working on its policy regarding forests and deforestation.

On 23 July 2019, the European Commission adopted a Communication addressed at the European Parliament, the Council of the EU, the European Economic and Social Committee and the Committee of the Regions on ‘Stepping up EU Action to Protect and Restore the World’s Forests’. The Communication builds on a number of previous EU strategies and intends to lay out possible actions to enhance existing policies and take additional action. The Communication follows up on the EU’s 2008 Communication on Deforestation.

The Communication adopts a very broad approach, focussing on five distinct areas of priority and future action: 1) Reducing the EU’s consumption footprint on land and encouraging the consumption of products from deforestation-free supply chains; 2) Deforestation-proof EU development cooperation; 3) International cooperation; 4) Investment; and 5) Improving information on forests and commodity supply chains.

On 5 September 2019, the European Parliament’s Committee on the Environment, Public Health and Food Safety (ENVI) held an exchange of views with the Commission on the Communication. On 16 December 2019, the Council of the EU invited the Commission, in close coordination with EU Member States, “to develop a roadmap for the joint follow-up by the Commission and Member States on the actions proposed in the Communication, in particular by setting clear targets by the first semester of 2020 to be achieved in terms of work with and support to partner countries”. Non-governmental organisations (NGOs) have also been lobbying the Commission to put forward a legislative proposal on the protection and restoration of forest during the course of 2020.

Analysis by MPOC Brussels office: The issue of forests and deforestation will clearly figure on the agenda of the Commission going into 2020 and beyond. The actions defined and undertaken may again result in commercial consequences for palm oil and/or increase the negative language on the palm oil industry.

6. Addressing the issues of palm oil within the available trade negotiations

The negotiation of comprehensive preferential trade agreements between the EU and palm oil-producing countries, currently ongoing with Indonesia and soon to be relaunched with Thailand, provides important opportunities to addressing palm oil-related issues. In such agreements, certain otherwise discriminatory disciplines can be packaged without leading to WTO-inconsistency. Additionally, within these instruments, negotiating parties have the opportunity to agree on institutionalised dialogues and cooperation mechanisms, which might allow for a continued flow of information and discussion and, ultimately, for disputes to be resolved at an early stage.

Analysis by MPOC Brussels office : In 2020, the EU will continue its trade negotiations with Indonesia, while negotiations with Thailand are likely to be resumed. In both of those negotiations, the issue of palm oil will likely play an role. Agreements to be reached may have important implications for other palm oil-producing countries, notably Malaysia. Malaysia should consider resuming its FTA negotiations with the EU as soon as possible, so as not to lose its comparative advantages.

Prepared by Uthaya Kumar

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