How Will the New EU Political Landscape Impact the Palm Oil Industry?

2019 will be remembered as a pivotal election year for the European Parliament and the Commission. Green parties (Liberals, Socialists and Greens) made significant gains across Europe. Their growing presence and their influence on the agenda of other political parties will lead to more environmental regulations. Populist parties of the left and right made big gains also and they have strong protectionist views and policies.

This result will have a dramatic, and negative, effect on palm oil, as the new Parliament and Commission will pursue a greater emphasis on environmental and sustainability regulations, and the Populist parties who will favour economic protectionism.

The EU Commission will now feel even more entitled to push environmental regulation and to target imports from non-EU countries, including Malaysia. The new European Commission President Ursula von der Leyen has made green policies part of her political guidelines which will be carried through all key portfolios, alongside the major piece of work for the first 100 days of the new Commission: The European Green Deal.

The European Green Deal, aimed at making Europe the first climate-neutral continent by 2050, will be the first objective of the new Commission. Commission Vice President Frans Timmermans is in charge of the European Green Deal. He was notably quite vocal during the revision of the RED and has supported previous planned restrictions on palm oil. It’s likely that opponents of palm oil will call for the Green Deal to include some restrictions on palm oil imports into Europe.

Secondly, the European Commission has published a communication on Stepping up EU Action to Protect and Restore the World’s Forests. The stated objective by the European Commission is to propose, and launch, a series of EU actions to reduce tropical deforestation and forest degradation around the world. It is easy to see how this could be used by protectionists and anti-palm oil activists to call for new import restrictions.

Many within the European Parliament are already calling for a ban on imported products linked to deforestation (they are targeting mainly palm oil, and to some extent soybeans).

The European Parliament’s response will be led by the Agriculture and Rural Development (AGRI) and the Environment & Public Health (ENVI) Committee. The ENVI Committee is chaired by Renew Europe (Liberal) Pascal Canfin of France – former Head of WWF France. His leadership of the ENVI Committee will be a crucial part of the discussions around the EU’s policy on palm oil imports over the coming months and years.

And this will find echo in the upcoming revision of the Renewable Energy Directive (RED) Delegated Act (DA). The publication of the DA back in May 2019 confirmed the progressive phase out of palm oil from 2021 until a complete ban as of 2030. A revision of the DA is foreseen in 2020-2021.

This issue will be followed closely by MEPs, such as Bas Eickhout (Green, from Netherlands), who has said he will not back down from their plans to restrict and ban palm oil, even inviting a fight over it at WTO level.

Outside of specific policies and regulations, there is a wider context. Green parties, and Populists/protectionists will have more influence and control over the EU’s broader policy arena, including foreign affairs and international trade.

There are no exact plans set out– but from public statements made during Commissioners-Designate Hearings it seems that the EU is likely to pursue more protectionist rules within EU free trade agreements – often hiding behind the argument that the protectionism is needed for environmental reasons. 

Mr. Phil Hogan, Commissioner-Designate for Trade, who used to be the Commissioner for Agriculture declared recently that he will ensure any Malaysia-EU FTA or EU-ASEAN FTA includes strict criteria and chapters on environment and sustainability. This, clearly, is aimed at palm oil.

The changing landscape in Brussels presents a new challenge for Malaysia. It is important for the EU to realize that Malaysia is an ally that shares their commitment towards environment and sustainability. But, there is a chance that the EU prefers to continue with its unfair and discriminatory practices towards palm oil. In that case, the question is how – and whether – the palm oil producing countries will stand up for their small farmers. If they do not, then Brussels could simply steamroller over them.

Written by The Oil Palm