The Oil Palm

The French Palm Oil Tax is a Bad Case of Déjà Vu

On January 21st, the French Senate passed an amendment approving a massive and discriminatory new tax on palm oil. The tax was passed as part of the French Government’s Biodiversity Bill.

For many who have followed the palm oil debate in France, this is sadly familiar. The same Green Senators, using the same discriminatory criteria, proposed the same palm oil tax in 2013, 2014, and 2015. The tax was defeated on every occasion.

So, why was the tax defeated then, but it has passed now? This is a critical question in order to understand the current situation in France.

The primary reason that the tax was defeated previously is that it has no economic rationale at all. Imposing only taxes on palm oil, and not on similar vegetable oils, would be discriminatory and unjust.

Many French Parliamentarians and Government leaders recognised this, and so voted against the tax on every occasion – in 2012, 2013, 2014 and 2015. The current French Foreign Minister, Jean-Marc Ayrault was even moved to give a speech in 2013 promising that France “would never impose discriminatory taxes on palm oil”.

So what has changed? Two primary factors –

First, the intervention of Environment Minister Segolene Royal. Mme Royale has previously made negative comments about palm oil, for which she apologized. However, she has played a substantial role in allowing the new discriminatory tax to pass. Mme Royal gave a ‘neutral’ recommendation to the Senate, substantially influencing the governing Socialist party. As a result, many Socialist Senators who in previous years had opposed the discriminatory tax, supported it in 2016.

Second, the Senate this time proposed the tax as part of the Biodiversity Bill – a politically less significant piece of legislation. This allowed Mme Royal and the Green Senators to sneak through the palm oil tax, with less scrutinty or attention. Previously, the tax had been proposed in the high-profile PLFFS Financing Bill, meaning that bogus arguments were exposed in public and so the vote was always against the tax.

As a result, the damaging, discriminatory tax has now been passed, and awaits a vote in the National Assembly in March.

We know that the tax is economically unsound. It is also legally unsound. The tax would contravene both WTO trade rules, and the Internal Market laws of the European Union, because it is discriminatory (only applying to palm oil and not to competitor products). To make matters worse, the tax is scientifically unsound. Claims that palm oil is harmful for health have been thoroughly debunked by numerous international scientific bodies; and allegations that Malaysia is deforesting have been exposed by a recent United Nations forest report as being simply, and demonstrably, inaccurate.

To recap, the palm oil tax is discriminatory, which breaks EU and WTO rules. The scientific rationale has been undermined by experts in every field; and the economic basis for the tax is fraudulent.

The decision now moves on to the French National Assembly, and the French Government will have a critical role to play. Malaysia, and other palm oil producing countries, are historically good friends and trading partners with France. Indeed, the French Foreign Minister, M. Ayrault, said as much – in the same speech in 2013 when he promised not to tax palm oil. It should be the fervent hope of the one million Malaysians who depend on the palm oil sector – including 300,000 small farmers – that M. Ayrault can keep his promise, and the French Government will see sense and reject this tax.