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If Europe wants to halt climate collapse, why is it watering down rules on palm oil?

Beneath its Green Deal rhetoric, the European Commission won’t jeopardize trade interests to tackle deforestation.

Hans Wetzels
16 October 2020
Forest fire at Rumbai Pesisir village in Riau Province, Indonesia, on March 1, 2020. Indonesia's fires often come from the burning of forests for palm oil production
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Afrianto Silalahi/NurPhoto/PA Images

This article is part of ourEconomy's 'Spotlight on the European Green Deal'.

It’s 12 December 2019 – just one day after the European Commission (EC) presented its Green Deal to the world. A small delegation of high-level lobbyists of the EU-ASEAN Business Council (EU-ABC) reports to the offices of European Commissioner Phil Hogan in Brussels. The Green Deal is a brand new political masterplan that should transform Europe into the first climate neutral economic bloc by 2050. The lobby delegation has travelled to Brussels from its home base in Singapore to demand an explanation. During the meeting with Hogan, the lobbyists express concerns about how difficult it is getting European dairy exported to Thailand, about new Indonesian legislation banning alcohol, and about high import tariffs on cars in the ten member states of the ASEAN economic community.

Above all, the EU-ABC is concerned about the impact the Green Deal might have on regulations concerning palm oil.

The EU-ABC is a small but extremely influential lobby group. Only the biggest European multinationals are eligible for membership. The group represents the foreign interests of Unilever, Shell, Bayer-Monsanto, German car manufacturers such as Daimler and BMW, liquor producer Pernod Ricard, insurance companies, healthcare and the financial services industries. From its head offices in the heart of Singapore, director Chris Humphrey organizes mission trips to ministries, arranges meetings with heads of state all over Asia, travels to Brussels to meet with top EU diplomats and always makes sure the interests of European multinationals are taken care of.

‘After the presentation of the Green Deal we wanted to ask the Commissioner some questions about what these new rules could mean for world trade,’ Humphrey explains about his meeting in Brussels. ‘EU rules on importing palm oil are already becoming much stricter. We expect the Green Deal to make matters even worse.’

Global web

The EU is a key player in the global economic web neoliberalism has woven. Europe is the biggest consumer market in the world, has trade links around the globe and by itself imports more from least developed countries than the United States, Canada, Japan and China combined.

Two thirds of those imports consist of raw commodities: Brazilian soya ends up in feed for livestock, cocoa from Cote d’Ivoire is processed into chocolate and Ukrainian wood becomes cheap Ikea furniture. To produce electrical cars, EU companies need large amounts of lithium, Europe imports oil and gas to meet its energy needs, and relies on Indonesian palm oil to produce cosmetics and foodstuffs. In international rankings European oil firms and car makers always turn out to be among the biggest.

To ensure sufficient raw materials to keep the economic machine going and guarantee worldwide markets for European companies to sell their products, the European Commission signs trade agreements with other countries. Especially since Donald Trump became president of the United States on the premise of a nationalist ‘America first’ policy, the EC has been feverishly trying to keep Europe on the map as a defender of the free trade order that has shaped world relations.

Over the few years, the Commission has signed new trade deals with South Korea, Canada, Japan, Mexico and Vietnam and reached a political accord with the South American bloc Mercosur (Brazil, Argentina, Paraguay and Uruguay). According to the most recent negotiating overview, there are also talks underway with Australia, Uzbekistan, the Philippines, New Zealand and Indonesia, and a massive investment agreement with China. Also talks with the US are back on track, mainly to prevent Trump from slapping high tariffs on European cars – a measure the American president has been threatening for years.

Forest fires

Sadly, the downsides of a trade system ultimately about ensuring the ability of corporations to make profits across borders, have become increasingly clear as well: growing inequalities, environmental degradation, loss of democratic control and steeply rising emissions. After the US and China, the EU is the biggest emitter of greenhouse gasses in the world. To move Europe towards a more sustainable economy, the Commission has designed its Green Deal.

Up until now, the Green Deal is not much more than an ambitious roadmap full of green promises, reduction goals, green investment strategies and plans to reduce fossil fuel dependency. To convert its ambitions into law and policies, the EC plans to introduce several packages of EU legislation, for which it will have to convince member states to cooperate and set rules in international agreements.

The latter is exactly what worries most multinational companies, Humphrey explains: ‘In theory, the business community supports what the Commission want to achieve by this Green Deal. But policy makers often forget that you can’t just demand greening measures from trading partners around the world and expect that to have no consequences for European companies doing business outside the EU.’

Indonesia is a prime example, Humphrey says. The biggest Muslim nation in the world produces (together with neighboring Malaysia) over 80 percent of all palm oil worldwide. Nike and Adidas produce cheap shoes and clothing in their Indonesian factories, while the Indonesian middle classes are becoming more affluent, creating a growing consumer market for European companies.

For these reasons, since 2016 the EC and the Indonesian government have been negotiating the Comprehensive Economic Partnership Agreement (CEPA): a new free trade agreement that, according to the negotiating mandate, would make it easier to sell European machinery, cars, chemical and pharmaceutical products and would finally allow EU companies to fully participate in lucrative government tenders. Indonesia, in return, mainly aims for better market access for cheap clothes, sneakers and palm oil inside Europe.

But according to the EC’s own Sustainability Impact Assessment (SIA), a free trade accord with Indonesia would lead to more deforestation for palm oil plantations, and an increase in water pollution when clothing production expands. To force the Commission into taking such dangers seriously, the European Parliament in 2017 adopted a resolution explicitly linking palm oil plantations to climate change and the increasing number of forest fires in Indonesia. The parliament also pleaded for more diplomatic pressure on Indonesian authorities to respect land rights of indigenous peoples and has demanded an all-out ban on palm oil not in compliance with sustainability guidelines.

‘Of course it’s the EC’s mission to defend European economic interests abroad,’ the German Liberal parliamentarian Ulrike Müller explains regarding her vote in favor of the resolution. ‘But parliament harbors doubts about the way the Commission transforms all its promises made concerning sustainability into actual trade policy. Doing nothing against deforestation in Indonesia would not be in the spirit of the Green Deal. Indonesian palm oil is, after all, part of our supply chain.’

Green diplomacy

The EC itself stresses that sustainability, labor rights and environmental commitments have all been part of European trade policy since 2006. By stipulating such conditions in trade agreements, the Commission hopes to force trading partners wanting to gain access to the European consumer market into adopting higher production standards.

Via this ‘green diplomacy’, the EC wants to use its weight in world markets to support the transition it envisions in the Green Deal. But in practice the workings of green diplomacy prove a bit more murky.

Sanctions to actually enforce such standards and commitments are hardly ever part of the treaties. After South Korean authorities detained several union leaders in 2015, it took the Commission four years to demand from the government in Seoul to respect union rights commitments agreed on in a 2010 trade accord. The text of the new trade agreement with the South American Mercosur bloc only contains voluntary environmental guidelines for companies, while an ‘expert-panel’ would be envisioned to make non-binding recommendations to resolve possible conflicts.

Meeting notes and internal e-mails about the CEPA negotiations – that openDemocracy was able to see thanks to the Dutch NGO Stichting Onderzoek Multinationale Ondernemingen (SOMO) – paint a similar picture. When Indonesian diplomats asked critical questions about the palm oil resolution in Brussels in 2017, a senior EC officer assured the Commission would take a ‘more nuanced stance’ about the demands of parliament to ban unsustainable palm oil.

Two years later, during an internal EC consultation in Brussels, ‘several DGs [directorates general] expressed concerns’ about regulations concerning ‘forest risk commodities’ and ‘felt that it is too early to consider a regulatory approach to due diligence’. Chris Humphrey explains:

‘When the EU was debating stricter rules on palm oil, French wines all of a sudden were blocked from entering Indonesia. Customs just let ships float around the port of Jakarta for days before giving permission to enter. That can be quite costly for companies importing perishable items or waiting for commodities to arrive. It’s just a way of the Indonesian government to pressure the European Commission into weakening environmental legislation.’

Resistance

In the corridors of power in Brussels, the palm oil debate has even led to a power struggle between several EU institutions. In January 2020, the European Parliament (with a 68 percent majority) voted in favor of another resolution – this time specifically about the Green Deal.

Among other things, parliament demands from the Commission stricter requirements on imports, including more emphasis on sustainable production standards, wants binding legislation to combat deforestation put in place and demands that ‘the European Green Deal should ensure all international trade and investment agreements include strong, binding and enforceable sustainable development chapters, including on the climate and the environment.’

Several months later, in April 2020, the agricultural committee of the European Parliament tabled a report with concrete recommendations for legislation to decrease deforestation. The second report was written under auspices of Martin Häusling of the German Green Party. He explains:

‘As members of parliament we have to keep pressuring the Commission to live up to its promises. Most countries the EU does business with, have no interest at all in sustainability demands for the products they want to make money with. All around the world there is enormous resistance against the European attempts to force sustainable production chains. The negotiating teams of the Commission have overlooked for years how important it is to anchor sustainability commitments in a concrete and legally clear way.’

To counter that criticism, the European Commission announced in May that is was appointing a new top diplomat responsible for supervising implementation of the sustainability commitments made in trade agreements: the Chief Trade Enforcement Officer (CTEO).

In July the French civil servant Denis Redonnet was introduced as CTEO. However, as policy researcher Bart-Jaap Verbeek of SOMO notes, the new CTEO has absolutely nothing to say about the substance the negotiating teams agree upon behind closed doors.

‘Tabling sustainability demands in a negotiating process is risky, because it means you automatically lose room to maneuver elsewhere,’ Verbeek explains. ‘In theory, smart integration of emission norms and environmental rules into trade agreements could raise the bar on a global scale substantially. But in practice nothing like that ever happens. Every European demand for more sustainable palm oil could lead to Dutch dredging companies being excluded from Indonesian government procurement and that is a risk the European Commission doesn’t want to take.’

Redonnet is an experienced EC diplomat and former investment banker. Nonetheless, his task of balancing sustainability demands with trade interests, selecting which sanctions even fall within the realm of possibility and reconciling the Green Deal with international trade rules, will be a complex one.

Martin Häusling remains skeptical about trade deals as possible agents for environmental protection. Not least because the official CTEO mandate not only puts Redonnet in charge of sustainability rules, but he will also have to monitor fair treatment of European companies abroad, handle trade conflicts and guarantee property rights. ‘How effective this CTEO can be, will fully depend on the content of the treaty texts he will have to implement,’ Häusling explains. ‘Without the possibility to sanction, a watchdog like this will be utterly useless.’

The substance of such treaty texts relates to the way the European Commission perceives trade relations, Verbeek says. Without fundamentally questioning the role world trade plays in the just transition the Green Deal envisages, green diplomacy will have no tangible effects in the end.

‘If palm oil always leads to massive deforestation, developing a regional alternative should also be on the table if you take sustainability commitments seriously,’ Verbeek explains.

‘We could look into scaling down supply chains instead of making global chains greener. That way developing countries would also be able to diversify their economies instead of being forced to simply open up their markets to European multinationals. If the European Commission is not willing ask those fundamental questions about how our global economy functions, the Green Deal will be never be more than another band-aid solution.’

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