The EU has put out curbs on palm oil imports as it looks to make its imports more sustainable. The said curb is to reduce the negative impact on the environment.
EU Implements Curbs to Save the Environment
Following the 2030 Sustainable Development Goals Agenda put out by the UN, the EU is looking to eliminate the imports of products that cause massive harm to the environment. Out of these, the most affected countries seem to be Indonesia and Malaysia. They produce nearly 85% of the palm oil in the world. Further, they have come under criticism for destroying tropical forests for palm oil production. But since the EU wants an entirely deforestation-free process of production, it is imposing new rules to save environmental health.
Environmental Impact
The palm oil production has a significant impact on the environment. As a consequence, there are forest fires every year in Malaysia and Indonesia. Even though both these countries proclaim that they are dealing with this problem seriously, they haven’t been any change. Despite Prof Dr Simon Lord, from the Sime Darby Plantation, confirming that “Malaysian Sustainable Plam Oil Production Initiative” has the excellent potential, the other countries might want to voice their opinion. Nevertheless, both Malaysia and Indonesia have taken measures to protect peatland areas.
EU New Food Rules
The EU is slowly trying to phase out unsustainable imports and food consumption before 2030. Along with that, it is looking to set new limits on food containment, 3-MCPD esters found in refined oils. However, the producers of palm oil feel that these trade barriers target them unfairly.
The Council of Palm Oil Producing Countries (CPC) headed by Malaysia and Indonesia have voiced out their concern against this new policy. Accordingly, they mentioned that the “Farm to fork” policy might serve as an excellent place to have productive discussions. Besides, they don’t want to be treated as mere spectators but as active decision-makers in the process.
Few Express Worries Regarding the Strategy
The MPOC President Kalyana Sundaram worries that this strategy might be extended beyond the EU borders. Also, UN advisor Fazlun Khalid warns that these measures by the UK might not help protect the environment. Further, he adds that if the EU boycotts palm oil, then it will be sold to developing countries, that will struggle more to fight the environmental problems. In addition to that, he critiques that this might lead to the production of other vegetable oils that results in more pollution.
Further, UN Advisor also warns that completely boycotting these products won’t help. He calls for a moratorium on deforestation in Indonesia and Malaysia. Also, he mentions that placing restriction on countries that don’t follow environmental regulations and giving free trade agreements to those who do will greatly help the issue.
Malaysia Reaches Out to WTO
The second-largest palm oil producer, Malaysia, will be massively hit by new palm oil curbs. Therefore, the Deputy Commodities Minister of Malaysia, Willie Mongin, said that Malaysia would file a case against the EU with the WTO. On that note, he further emphasized that Malaysia was adamant on taking legal action against the EU in an online conference.
Mr Willie Mongin said that Malaysia is determined to fight against anti-palm oil lobbyists. Therefore, the government has come up with a new slogan- “Palm oil is God’s gift”. They are looking to spread this slogan both domestically and internationally.
The other major producer of palm oil, Indonesia, has also made its displeasure vocal. We will have to wait and see how the situation pans out as the negotiations with the WTO commenced.
Prices Fall on Low Export Demand
The palm oil futures fell after low export demand from the EU. The Malaysian Palm Oil Board said that they expected exports to fall by 15% in the first week of July against the previous month. Today in early trade, on Bursa Malaysia Derivatives Exchange, the benchmark palm oil contract for October fell by 1.6% to 2,629 ringgit a tonne.
In conclusion, the sustainability promoting initiative from the EU is commendable. But, a complete boycott of products will not serve the interests. Thus, it is crucial to formulate a proper plan to satisfy both environmental as well as economic needs.