New EU Regulation Could Hurt Small Palm Oil Producers: Watchdog – The Diplomat

Pacific Money | Economy | Southeast Asia

This week, Reuters news agency conducted an interview with Joseph D’Cruz, the head of the Roundtable on Sustainable Palm Oil (RSPO), about new European regulations that could severely restrict the bloc’s imports of palm oil.

D’Cruz, the chief executive officer of the RSPO, said that a new European Union regulation, passed in December, which requires companies to prove that their supply chains are not contributing to deforestation, could sideline small farmers, and, by implication, lead to further consolidation of the global palm oil industry.

D’Cruz said in the interview that palm oil producers who are already certified by the RSPO will not find it difficult to comply with the EU’s requirements, given that its certification process is fairly rigorous and already prohibits deforestation and the conversion of primary forests to plantations. However, he warned that smaller producers in Asia, Africa and Latin America – even those that harvest palm oil sustainably – would find it challenging to demonstrate that the attenuated supply chains of which they are a part do not contribute to deforestation.

“There is a human, social, and developmental cost there, which smaller, marginal producers may be forced to bear for the EU deforestation regulation to be implemented the way it is being set up right now,” D’Cruz said.

For decades, the global palm oil industry has been linked to a long list of labor rights abuses in addition to “widespread rainforest destruction and wildlife loss” in Southeast Asia. The RSPO is a non-profit organization that aims to transform the sector “by bringing together stakeholders across the supply chain to develop and implement global standards for producing and sourcing certified sustainable palm oil.”

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Given its tight link to deforestation, palm oil is likely to come under particular scrutiny of the new European regulation, which will “ensure that a set of key goods placed on the EU market will no longer contribute to deforestation and forest degradation in the EU and elsewhere in the world,” the European Commission said in a statement following its passage. In addition to palm oil, the law will also apply to cattle, soy, coffee, cocoa, timber, and rubber, as well as various other products derived from these.

More than seven million smallholders globally cultivate palm oil for a living, according to RSPO data cited by Reuters. In Indonesia and Malaysia, the two top producers of palm oil, smallholders account for about 40 percent of the total area dedicated to palm oil plantations.

The potential negative redistributive impact of the law is another example of the unintended consequences of the EU’s values-based economic policy, which seeks to leverage the bloc’s huge economic weight to incentivize progressive change in foreign countries. The proposed EU law, and its policy toward palm oil more generally, have already soured Brussels’ relations with Indonesia and Malaysia, right at a time when the EU is seeking to bolster its “strategic engagement” with the Association of Southeast Asian Nations (ASEAN).

The two nations were so concerned about the new EU rule that they joined forces to lobby against it. Following its passage, a senior Malaysian trade official suggested that his country could cease palm oil exports to the EU entirely. The EU’s economic weight undeniably gives it considerable power on the global stage – but that weight is evidently a blunt instrument for bringing about change.