EU Anti Deforestation Laws and Due Diligence. Malaysia
- Did the EU, under French Presidency, just offer an olive branch to Malaysia to break the impasse on palm oil?
- Will the EU rescind its discrimination against palm oil in the RED ll Delegated Act?
- Media reports would indicate so.
The European Commission on Wednesday proposed a law to make large companies operating in the EU check that their suppliers around the world respect environmental standards and do not use slave or child labour.
The Corporate Sustainability Due Diligence law will also oblige directors of European Union firms to ensure that their business strategy aligns with limiting global warming to 1.5 Celsius, as agreed under the Paris climate agreement.
"We can no longer turn a blind eye on what happens down our value chains," EU justice commissioner Didier Reynders said.
The lofty ambitions of the EU Commission has meanwhile been exposed by EURACTIV as having an impact on only 1% of the EU’s imports.
An assessment of the anti-deforestation laws by ClientEarth further warned that:
“The public has high expectations for this new law and the public must be able to monitor compliance and pursue enforcement when necessary. Otherwise the promise of a law that ‘ends deforestation’ risks ringing hollow.”
Brian Monteith who was Chief Whip and Brexit Party MEP for North East England 2019-2020 and previously a Conservative & Unionist Member of the Scottish Parliament was more exact in his criticism of the EU-MERCOSUR deal. His opinion titled “How EU double standards help deforestation” is an essential read for anyone who thinks the EU’s proposed laws will have an effect on deforestation.
ARC2020, an independent NGO based in Brussels raised the question of the anti deforestation laws impact on smallholders in cocoa and coffee production in Africa.
“This proposal can be seen as a well intentioned piece of legislation, but one that initially risks punishing small operators unless there is some significant tweaking. Large companies will be able to shift production to less risky regions of the world, and adapt to meet the standards through various means. but what of those left behind?”
The oilseeds trade associations of Europe as represented by COCERAL, FEDIOL, and FEFAC, repeated their concerns by saying that:
“the EU grain and oilseed trade, crushing and animal feed industry, support the EU’s ambition to halt deforestation and only allow imports of deforestation-free products in Europe. For the EU framework to also achieve sustainable transformation in the countries of origin, it requires putting in place tools and processes that are practicable for the whole food and feed supply chain, from the site of production to the market of destination. There is no one-size-fits-all solution. Tools and processes will have to be adapted to the supply chain models of the different commodities concerned.
The draft Regulation, instead of supporting the increase of deforestation-free supply chains, is expected to have important negative impacts, such as supply shortages in the EU leading to high prices and challenging the EU food and feed chain competitiveness; lack of real impact on deforestation due to lack of leverage and incentives to transform practices on the ground; exclusion of the majority of smallholders and certain mills supplied by smallholders from the supply chains; and disproportionate administrative and logistical burdens for both operators and competent authorities.”
Human Rights Watch has labeled the proposed legislation as "disappointing."
"Legislators should ensure that the proposed directive covers more small and medium-size companies and extends due diligence requirements to all businesses in their supply chains, in line with international norms on business and human rights. Responsible purchasing and responsible disengagement (the process for ceasing business relations), which are not yet explicitly referenced in the proposal, should be at the heart of due diligence."
Will "mirror" clauses improve environmental and human rights of the EU's imports?
Between the industrial soy and beef industries in MERCOSUR and the small coffee and cocoa farmers of Africa, the proposed EU anti-deforestation laws looks like it will create more problems than solutions.
This would make the French proposal to introduce “mirror clauses” sound over simplistic. The French idea of using “mirror clauses” is detailed as:
“France is taking the opportunity of its six-month Presidency of the Council of the EU to make progress towards "strategic autonomy" and further with the Union's ambition to become a global standard setter in the field of trade. The French Presidency's more assertively protective approach to trade is evident in its proposal to introduce "mirror clauses". Such clauses would require trade partners to mirror the EU's own production standards so that European farmers, for example, are not undercut by the prices offered by producers from other third countries who are not obliged to adhere to the same environmental rules. The French presidency programme explains that the aim is to "ensure that imported products are subject to the manufacturing standards in force within the EU, whenever this is necessary, to heighten protection of health and the environment, in compliance with WTO rules" by proposing mirror clause measures to ensure reciprocity in trade standards.”
Should “mirror clauses” be adopted as the foundation for sustainable EU imports within the anti deforestation laws, it will be challenged by MERCOSUR countries like Brazil and palm oil producing countries like Indonesia both of which have a much larger green canopy than the EU. The thing about the sustainability of EU agriculture is that it continues to be roundly criticized by European NGO like Birdlife International whose opinion on the Common Agricultural Policy in the context of the EU’s Green Deal and climate objectives “fail to adequately address the urgent crises of biodiversity loss and climate change.”
Trade Restrictions as Vinegar or Stick
If “mirror clauses” won’t work, will trade restrictions have a better chance of stopping deforestation associated with the products named in the anti-deforestation proposals?
Trade restrictions will not work according to the findings of a new study published in Environmental Research Letters written by Dr. Jonah Busch with co-authors from Conservation International, Earth Innovation Institute, Purdue University, Research Triangle Institute, and University of Mainz.
Describing trade restrictions as sour, confrontation vinegar, it could be added to Dr. Busch’s report that palm oil producing countries like Malaysia are opting to find more favorable markets than the vinegar being offered by the EU.
France with its current presidency of the EU might have recognized the plethora of problems faced by its climate change ambitions. In what can be construed as a reconciliatory message, French Ambassador to Malaysia, H. E. Roland Galharague published an opinion in local media offering honey instead of vinegar, in Dr Busch's words, as he appealed to “the Malaysian public and private stakeholders to join forces with us” as the EU pushes for a Carbon Border Adjustment Mechanism (CBAM).
It is not known at this time, whether Malaysia will “join forces” with the EU as urged by the ambassador since the overall French hostility against palm oil remains a contentious matter.
For any hope of Malaysian support for CBAM, the EU under the presidency of France has to first remove the contentious singling out of palm oil in its Delegated Act of RED ll. This will meet Malaysia’s demand that all vegetable oil feedstocks for EU biofuels must be assessed under one common standard.
Malaysia has a point in making this demand. The same point would actually serve to address the various concerns as expressed by the oilseeds trade associations of Europe, ARC2020 and every group mentioned above. The point being made is that Malaysia with its pledges to conservation and fighting climate change has invested heavily into the management of its primary industries in timber, palm oil, rubber and cocoa.
Its flagship certification system for palm oil under the Malaysian Sustainable Palm Oil (MSPO) scheme is something the country finds considerable pride in. In a nutshell, the MSPO meets all the recommendations of COCERAL, FEDIOL, and FEFAC in transparency, chain of custody, smallholders and accountability. The MSPO even meets the recommendation of Human Rights Watch to the EU as Malaysia continues to work with the ILO to eliminate labor issues in its industries.
Can an EU-Malaysia agreement on these issues lead to a global model of producing sustainable agri-products? The safe bet is that it will as long as the EU under France’s presidency is willing to add a bit of honey to the agreement.
Published February 2022. CSPO Watch