After securing European Parliamentary support for a second term, EU Commission President Ursula von der Leyen has suggested that EU deforestation rules (EUDR) have complicated the EU’s relationship with trading partners. The EU rules, which impose new bureaucratic requirements on products seen to be linked to deforestation, have led to protest from both the United States and Asian trading partners of the EU.
Von der Leyen stated during her acceptance speech: “We also need to listen and respond better to the concerns of our partners impacted by European legislation, in particular those linked to the European Green Deal.”.
She added:
“We need a more systematic approach to assessing the impact of our laws on non-EU countries, and we need to provide more targeted support to help them adjust to and benefit from those laws.”
As a solution, she suggested that “each Commissioner will be tasked with focusing on reducing administrative burdens and simplifying implementation: less red tape and reporting, more trust, better enforcement, faster permitting. They will hold regular dialogues on implementation with stakeholders to discuss how best to align implementation with realities on the ground.”
Assuring message from @vonderleyen wishing to deepen our #SingleMarket across the board. "We need less reporting, less bureaucracy, and more trust, better enforcement and faster permitting." @EPPGroup stands by it.@EP_SingleMarket
— Kaja Sõrg (@visszhang) July 18, 2024
Earlier, top European Commission trade official Sabine Weyand already took a similar stance. In a speech for the the Institute of International and European Affairs, she remarked that trading partners are increasingly questioning EU’s use of trade policy to act as a “global regulator”. She thereby also questioned the EU’s handling of its deforestation directive, stating:
“We should learn some lessons from the opposition we are currently facing with respect to the deforestation regulation … we have to recognize that the means are extremely burdensome and very difficult to meet for developing countries and notably for small and medium sized businesses and smallholders in these countries.” (…)
“We have pushed away a number of partners we need through our increased use of autonomous trade measures; unilateral measures that other countries see as imposing on them extra-territorial effects of our legislation. And they resent that. (…) We hear that increasingly on measures like the deforestation regulation … there are huge concerns. So we need to think about our attractiveness for our trading partners.” (…) “The Global South and the emerging and developing economies, they do not simply want to copy our legislation and they say, who has appointed you world regulator? So I think we have to take on regulatory cooperation. We have to take a proper cooperative approach. (…) It is clear that we will not be able to have such an approach with India and Indonesia.”
Other countries are increasingly questioning EU’s use of trade policy to act as a “global regulator”, acc to EU’s director general @WeyandSabine during an address to the Institute of International and European Affairs on Tuesday. https://t.co/GwqZGWqKGw
— Frans Köster (@franskoster070) April 24, 2024
This all will be welcome news for South East Asia, where important palm oil exporters like Malaysia and Indonesia have been attempting to make clear to the EU that its policy direction is misguided. They have thereby been strengthened by international environmental protection NGOs, like Global Forest Watch, who have reported a sharp reduction in forest loss in countries such as Malaysia and Indonesia. This follows significant achievements, with about 83% of palm oil refining capacity now operating under a ‘No Deforestation, Peat and Exploitation (NDPE)’ commitment. Additionally, government efforts include capping the area for oil palm at 6.5 million hectares in 2023 and enacting new forestry laws in 2022 to enhance penalties for illegal logging.
Opponents of the EU’s approach have stressed that an estimated 93% of palm oil imported into Europe is sustainable and does not contribute to deforestation, unlike alternatives like soy, which require significantly more land, pesticides, and energy.
Last year, palm oil-exporting countries Malaysia and Indonesia froze trade talks with the EU over Europe’s refusal to recognize their standards for preventing deforestation. In contrast, the UK decided to treat Malaysian standards as equivalent, securing its place in the new transpacific trade deal CPTPP, which covers around 15 percent of global GDP.
A policy change on the horizon?
A new report by GlobalData reveals that EUDR now could potentially add $1.5 billion in compliance premiums for palm oil and rubber alone, which will lead to big price increases for consumers.
It notes:
“EUDR compliance premiums for companies operating in the supply chain for oil palm products and their derivatives and rubber could be in excess of $1.5 billion for these two commodities alone. This could lead to price increases as companies are likely to pass on the extra costs of EUDR compliance to consumers. Food, drink and personal care categories likely to be most affected by retail price hikes due to the EUDR include coffee, chocolate, soy-based meat alternatives and oil palm products and their derivatives including hundreds of personal care products such as shampoo.”
This is one of the reasons why the European People’s Party (EPP), to which von der Leyen belongs, has already backed a two-year delay.
Even the German greens, which are in government, support a delay. German Agriculture Minister Cem Özdemir, a member of the Greens, commented: “The Commission is once again called upon to implement this in a way that is suitable for reality. To date, it has not done its homework. The conditions for practical application are still not in place. There is still no country benchmarking. (…) I want to make this very clear here. Our economy, our companies are being confronted with a completely unreasonable effort. This ruins the purpose [and] raises doubt about the understanding of the issue of deforestation-free supply chains. The Commission must now ensure as quickly as possible that this regulation becomes applicable. I ask the Commission once again to decide very quickly on a postponement so that we can ensure it works in the remaining time.”
As a result, the EU’s Agriculture Council supported a delay earlier this month, driven to do so by Austria and backed by other EU member states.
Der Landwirtschaftsminister beim europäischen Rat – fordert Entscheidung zur Verschiebung der #EUDR @cem_oezdemir pic.twitter.com/wz1q0CdjmI
— 🐈⬛dvh (@liberal_dvh) July 15, 2024