Palm Oil Internet Seminar

EU Market for Palm Oil - Challenges and Opportunities
By: Mr. Paolo R Vergano

Mr. Paolo R. Vergano is a partner at FratiniVergano - European Lawyers in Brussels, Belgium and Singapore (www.fratinivergano.eu). His practice focuses on international trade law (WTO law, dispute settlement and trade negotiation in the areas of agriculture, services and non-tariff barriers such as sanitary and phytosanitary measures and technical barriers to trade). Mr. Vergano has extensive experience in advising Governments and private parties on WTO matters and multilateral/regional/bilateral trade negotiations. He has actively participated in seven separate WTO dispute settlement proceedings and in countless EU proceedings (anti-dumping and countervailing duty investigations, duty suspension applications, TRQ establishment, etc.). Since 2007, he is legal advisor to the ASEAN Secretariat and has worked in countless projects advising ASEAN in general and individual ASEAN Member States on issues of regional economic integration, regulatory transparency, streamlining of non-tariff measures (NTMs), removal of non-tariff barriers (NTBs), dispute settlement, trade negotiations, legal drafting, private sector engagement, and trade facilitation. Since 2012, he has been advising the palm oil industry with respect to issues of market access to the EU, both in relation to the food and biofuel applications of palm oil. Prior to co-founding FratiniVergano in 2007, he worked in the international trade departments of law firms in both Washington, DC and Brussels, Belgium and with the External Economic Relations (REX) Committee of the European Parliament. Mr. Vergano is admitted in Belgium and is a member of the Brussels’ bar (A list) and of the IPBA, of which he is a former Chair of the International Trade Committee. Mr. Vergano is a graduate of the Faculty of Law of the University of Torino, Italy (1995), received a Diplôme Supérieur de Droit Comparé at the Faculté Internationale de Droit Comparé in Strasbourg, France (1996) and holds a Master’s degree in International Business and Trade Law from the University of Fordham School of Law in New York, United States (1997). He teaches international trade law at the World Trade Institute in Bern, Switzerland since 2002, and international trade and food law at the LUISS University in Rome, Italy since 2017, and is a frequent lecturer and author on issues of WTO, EU and ASEAN law. Since 2009, he is the Editor of FratiniVergano’s fortnightly publication Trade Perspectives©, (http://www.fratinivergano.eu/en/trade-perspectives/), regularly providing readers with a set of recent international trade developments of particular commercial and regulatory interest. Since 2011, Mr. Vergano is also on the Editorial Board of the Global Trade and Customs Journal.
The presentation will address the key issues in relation to the EU market for palm oil, highlighting challenges and opportunities through two lenses: 1) Public measures at the EU and EU Member States’ level; and 2) Initiatives and campaigns by private market operators.

A key recent development is the EU’s revised Renewable Energy Sources Directive, the so-called RED II, which called for criteria for the certification of low indirect land-use change-risk (low ILUC-risk) biofuels, bioliquids and biomass fuels and for determining the high indirect land-use change-risk (high ILUC-risk) feedstock for which a significant expansion of the production area into land with high-carbon stock is observed. Palm oil is the only biofuel feedstock that the EU considers to be a high ILUC-risk feedstock with the associated negative implications and bleak trade outlook. While not an outright ban, this restriction will inevitably alter the conditions of competition among feedstocks used to produce biofuels, discriminating against palm oil. The EU’s ILUC approach is, arguably, inconsistent with a number of WTO rules and agreements.

In recent times, the EU has also been working on its policy regarding forests and deforestation. In February 2020, the EU published the roadmap for a legislative initiative on ‘Minimising the risk of deforestation and forest degradation associated with products placed on the EU market’. The European Commission will consider a wide array of regulatory and non-regulatory policy options and notes that possible instruments could include mandatory labelling, voluntary commitments and labelling, due diligence, as well as verification schemes. A legislative proposal is expected in 2021.
The presentation will further discuss that palm oil might soon be subject to strict maximum levels for certain process contaminants in the EU. The EU is currently in the process of setting new maximum levels for 3-MCPD and its esters in vegetable oils. The Commission opted for a ‘split level’ approach, in which palm oil is subject to a higher maximum level of 3-MCPD than other vegetable oils. While the split maximum levels might raise unnecessary concerns by consumers, the higher maximum level for palm oil is important for the industry and the scientific reasoning behind this approach should be explained to consumers.

Negative campaigns intended to motivate consumers to reduce the use of palm oil, for its alleged negative environmental and/or nutritional implications, have been waged in the EU and within its Member States for years. The presentation details why ‘palm oil-free’ labels on products are arguably illegal under EU law. Misleading green claims, supposed to empower consumers to make sustainable food choices, appear to become a further ground to challenge ‘no palm oil’ labels. In 2024, the European Commission intends to publish a proposal for a sustainable food labelling framework. The presentation will also discuss front-of-pack nutrition labelling, some forms of which can be considered as discriminatory towards palm oil. The European Commission has announced a proposal for a harmonised mandatory nutrition labelling scheme enabling consumers to make informed and healthy food choices for the fourth quarter of 2022.

Finally, the presentation will address what the palm oil industry can and should do vis-à-vis these issues. The presentation will review the possibility of challenging discriminatory and illegal initiatives in Court or through administrative actions, assess the relevance of an internationally agreed standard for sustainable palm oil, and highlight the opportunities that the negotiation of preferential trade agreements provide in order to advance the palm oil industry’s interests.

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Questions & Answers (3) :
George Teh
4 years ago
Dear Mr Vergano Thank you for the comprehensive review of EU's legislative agenda viz-a-viz palm oil. Does EU match its legislative agenda with effective executive enforcement on the ground? Please comment if Brexit creates an opportunity for Malaysia and Indonesia to jointly challenge the integrity and sanctity of EU's agenda from across the English Channel? Thank you. George Teh
Paolo R. Vergano:
EU measures are typically complied with and strong enforcement tools are available under EU and EU Member States laws. In this case, enforcement is also delegated to economic actors. Palm oil, even unsustainable palm oil, will still be allowed for importation into the EU, but it will not have a market in the biofuel market, if biofuels made from palm oil can no longer be accounted by EU Member States to reach their targets under the RED 2. As for Brexit, I do not see any legal avenues for Malaysia and/or Indonesia to challenge EU measures from the UK. The UK will soon no longer be an EU Member State with recourse to the European Court of Justice and from a WTO perspective it does not have any visible and immediate grounds (or reasons to pick up a fight with the EU at the WTO), unless it could be proven that a lot of the CPO is converted into biofuels in UK plants for export to the EU and the EU policies were to effectively take away that commercial opportunity.
4 years ago
Raymond Cheow
4 years ago
Mr Vergano, Do you see any other alternative for EU to replace palm oil and its product derivatives other than land expansion for planting less yielding crops ? Which translate into higher costs for European consumers ?
Paolo R. Vergano:
I do not see a rational alternative to palm oil or, rather, to sustainable palm oil. The discussion and negotiations with the EU must first be informed by science, trade facilitation and shared environmental and sustainability factors. Agreeing with the EU on those, it will prove relatively easy and straight-forward to define policies and measures that welcome sustainable palm oil on the EU market as part of the solution, not a competitor that, for environmental or economic reasons, must be undermined.
4 years ago
4 years ago
Dear Mr Paolo R Vergano Around 60% of the EUs renewable energy target is met through bioenergy, especially biofuels and bioliquids (including from palm oil) and wood-based biomass (which accounts for the largest share of bioenergy) Under the conditions of the RED (and from 2021, RED 2), a higher renewable energy target automatically raises the share of bioenergy GFC accuses EU of having failed to acknowledge about the harmful impacts of EU renewable energy policies on forest, wildlife, climate, and communities due to their support for bioenergy Global Forest Coalition / GFC - a coalition of 100 NGOs and Indigenous Peoples Organisations who work to protect and defend forests, social justice and the rights of forest peoples Appreciate to hear your view on the matter
Paolo R. Vergano:
I think that it is clear to most that EU policies are good-intentioned, but can definitely be improved. Whatever the case, and notwithstanding the policy space that the EU is entitled to when pursuing (legitimate) trade-related environmental or sustainability objectives, such policies and the ensuing EU Member States measures must be science-based, non-discriminatory and proportionate. GFC should continue engaging constructively with the EU to make its voice heard and I am sure that you will agree that banning or making palm oil non-economically viable as a biofuel is not the solution. The solution can only be the pursuit and definition of a credible, fair and workable standard on sustainable palm oil, as well as on wood-based biomass, that can take all legitimate interests into account.
4 years ago
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