Malmström’s Asia Test

This week, European Union Trade Commissioner Cecilia Malmström will be in Singapore for the ASEAN– EU Business Summit.  Publicly, she’ll be all smiles trumpeting European global leadership and the “open for business” tagline in the face of what she and her fellow Commissioners believe is America’s retreat from the global trading system.  Privately, she will know that Brussels is causing more frowns that smiles in Asian capitals.

Europe may not have a loud protagonist in the mould of President Trump – calling for a global re-write of the trade rules, and openly espousing protectionism – but the actions of the European Parliament are in effect endorsing Trump’s worldview of prioritising domestic political gain over the international rules-based order.

That Trumpian world view of the Parliament is best illustrated by its attempt to ban Palm Oil under the Renewable Energy Directive (RED). The Palm Oil ban is anti-trade, anti-globalist, and based on a flawed and protectionist justification. Donald Trump would be proud of his protégés Bas Eickhout, José Blanco Lopez, and their colleagues.

Commissioner Malmström is aware of the potential damage caused by Brussels’ embrace of Trump-politics and she is worried.

The EU and ASEAN have a dynamic partnership in a number of areas, from political dialogue, to cooperation in security/defence, and trade and investment relations. But all of this could encounter serious turbulence if the EU Palm Oil ban is enacted into law.

It is in the EU’s overwhelming interest that the Commission asserts itself and ensures that the Parliament is unable to force through a ban on Palm Oil.

What are the Commissioner’s options, this week? She could go public with opposition – following the example of Swedish Ambassador to Malaysia Dag Juhlin-Dannfelt who stated that “Sweden and many other European countries, who are member states of the EU, are against any kind of discrimination. That includes any regime that would be discriminating against other products”.

EU Governments including France, Italy, the Netherlands, and Spain have also spoken against the Palm Oil ban in the past month.

If the Commissioner were to speak out publicly it would earn respect and gratitude amongst her hosts in South-East Asia. It would also send a signal that DG Energy – which will be representing the Commission in the RED Trilogue negotiations – will take a firm line against the Palm Oil ban.

Another option is for the Commissioner to express private support for Palm Oil producing countries, while publicly refusing to commit. This may be more diplomatic in terms of internal relations inside the Commission – but it will not inspire confidence or trust in Kuala Lumpur, Jakarta and Bangkok. Finally, the Commission could attempt to ignore or brush off the Palm Oil issue entirely. This would be unwise: it would appear as though the EU does not understand the gravity and importance of the issue to its ASEAN trading partners.

The UK Government has taken this approach, and the indecision has led to stories in the UK press speculating about the risk to export contracts, loss of jobs, and a negative impact on post-Brexit trade deals. The Commissioner is known in Brussels as a sharp operator, and is unlikely to make the same mistake as the British Government.

What Commissioner Malmstrom says this week is important. But more important is what the Commission will do in Brussels over the four planned Trilogue negotiation sessions, which will decide whether or not to ban Palm Oil biofuels. The critical issue is can the Commission stand firm – supporting WTO rules, and supporting the EU’s trade strategy – against the Parliament’s Trumpian attempt to undermine those two pillars?

If the Commission gives in to the Parliament, and the ban is passed, the threat is real.

The Malaysian Government has indicated that if the EU moves ahead with the Palm Oil ban, the Government would have to take retaliatory measures and “review the purchase of products with any countries that banned Palm Oil”.  The EU exports over €17 billion annually to Malaysia alone. Thailand and Indonesia would join the retaliation.

Malaysian Trade Minister Mustapa Mohamed recently declared that a WTO case would also be forthcoming – an embarrassment for the EU, which is attempting to present itself as a guardian of the global international order.

In that vein, earlier this year Commissioner Malmstrom condemned American talk of a “trade war as irresponsible”. She needs to take the same hard-headed approach to the EU Parliament’s irresponsible trade war against Palm Oil-producing countries.