Memo to Europe: We’re Not Bluffing

Ahead of the Second Trilogue for the Renewable Energy Directive (RED) on March 27th, a delusional narrative has taken hold in certain European capitals that the threat of trade retaliation from Palm Oil producing countries, specifically Malaysia and Indonesia, is a bluff. It’s the equivalent of saying Donald Trump is bluffing when it comes to his action on steel tariffs.

The case of the steel tariffs imposed by the U.S. Administration provides an important lesson for Europe.  Take German industry: all four major industry groups, the BDI, DIHK, BDA, and ZDH released a joint statement, to the effect that “German industry is extremely concerned about the decision of the U.S. government to impose far-reaching punitive tariffs … To prevent a spiral of protectionism, Germany and the European Union must continue to stand up the global world trade system”.

They are not dismissive of the moves by the Americans: it is being handled with the utmost seriousness. Commissioner Malmstrom has addressed the U.S. actions publicly on multiple occasions.

Why then is Brussels, and capitals like Berlin, dismissive of the threats of two of S.E. Asia largest economies, and their vow to enact retaliatory trade sanctions against European products if Europe moves ahead with the ban on Palm Oil? Why is this considered a “bluff”?

In case the European group think believes these threats are a bluff, and unserious, here’s a quick reminder of the most recent comments from leaders in these two countries:

  • “If they stop buying our palm oil, we will stop buying their products”- Mah Siew Keong, Minister of Plantation Industries & Commodities, Malaysia 
  • “When we look at the defence relationship with Europe, we cannot detach that from economic considerations as well […] We have to stand firm when it comes to the interests of our country and our people.” – Hishamuddin Hussein, Defence Minister, Malaysia
  • “Indonesia would consider taking retaliatory measures” – Pramono Anung, Cabinet Secretary, Indonesia

The evidence is crystal clear: the palm oil producing countries are not bluffing.

Perhaps one factor is the fact that Green NGOs, led by Transport & Environment (T&E) are pushing the line that this is a bluff. T&E is also in lockstep with the Green European Parliamentarians, by attempting to state that the proposed ban on palm oil ‘isn’t actually a ban’.

For those of us living outside Brussels: if palm oil is banned from being counted in the EU’s renewable energy programs (which is what is proposed), then it is a ban, pure and simple.

T&E and Green MEPs are also calling palm oil ‘unsustainable’ for the purposes of the EU renewables program. This is Orwellian doublespeak. The European Commission has gone to great lengths to ensure that all palm biodiesel being used in the RED is certified to European standards, and by European scientific certification schemes.

If anyone in Brussels needs evidence that this isn’t a bluff, they should visit the trade ministries of Kuala Lumpur and Jakarta. Better still, they should talk to some actual oil palm growers. The anger towards the European Union right now is real and palpable. This anger will increase exponentially if the ban is confirmed: and it will manifest itself in trade retaliation against European products.

Indonesia is already devising ways to make life difficult for European exporters. They’re well practiced at this. A few years ago, they made it nearly impossible for US exporters to deliver agricultural produce to Jakarta’s main port, meaning that most imports were spoiled. This was in response to numerous trade actions by the US government. The US discovered that Indonesia wasn’t bluffing; it was serious and prepared to act.

If the palm oil ban is enacted under the RED, the EU will learn the same lesson.

The fact that the EU has not yet grasped the seriousness of the issue is a major cause for concern.

The EU’s response to President Trump’s tariffs has been based on two principles: a) the threat to EU exports is real; and b) and global free trade must be defended against protectionism. The EU needs to adopt these two principles in the palm oil debate, too. The threat is real. The palm oil ban has to go.