How the European Union's protectionism is hurting developing economies

The European Union is widely known as the paragon of free trade but in recent years, it has increasingly adopted a curious double-standard. While adopting free trade within the bloc, the EU has been increasingly lobbied by big businesses to protect domestic industries while targeting competitive foreign industries from developing countries. 

One of the most egregious cases where this appears to be happening is in relation to palm oil for biofuels - recently classified by the European Commission as unsustainable, which means it cannot be counted toward EU renewable energy targets. 

In the wake of the announcement, two of the world’s biggest palm oil producers, Indonesia and Malaysia – both multi-billion dollar trading partners with the EU – condemned the policy and threatened trade retaliation. 

The EU rightly says that palm oil is destroying forests, in turn worsening climate change and driving important species like the Orangutan to near extinction. This is undeniable. The question is what to do about it to have the right impact.

Unfortunately, the EU has not done enough to rein in its own direct role in such processes. For instance, the European Commission has long known that the biggest driver of deforestation is not palm oil from Asia, but beef and soy production from Latin America. 

From 1998 to 2008, soybean from Latin America was responsible for 82 percent of deforestation compared to palm oil imports from Malaysia and Indonesia accounting for 17 percent of deforestation according to the European Commission’s own report.

It is also far from clear that the primary driver of deforestation in those countries is palm oil. For instance, in Indonesia, only 11 percent of deforestation could be attributed to palm oil plantations, compared to 27.4 percent due to tree plantations for pulp, forestry concessions and mining concessions.

The main problem, though, is that it is not clear that the EU’s palm oil policy can save the climate. Last year the International Union for the Conservation of Nature issued a landmark report warning that because palm oil uses less land to produce greater oil than soy, rapeseed or sunflower, the ban will lead to greater land-use driving higher rates of deforestation in Latin America. 

Meanwhile, some 42 percent of palm oil in Indonesia is grown by smallholder farmers, millions of whom will be decimated by the impact of EU policy. 

Greenwashing?

The EU’s singling out of palm oil can be traced back to an effort by certain EU lobbies. 

Veteran environmentalist Sir Jonathan Porritt, former chair of the UK government’s Sustainable Development Commission, says that the EU’s palm oil boycott is a result of the influence of “two very powerful lobbies,” namely, “trade associations seeking to protect EU-based producers of rapeseed oil and sunflower oil” regardless of their involvement in massive deforestation, and some “environmental NGOs” funded by the EU who have ended up supporting this protectionist agenda. 

In March, Friends of the Earth Europe (FOEE) issued a report demanding an EU palm oil ban. The report was funded by the European Commission’s LIFE Programme. This is a longstanding relationship that goes back years. 

In 2017, FOEE received just under 2 million euros from various agencies of the European Commission. 

This raises the question of a conflict of interest: how can an NGO provide independent advice to the very body that provides it with critical funding? 

Many NGOs demanding a full-on palm oil boycott have similar financial ties to the EU. The European Federation for Transport and the Environment (EFTE), which organised a mass petition signed by nearly a million Europeans to promote the palm oil ban, received over half a million Euros from the European Commission in 2017.

Although packaged as a pro-environment campaign, by EFTE’s own analysis, the EU’s own biofuels industry – which is the chief beneficiary of the campaign – is still generating polluting than diesel from fossil fuels (rapeseed being 1.2 times worse, and soy being twice as bad). 

The protectionist trend

The EU’s blinkered policy on palm oil is only one high profile case in a much longer trend of protectionism which ultimately hurts consumers, by reducing choice and inflating prices. 

There has been a long history of protectionism against southeast Asian countries to protect specific producers in EU member-states, such as the European Commission ‘safeguard clause’ used to protect Italian rice from Cambodian exporters. 

More recently, countries like Germany are taking hardline measures against free trade in response to more aggressive competition from the Trump administration and China. 

In such cases, the EU has moved to favour its own industries at the expense of those of poorer, developing countries. 

In 2017, the EU ended its long-standing policy on sugar quotas after a negative World Trade Organisation ruling found that import rules gave unfair advantages to local producers. The policy inflated sugar prices by reducing competition with EU free trade partners all over the world. 

But the EU hasn’t really ended its protectionist approach. We still put large tariffs on non-EU member sugar producers. This prevents imports from the most competitive, sugar-producing countries such as Brazil and Thailand, despite them being developing countries.

The fisheries case

The EU’s quiet pursuit of protectionism has continued in many other sectors. In February, for instance, the European Parliament voted to uphold the ‘Sustainable Fisheries Partnership Agreement’. 

Here, once again, the idea of sustainability has been used to rubber-stamp an agreement that may not be sustainable at all, but which benefits the EU’s own fishing industry at the expense of that of Western Saharans. 

Under the 4-year deal, the EU fishing industry has been granted opportunities in Western Sahara in exchange for the Moroccan government receiving an overall payment of 208 million euros. 

While EU officials have described the agreement as beneficial to both sides, a number of MEPs have raised concerns – especially around the legality of Morocco's status over Western Sahara and international law has no authority to grant the EU access there.

In 2013 Greenpeace found that the EU’s fishing practices in the Sahara “are devastating West African fish stocks and undermining the rights of local people.”

All these cases prove that the protectionism is not the answer. The danger of the EU’s accelerating protectionist tendency is that it feeds into a nationalist mindset that undermines the real foundations of prosperity: open markets and free trade, to underpin fair competition that gives consumers fair prices and access to better products. 

All too often, buzzwords like ‘sustainability’ are being used to camouflage short-sighted trade policies.

By denying developing nations the chance to lift their populations out of poverty, the EU is not just damaging them in true colonial fashion, but hurting European consumers who are forced to rely on domestic monopolies, even when those monopolies are inefficient, costly and far from sustainable.