Last week members of the French National Assembly voted to drop the palm oil tax from the country's Biodiversity Bill during a plenary session. Although this still has to be confirmed by the Senate, which will meet in July to confirm the deletion, producer countries are breathing a sigh of relief.
CEO of the Malaysian Palm Oil Council, Dr Yusof Basiron, said the vote was a welcome relief for Malaysian palm oil farmers.
"French MPs have done the right thing, rejecting the government's discriminatory palm oil tax. In rejecting this tax, the National Assembly has publicly shown its support for Malaysian small farmers, and has avoided implementing a palm oil tax that infringes both WTO and EU trade rules."
"The French government should drop once and for all this unfair and unjust tax campaign against palm oil."
Legislating with ‘a knife to our throats’
But French media have reported deputies saying they were pressurised into withdrawing the tax, often dubbed the Nutella tax due to the amount of palm oil used in France’s beloved chocolate spread.
Indonesia, the world’s top palm oil exporting country, had reacted angrily when the tax was proposed with its Minister of Natural and Marine Resources, Rizal Ramli, denouncing the measure as “arrogant” and “excessive”, while Malaysia, the second largest producer, said it was discriminatory, unfair and violated World Trade Organisation (WTO) rules.
In 2014 the MPOC said Malaysia prioritised dialogue and discussion – rather than retaliatory trade barriers – over the issue of French and Belgian companies making ‘palm oil-free’ claims on products, something it saw as an unfair barrier to trade.
Uggah Embas of the MPOC said at the time: “We hope we don’t have to resort to legal action. We hope with dialogue and discussion, more deliberation and understanding of palm oil we will be able to resolve these issues.”
Would Malaysia react by reducing the number of Airbus aircraft carriers?
“As much as you [France] are selling your Airbus to us and how this benefits your economy, we hope you also understand how important it is for you to buy our palm oil to help our economy, because if our economy is growing then we have money to buy your Airbus,” he said.
According to Republican party politician Nicolas Dhuicq, Indonesia threatened France with economic retaliation, notably regarding purchases of Airbus and satellites.
Socialist party politician Delphine Batho went further saying: “We are legislating with a knife at our throats. The French Parliament is being blackmailed.”
Ecologist deputy François-Michel Lambert said if the national deputies had given into economic blackmail, they might as well lower all tax barriers.
Legal fragility
Secretary of state for biodiversity Barbara Pompili and rapporteur Geneviève Gaillard justified the about-turn saying there was a “legal fragility” and instead said they would aim to review current taxation of edible oils in six months.
The tax had already been reduced down from the initial levy - which have started at €300 in 2017 rising to €900 per tonne in 2020 – to €30 to €90 for the same period.
Secretary of state for biodiversity, Barbara Pompili said at the time: “This [reduced] tax is more realistic […] We do not want to boycott these two countries, nor palm oil.”
Define ‘sustainable’
But for Nathalie Lecocq, secretary general of oil trade group, Fediol, the situation is complex and far from over.
“It would be wrong to think the issue is finished. The draft law now calls for the tax system on vegetable oils to be reviewed and the question of the
palm tax is likely to surge again,” she told FoodNavigator.
“The problem we see overall in this debate, is that the suggestion to differentiate products according to whether they meet -yet undefined- sustainability criteria, which was promoted to make the palm oil tax more acceptable, is not only going to stay, but could well expand much beyond palm oil.
"The definition of sustainable will prove highly challenging and the likely outcome even more distortive.”
There is no single definition of sustainability for palm oil used in the food industry, unlike its use as a biofuel.
Criteria set by the Roundtable for Sustainable Palm Oil (RSPO) remains the benchmark for certified sustainable palm oil, but it has four different methods which vary in stringency and all of which are voluntary for industry.
The Malaysian Palm Oil Council did not respond in time for publication of this article.