Questionable Trade Moves against Palm Oil
In the EU, efforts to limit the importation, distribution and sale of palm oil and products using palm oil have been intensifying. It appears as though domestic competitors of palm oil are attempting to convince member-states and government officials to implement discriminatory measures, as highlighted by action taken in Bulgaria and the Czech Republic.
On Nov 3, 2015, Bulgaria’s Ministry of Agriculture and Food issued a Decree Amending and Supplementing Decree No. 9 of Sept 16, 2011 (the Consolidated Decree) on specific requirements for safety and quality of foodstuffs offered in kindergartens and schools, as well as for foodstuffs offered during events organised for children and schoolchildren.
Article 21(2) prohibits foods containing fats, except for butter derived from cow’s milk, sunflower oil and olive oil; hydrogenated fats of plant origin; and fats of plant origin, the labelling of which does not mention the type of their processing.
There is no doubt that the move affects food products containing palm, coconut and rapeseed oils, as well as cocoa.
Bulgaria acceded to the World Trade Organisation (WTO) on Dec 1, 1996, and to the EU on Jan 1, 2007. As such, it is subject to legal obligations at the regional and multilateral level, including various regulations prohibiting unjustified discrimination.
Its measure appears to be inconsistent with WTO law, including the General Agreement on Tariffs and Trade 1994 (GATT), the Agreement on Technical Barriers to Trade (TBT Agreement) and the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement).
It appears that the Consolidated Decree provides less favourable treatment to imported oils and fats in a discriminatory manner, which consequently protects the Bulgarian dairy, sunflower oil and olive oil industries.
There is also no evidence that Bulgaria has gathered scientific evidence or conducted a risk assessment – as is required – regarding the exclusion of palm, coconut and rapeseed oils, and cocoa.
The Consolidated Decree entered into force on Nov 3, 2015, but includes ‘transitional and conclusive provisions’ allowing non-conforming goods to be offered until available quantities are depleted. Any contracts between suppliers and schools concerning non-conforming food, concluded before Nov 3, 2015, have one year to be brought into conformity with the measure.
Enforcement of the Consolidated Decree has begun and some food suppliers have recently been subject to sanctions for offering products with palm, coconut and rapeseed oils, and cocoa.
Bulgaria has notified the European Commission of the draft decree, but there is no evidence that it has informed the TBT Committee or the SPS Committee, as required under WTO rules on transparency. Nor does it appear as though any WTO members have raised any relevant ‘specific trade concerns’ in the context of such committee meetings.
The next meetings of the TBT Committee and SPS Committee are scheduled from June 15-16, 2016 and from June 30 to July 1, 2016, respectively. Affected stakeholders must act quickly so that relevant ‘specific trade concerns’ are included in the meeting agenda and statements can be prepared. Affected businesses in the EU may consider legal options as well.
Situation in the Czech Republic
The country’s Ministry of Agriculture has had to field complaints and attempts to encourage it to prohibit the sale of products containing palm oil. At a press conference on Feb 5, 2016, Agriculture Minister Marian Jurečka said the Ministry would not prohibit the sale of products containing palm oil, noting that there is no evidence regarding negative health effects.
He indirectly referenced Regulation (EU) No. 1169/2011 of the European Parliament and of the Council of Oct 25, 2011 on the provision of food information to consumers. He recognised that, as of December 2014, all products containing palm oil must be labelled as such in their list of ingredients.
On March 15, 2015, a seminar on palm oil – themed ‘Defend palm oil?’ – was held in the Chamber of Deputies within the Parliament. It was organised by Olga Havlová, Member of the Chamber of Deputies and Vice-President of its Committee on Agriculture.
At a press conference afterwards, Havlová stated that she intends to table a bill to prohibit the sale of products with palm oil in schools and hospitals. She cited alleged (though unsubstantiated) health risks associated with palm oil consumption.
There may be an ulterior motive, as the Czech Republic has a major dairy industry. Reports suggest that margarine containing palm oil has increasingly replaced butter in many food products.
The bill has not been tabled to date. However, if it were to be adopted by the Parliament, it would raise the same potential inconsistencies with regional and multilateral legal obligations as the Bulgarian decree.
At the EU level, such discrimination would likely violate rules on the free movement of goods. At the multilateral level, the Czech Republic would likely be in violation of its WTO obligations, in particular with respect to the GATT, the TBT Agreement and the SPS Agreement.
Generally speaking, WTO members may not discriminate against foreign products, and technical regulations must be supported by scientific evidence and risk assessments. There is no evidence that Havlová or any Czech government official has commissioned or conducted such studies.
In countering the moves by both countries, the palm oil industry must make clear to government representatives at the national and EU levels that such measures will not be tolerated. In this, the rules of the EU and the WTO are on the industry’s side.