Palm Oil as an Economic Savior - Assignment Example

? International Trade Law There is a well argued consensus that the removal of the rainforest and converting the land for the oil palm plantations results in the rigorous release in vehement amount of greenhouse gases and with the loss of the rainforests imparts heavy pressure on several species of plants and animals among which many of them are endangered species (Earth’s Tree News, 2012) . The palm oil is a major contributor to the Malaysian as well as that of the Indonesian economy and huge amounts of the palm oil are produced and synthesized in the countries (Schubert, 2012, p.77). More than around 40 plantation companies are officially listed in the Malaysian Stock Exchange with the accumulated market capitalization of more than 40 billion US dollars. The palm oil sector faces robust competition from the soybean and that of the rapeseed producers adding to the grave concerns of deforestation, killing and destruction of the wildlife with the devastation of the life of the orangutans and many wild life species and that of the carbon emission that results from clearing the peat land (Chow, 2011, p.24). Thus the controversy has cropped up regarding the usage of the palm oil and the Australian government in 2011with a group of senators including Nick Xenohpon introduced the Food Standards amendment bill to the Senate. If the bill is legalized then the manufacturers will be required to accurately label the Palm oil among its ingredients. The Bill would have allowed the manufacturers in indicating via labeling in a way such that whether palm oil used in a product is certified sustainable or not. It was also mandated that the consumers who have been able to choose to purchase products containing palm oil should be produced in a sustainable way keeping in parity with the International Roundtable on the sustainable palm oil. The paper will deal with the arguments relating to that of the passing of the palm oil bill and its implications with regards to that of the world trade organization and international trade agreements and its feasibility evaluation both with respect to that wildlife and that of the human perspective, i.e targeting towards the establishment of an indifferent decision which will not harm the wildlife as well as does not affect the business perspective of the countries. In economic terms the paper will seek to find out a pareto optimal situation of conflict management encompassing the palm oil legislative bill. Palm oil as an economic savior The palm oil industry is entangled with the payment in excess of around 46% in taxes which includes that of the federal taxes which includes that of the corporate tax, windfall levy, export tax and that of the state taxes which makes it the most heavily taxed commodity in the Southern Asia especially in the country of Malaysia. It has been verified empirically that the trajectory of the palm oil industry is a chief source of employment generation and that it has immensely helped in uplifting the poverty scenario of the south eastern Asia. It has been found that the conversion of the lands into plantations has given employment for the local residents and also allowing the other business persons and entities in opening up revenue fetching services like that of shops and restaurants which lead to the development of the small towns surrounding that of the oil palm and that of the rubber estates. In the country of Malaysia, the work agencies like that of Federal land Development Autbority has allowed the government in the reduction of the poverty as well as that of the allocation of the landless farmers within the land development schemes. Each of the family was allocated around 4 hectares of land for the cultivating the cash crops mainly that of the oil palm, rubber as well as cocoa. This was the most successful land development scheme in the world which has made some of the Felda settlers millionaires. But despite all of these development around 63% of the Malaysian land is still covered with the oldest rain forests in the world where the industry of ecotourism is nurtured and the home to a large base of Orangutans which are alleged to be of being devastated by the exploration of the palm oil (Chow, 2011, pp.24-25). WTO and the ‘Truth in Labeling Laws’ – Palm Oil The introduction of the Bill has been followed by that of various NGOs with the inclusion of the Palm Oil Action Group and the Australian Orangutan Project. There has been support provision from the Australian zoos and the individuals who have made submissions to the Senate Inquiry into the Bill. But it is in fact that there has been strong opposition to the existence of the Bill mainly from the Malaysian Palm Oil Council (MPOC) and the Malaysian government. The regulatory authorities which are in the charge of the administering the food standards in Australia also expressed their concerns about the bills. It can be argued that the isolating the palm oil and making it an issue different from that of the other vegetable oils may be seen to as a violation stance against the obligations under the World Trade Organization (WTO) Agreements. If the Bill is endorsed and then it is challenged within the purview of the dispute settlement then it would be found that it would be inconsistent with that of the Australia’s WTO obligations (GLOBAL OILS & FATS BUSINESS MAGAZINE, 2011, p.6). Trade Barriers to Trade Agreements (TBT) The bill may be found to be falling in the inconsistent domain in accordance with that of the Articles 2.1 and 2.2 of the agreement with that of the Agreement on Technical Barriers to Trade. The application is subjected to that of the technical regulations, standards as well as that of the assessment of the conformity procedures. It may well be the case that the requirement of the labeling will be falling under the definition of the explanation of the definition of a ‘technical regulation under the annexure I of the TBT agreement (GLOBAL OILS & FATS BUSINESS MAGAZINE, 2011, p.6). Article 2.1 of TBT The requirement of the Article 2.1 requires that the technical regulation accord products which are imported from the territory of any other WTO member treatment as ‘no less favorable’ than that accorded with that of the ‘like products’ of the national origin or to ‘like’ products originating from any of the other countries. Under the Bill, the palm oil is a product which is generally not produced in Australia and is primordially imported from the countries of Indonesia and Malaysia and is generally subjected to that of the labeling requirement which do not apply to that of the other vegetable oils. If the requirement holds that of the less favorable treatment of the palm oil in comparison to that of the other vegetable oils and if those vegetable oil are treated as that of ‘like palm oil’ then the Bill may be found to be inconsistent with that of the Article 2.1 of the TBT Agreement. With the assumption that the palm oil and the other vegetable oils are synonymous products the Bill would be standing in the process of infringing Article 2.1 if the treatment with the palm oil is less favorably conjectured with other vegetable oils. Within the context of the GATT and that of the WTO Appellate Body, the key issue which stands in the analysis is that whether the measures stands in the way of modification of the conditions of the competition within the relevant market in the detriment of the imported products. The labeling requirement in Australia does not stand in the way of any distinction to be made within any case of the other oil on the basis of the evaluation of it in a sustainable way or not. For the purpose of the achievement of its objectives the assumption which is held behind the Bill is that of the requirement of the labeling for the palm oil which will alter the products that the consumers will purchase with the result in diminishing the palm oil consumption. Impracticability arises for the achievement of its aims without the modifications in the conditions of the competition within the market and directs towards the encouragement of the manufacturers as well as that of the consumers for not using the palm oil or to be using it as only certified sustainability of the produced palm oil. The violation of the Article 2.1 is violated only at the juncture where the imported products are generally treated less favorably than that like domestic products and that of the products imported from the other countries. The Bill does not explicitly treat the imports of the palm oil differently from the domestically produced palm oil or that of the palm oil produced in different countries in any countries different from any other vegetable oil. However it can be stated that the well accepted de facto discrimination may lead to that of the violation of the national treatment principles in the WTO law GLOBAL OILS & FATS BUSINESS MAGAZINE, 2011, pp.6-7). Article 2.2 of TBT The Article 2.2 engages the members of the World Trade Organization for the purpose of ensuring the fact the regulations prepared, adapted as well as applied without any ambiguous target of establishing obstacles in the paradigm of international trade. And on this ground the technical regulations should be such that it should be more trade restrictive in comparison with that of fulfilling legal objectives that would generate a risk non fulfillment. The article infuses within it some non exclusive list of legal objectives which a technical regulation may pursue with that of the protection of the human, plant life or health issues as well as that of the environment. The health dimension of the bill falls within the domain of the protection of the human health and that of the environmental purpose of the bill that advances the issue of the protection of the animal life or health as in this case associated with that of the protection of the habitat of the orangutans and their lives. The major issue circumscribes around the notion whether the Bill exposits intensified trade restrictiveness than required in order to achieve the legal health as well as that of the environmental objectives. Within the purview of the GATT and the WTO Appellate Body there has been the adaptation of a weighing and balancing approach in the assessment of the legitimacy or the accountability of the necessary measures. The approach attaches with it the consideration of the significance of the measure, contribution of the measure to the proposed objectives and that of the intensity of the trade restrictiveness of the measure. If the measurement of the weighing and balancing directs towards the measure as necessary the alternatives which are deemed to be possible alternatives in confirming its validity as well as its necessity. With the application of this approach, a robust argument which can be inferred is that the Bill generates more trade restrictiveness than the legitimacy of the protection of the environmental issues. It would be rather difficult to establish the fact that the Bill fails to make a material contribution for the reduction in the deforestation in the Malaysia or Indonesia as this Bill in its impact aspects steps away from generating possible influence on the Australian consumers. Bestowed is the fact that palm oil is in high demand it may be the case which will be generated that directs in the decline of the oil consumption in Australia and the business may be diverted towards another emerging and potential markets. Even if the legislation succeeds in its endeavor for the demand reduction in the palm oil it is highly obscure that it would be successful in reducing the deforestation in the Malaysian and the Indonesian rain forests. The CEO of the MPOC, Dr Yusof Basiron appeared before the Senate Community Affairs Committee and explained that the deforestation and that of the rampant man made clearing of the forests is generally an industry which is indeed a segregated domain from that of the palm oil industry and it has been also scientifically tested that palm oil production provides a more sustainable production platform in comparison with that of the other oils and that the decline in the palm oil production will be resulting in the replacement with that of less sustainable oils which will ultimately be causing that of the environmental damage. Even if the Bill gets down with the achievement of making material contribution in its environmental objectives the Bill may still possess more trade restrictions than that required. The Bill has a likely potential in distorting the trade as because the palm oil is rigorously produced in the countries of Malaysia and that of Indonesia while that the other vegetable oils that may act as substitutes for the palm oil as that of the rapeseed, sunflower and soybean oils which are largely produced in other countries. The Bill is likely to be having that of the imparting negative effects as in with the restriction of the imports of palm oil from Malaysia into Australia (GLOBAL OILS & FATS BUSINESS MAGAZINE, (2011),pp. 7-8). The palm oil companies in the dispute resolution The palm oil companies visualize them as neutral in the process of the production as well as that of the transactions of the Palm oil. The Singapore based palm oil company, Wilmar International Ltd., is one of the largest producers which states that it is highly engaged towards the ensuring as well as the conservation of the rare, threatened and the endangered species. The companies also point they are generally the providers of the employment to millions of people in the developing world with the simultaneous restoration of the helf-stable cooking oil free of trans-fats. An island Borneo which acts as a divider between that of Indonesia, Malaysia and Brunei is a center of clash between the planters and that of the conversationalists. The rain forests of this area are one of the most ecologically diversified in the world with that of around 15,000 types of plants with that of more than 600 species of birds and animal population with highly micro equipped flora and fauna (Bil, 2010). The Woolworths palm oil company of Australia is also a giant company in the palm oil production and it stands in the support of the Food Standards Amendment and the company especially welcomes the use of the RSPO criteria for the purpose of the determination of the sustainability of the palm oil production. The Company is also committed in labeling palm oil on its Private Label products with the utilization of the RSPO certified palm oil in those products by 2015. The company is optimistic in this view but it also raises an issue that the Bill requires the producers, manufacturers and distributors of food containing palm oil for labeling the presence of the palm oil “regardless of the amount of palm oil used in the food or to produce the food” ( Woolsworth Limited, 2010, p.3). The company is concerned that the requirement of the label all palm oil in a food product despite of the quantity of palm oil in that product is likely to be non working and has a high probability of generating compliance difficulties for the agents involved in this particular industry. Such a mandatory requirement would be directing towards the fact that the agents involved in this palm oil industry would be required for the identification and labeling of the presence of palm oil in almost every compound ingredients, food additives and that of various processing aid. The manufacturers, producers and the distributors possess limited visibility and ability in ascertaining the minor ingredients particularly in cases where they contain minor trace elements and ingredients (Woolsworth Limited, 2010, p.3). Don’t Palm Us off campaign Among the various campaigns in the protection of the survival of the orang –utans , the Don’t palm off campaign directs towards the establishment of the link between the consumers and that of the orang-utan survival and drives towards the production of certified sustainable palm oil through fair and mandatory labeling. If there are discrepancies in the food products regarding that of the sustainability there are provisions where one can write about the commitment of a 100% Certified Sustainable Palm Oil and so on (Don’t Palm Us off, 2012) . A variance in the angle of perception One of the principal claims by the anti-palm activists and that of the campaigns have been regarding the issue of the loss of orang-utan’s survival conditions. But close scrutiny has been that the chief driver for the enhanced demand regarding the increased agricultural land is that of the rapid development of the primary industries in helping the rural communities in getting rid of their poverty. The reality is based on the fact that the growth in the industry output can be seen to be that of as direct parameters with the consequence of direct yields. But it is also our duty to save the wild life. The Malaysian government has planned in banning the palm oil planting the palm oil near the rivers for the purpose of maintaining the wildlife habitats. Attached with it is also the economic sustainability of around one million Indonesians and Malaysian workers depending on it as a dietary staple. It can be concluded that the creating pressure on the consumers in reducing the palm oil consumption would not be solution but it does have the potential in increasing the amount of land required for producing an equivalent amount of agricultural output (Wilson, 2009, pp. 6-8). Australia Trade Minister Dr Craig Emerson also stated that his government will be opposing any laws which will be standing in the way of discriminating the palm oil as it will be give rise to trade war between Malaysia and Indonesia which is the biggest supplier in the food ingredient globally (Ching, 2011) Conclusion and recommendations The paper centers on the brief discussion of the labeling of the palm oil products for the purpose of attaining sustainability and that of the business around which lives of millions of people depends. Close scrutiny and evaluation if made from a unbiased yardstick of measurement it can be stated that severity of the legalization of the Bill does not surpass tolerable limits and it will be also putting at stake the lives of millions of people. The palm oil production can be also stated to be a weak predictor of the orang-utan’s survival. One of the alternatives which can be thought of is that of the targeting of only the palm oil produced on land which is already deforested with the consideration of the fact that reduction of the marketability of palm oil acts neutrally on the environmental purpose if the land has been cleared ex ante (DON’T PALM US OFF FACTS, n.d.). If the intention of the bill is directed towards the encouragement of the consumers in using sustained produced palm oil then a voluntary scheme can be formulated which would be allowing the manufacturers and that of the producers in order to label their products as containing vegetable oils certified as sustainable. References 1. Bil, B, (2010), MISSION ORANGUTAN, Smithsonian, Vol. 41, Issue 8, p. 36, available at, < http://web.ebscohost.com/ehost/detail?sid=4b10c37e-55a4-45c6-8d4f-9e9cf1334efe%40sessionmgr110&vid=7&hid=122&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=aph&AN=55442937> (accessed on 21 August, 2012) 2. Ching, O. T. (2011), Australia to continue to oppose laws against palm oil, available at < http://www.btimes.com.my/Current_News/BTIMES/articles/osees/Article/> (accessed on 21 August, 2012) 3. Chow, B. P. (2011), Palm oil -boon or bane?, No. 842, pp.24-25, available at: < http://web.ebscohost.com/ehost/detail?vid=4&hid=122&sid=4b10c37e-55a4-45c6-8d4f-9e9cf1334efe%40sessionmgr110&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=aph&AN=65916946> (accessed on 21 August, 2012) 4. Don’t Palm Us off, (2012), available at < http://www.zoo.org.au/palmoil> (accessed on 22 August, 2012) 5. DON’T PALM US OFF FACTS, (n.d.), available at < http://www.nationalzoo.com.au/attached_documents/dont_palm_us_off_fact_sheet.pdf> (accessed on 22 August, 2012) 6. Earth’s Tree News, (2012), available at, < http://forestpolicyresearch.com/news/page/49/> (accessed on 22 August, 2012) 7. GLOBAL OILS & FATS BUSINESS MAGAZINE, (2011), VOL.8 ISSUE 3, available at < http://theoilpalm.org/wp-content/themes/oilpalm/pdf/GOFB-8-3-Australian-Bill.pdf> (accessed on 21 August, 2012) 8. Schubert, R, (2012), Future Bioenergy and Sustainable Land Use, Earthscan 9. Woolsworth Limited, (2010), available at < http://www.woolworthslimited.com.au/icms_docs/130286_Truth_in_Labelling_-_Palm_Oil_Bill.pdf> accessed on 21 August, 2012 Read More