Sticky business: Region frets over EU regulation that affects palm oil trade

Singapore-based traders may feel the impact, but they can also be a force for good.

- Simon Tay and Aaron Choo

Agriculture and commodities have always been important for our region, and remain a priority for Indonesia, Malaysia and Thailand. But concerns about climate impacts and deforestation have now come to the fore. It is in this context that an upcoming regulation from the European Union could have a huge impact on the region.

On the face of it, the aim of the EU's Regulation on Deforestation-free products, or EUDR, is noble. It wants Europeans to avoid buying, using or consuming products that contribute to deforestation. In reality, the move can be hugely disruptive for the region's producers, the European consumers and even players in Singapore.

The regulation was originally slated to be implemented by the end of 2024. It has been challenged in legal cases brought by Indonesia and Malaysia to the World Trade Organisation. Fortunately, the European Commission and European Council have agreed to a proposal to delay the EUDR's implementation by 12 months, pushing it back to the end of 2025.

The proposal is now going to the EU's third governing body, the European Parliament, for a vote between Nov 13 and 14.

Yet even if a one-year extension is granted, this may not be enough to resolve questions surrounding the impact of the EUDR, even on Singapore. After all, it is the traders that link the producers and the consumers. This includes many businesses in Singapore, which serves as a hub for global exports.

HIGH STAKES FOR REGION The regulation aims to stop consumption that can drive deforestation, but many in the region have painted it as a "ban on palm oil".

Adopted in 2022, the regulation applies to seven types of agricultural goods imported into the EU, namely cattle, cocoa, coffee, palm oil, rubber, soy and wood. While palm oil is of particular importance to Indonesia and Malaysia, there are countries like Brazil for which other exports like soya beans and beef are more significant.