August 11, 2010 | Commentary on Energy and Environment, Renewable Energy

Green Protectionism

European policy makers and environmental groups want to restrict imports—but not in order to save the planet.

A recent article in the New York Times featured unsubstantiated accusations by Greenpeace that Indonesian pulp, paper, and palm oil conglomerate Sinar Mas is “secretly planning a massive expansion of pulp mills and cutting down essential forests, including habitats for endangered tigers.” Alleging serious ecological harm, Greenpeace—along with the World Wildlife Fund, Friends of the Earth, and the Rainforest Action Network—is advocating trade restrictions on these products from Indonesia.

This attack on Indonesia’s forestry sector bookends a recent blitz by Greenpeace activists against Indonesia’s palm oil industry on similar grounds. Meanwhile, companies in Europe, North America, and Australia that produce competing agricultural commodities have lobbied their governments to impose trade restrictions against lower-cost products from Asia.

Welcome to the world of “green protectionism.”

Western policy makers know it is against established trade law to block imports for protectionist purposes; no trade court would allow it. So they have shifted strategy. Policy makers who are hostile to foreign trade now echo the claims of radical environmental NGOs in an attempt to block imports on ecological grounds. In this way they achieve traditional protectionist goals via non-traditional means.

Take the forestry industry. The first “green shoots” of trouble for free trade in that sector began sprouting in the last couple of decades, when pulp and paper exports from Asia started to significantly impact world trade flows.

Serious efforts to block imports of forestry products began in the European Union (EU) when its “Forest Law Enforcement Governance and Trade” (FLEGT) Action Plan was published in 2003. It included provisions for “voluntary partnership agreements” between developing countries and the European Union, whereby both sides committed to government procurement policies allowing the purchase only of “legally harvested” timber.

But the FLEGT apparently did not hinder enough imports. In 2008, European protectionists and NGOs pushed through new EU regulations imposing additional regulatory “due diligence” burdens on European importers of pulp and paper products to ensure that EU officials would be the final arbiters of what constitutes “legal timber.”

The global economic downturn of the past two years has engendered additional protectionist pressures and this summer the European Parliament actually voted to close EU markets to “illegal” timber. The new law covers “the whole timber supply chain from logging sites to European consumers [and] aims to guarantee legally sourced products access to EU markets while halting deforestation in third countries.”

European protectionism is also now being found in sectors such as palm oil, which has made big gains in the European market against competitor products. The palm oil industry has been an important source of private-sector foreign direct investment, economic development, and employment for millions worldwide, including 570,000 Malaysians and more than 3 million Indonesians.

Greenpeace and the other environmental NGOs are leveling the same charges against palm oil producers that they employ against the forestry sector. They allege that companies buying goods from Asia’s tropics are complicit in the destruction of rainforest and habitats for endangered species.

Thus these NGOs are pushing for adopting the EU’s “Renewable Energy Directive” (RED), which would restrict imports of biofuels by imposing more onerous environmental standards on them than on biofuels produced in the EU such as rapeseed oil. Such favoritism is prohibited under the World Trade Organization’s (WTO’s) nondiscrimination and national treatment rules.

Contrary to Greenpeace’s claims, palm oil is environmentally friendly, as it consumes less energy in production, uses less land, requires less input of fertilizers or pesticides, and generates more oil per hectare than other leading vegetable oils.

The EU should put a stop to green protectionism as it contravenes decades of beneficial work opening markets by the United States and its trading partners at the Organization for Economic Cooperation and Development and the WTO.

Green protectionism that undermines sustainable, private sector-led development and economic growth in Indonesia and elsewhere is reprehensible. The WTO should define green protectionism as an illegitimate (and actionable) intervention by governments in the marketplace.

The campaign by European-funded NGOs to restrict production in developing countries of forestry products, palm oil, and other commodities—coupled with efforts by the EU to limit access to its markets through protectionist measures such as the FLEGT and RED—would block future job creation, higher living standards, and poverty reduction in the very countries the NGOs claim to be protecting.

The EU should uphold its member states’ principles of poverty alleviation through free trade and investment to encourage economic growth. If not, the losers will be both Western consumers and the industrious people of Indonesia, Malaysia, and many other countries whose citizens are seeking improved living standards and a better future for their children.

James M. Roberts is a research fellow for economic freedom and growth at the Center for International Trade and Economics at the Heritage Foundation.

About the Author

James M. Roberts Research Fellow For Economic Freedom and Growth
Center for Trade and Economics (CTE)

First appeared in The Journal of American Enterprise Institute