Called the Truth in Labeling – Palm Oil Bill 2010, the bill is aimed at making consumers aware of palm oil as an ingredient. Palm oil can currently be listed as vegetable oil on packaging.
Originally proposed by independent Senator Nick Xenophon, the bill was based on environmental concerns, citing deforestation in Indonesia and Malaysia for palm oil production. The bill was passed by the Senate at the end of June and is awaiting consideration in House of Representatives, where if passed, it would become law.
However, now the federal government has said that it will oppose the bill as it would violate Australia’s obligations under the World Trade Organization (WTO) and put Australian food businesses under extra compliance costs of AU$150m.
Bill to law is still 50-50
There is still a chance that the bill might become law, as the federal government and the opposition coalition have parity in numbers. As of the current status, the ruling government controls 72 seats in the House of Representatives, while the opposition coalition also controls 72 seats.
Tim Wilson, director, IP and free trade unit and climate change policy at Melbourne-based think tank Institute of Public Affairs, said that bill is more or less set to pass, despite being locked up in a Committee Inquiry.
“It's likely it will be made law in the next two months, but the timeline to come into effect is longer,” said Wilson.
According to Wilson, if the bill passes, Australia is risking retaliatory measures from Malaysia and other countries in ASEAN, which could affect Australian food manufacturers.
“It is also likely to harm Malaysia FTA [free trade agreement] negotiations. And there have already been rumbles that it will be challenged in the WTO. But it will pass and the price of food for consumers will rise and it will create a trade policy headache for Australia,” said Wilson.
AFGC is still hopeful, urges coalition to oppose
The Australian Food and Grocery Council (AFGC), which has taken a lead in opposing the bill previously, along with Malaysian and New Zealand trade bodies, has issued a statement calling upon the coalition to oppose the bill as well.
“It’s simply not the right time to introduce significant new cost pressures and regulatory burdens on industry when the sector is already under significant pressures,” AFGC chief executive Kate Carnell said in the statement.
The AFGC had previously stated that the cost of changing a single label would be between AU$10,000 to AU$19,000, which equated to hundreds of millions of dollars in extra costs as there are up to 60,000 products on supermarket shelves.
Tony Mahar, director of sustainable development at the AFGC, said that most of the concerns regarding the ecological impact of palm oil plantations are well understood by the AFGC, but disputes their truth.
“On the reasoning that it damages the region it is grown is not true. The fact is that palm oil trees are a more efficient crop than some of the crops that grown in the said regions, like Malaysia,” he said.
According to Mahar, Australia only uses 0.3 per cent of the world's palm oil and most of the affected food companies in Australia have committed to using certified, sustainable palm oil. A change in labelling is therefore not required, he said.
Mahar added that if the bill were passed, the logical fallout would be that either food companies would start looking for alternatives, which may be costlier, or they would change labels; in both cases they might pass on the cost to the customer.