The diplomat may cut palm oil exports to the European Union

ASEAN win | Economie | Southeast Asia

The move followed Brussels’ passage of a law that could severely restrict palm oil imports into the European bloc.

Truck transporting harvested palm oil, Sabah, Malaysia.

Credit: Greg Gerrard/Civour

A senior Malaysian official has announced that his country may stop exporting palm oil to the European Union in response to the passing of a new EU law that would strictly regulate its sale.

Speaking on the sidelines of a seminar yesterday, Minister of Commodities Fadila Yusuf told reporters that Malaysia and Indonesia, the world’s two largest palm oil producers, would discuss the implications of the regulation, which requires companies to prove that their supply chains do not contribute to deforestation. .

“If we need to involve experts from abroad to counter any move by the European Union, we must do so,” Fadila was quoted as saying by Reuters. “Or the option may be to stop exports to Europe, and just focus on other countries if they (the EU) are giving us all a hard time exporting to them.”

In recent years, the European Union has taken steps to leverage its market power to ensure that products entering the bloc are more environmentally sustainable. The regulation, passed in December, “will ensure that a range of essential goods on the EU market will no longer contribute to deforestation and forest degradation in the EU and elsewhere in the world,” the European Commission said in a statement following its approval. . In addition to palm oil, the law also applies to livestock, soybeans, coffee, cocoa, timber, and rubber, as well as various products derived from them.

This naturally led to friction with major palm oil producers, which has been linked to a long list of workers’ rights violations as well as “widespread destruction of rainforests and loss of wildlife”. Malaysia and Indonesia were so concerned about the new EU rules that they joined forces to lobby against the proposed regulatory changes.

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“The Deforestation-Free Products Act is a deliberate measure by Europe to prevent market access, harm small farmers and protect the domestic oilseed market which is inefficient and cannot compete with the cost of palm oil,” Fadila said in a statement last month. its passage.

Some outside analysts agree that the restrictions are motivated as much by protectionism as by environmental concerns. At the very least, national governments and European oil crop growers and their lobby groups have played an important role in pushing the EU against palm oil.

This is not the only EU policy that has angered Kuala Lumpur and Jakarta. In late 2019, Indonesia lodged a complaint with the World Trade Organization over the European Union’s 2018 Renewable Energy Directive 2, which states that biofuels produced from palm oil will not be considered green fuels and will therefore be phased out under the targets of the new renewable energy bloc. . . Malaysia followed suit in 2021.

With the entry into force of various EU regulations, the palm oil issue has begun to affect the course of relations between Brussels and the Association of Southeast Asian Nations (ASEAN). In particular, negotiations on a free trade agreement between the European Union, Malaysia and Indonesia have been suspended.

The row thus increasingly exposes the tension between the EU’s commendable approach to trade and its determination to increase its “strategic engagement” with ASEAN. Yesterday’s warning from Malaysia’s commodities minister also suggests that there are limits to the leverage created by the large EU market, especially in the realm of growing Asian powers such as India and China. Either way, as Naila Maier-Knapp wrote for The Diplomat in 2020, “the palm oil dilemma signals troubled times awaiting EU and ASEAN diplomacy.”

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