Malaysia says it could stop palm oil exports to EU after new curbs

The new law bans the sale of palm oil and other commodities linked to deforestation. PHOTO: REUTERS

KUALA LUMPUR - Malaysia has said it could stop exporting palm oil to the European Union in response to a new law in the bloc that aims to protect forests by strictly regulating the sale of the product.

Commodities Minister Fadillah Yusof said Malaysia and Indonesia would discuss the law, which bans the sale of palm oil and other commodities linked to deforestation unless importers can show that production of their specific goods had not damaged forests.

Since the EU is a major palm oil importer, the law, agreed to in December, has raised an outcry from Indonesia and Malaysia, the top producers.

“If we need to engage experts from overseas to counter whatever move by EU, we have to do it,” Mr Fadillah told reporters on the sidelines of a seminar on Thursday.

“Or, the option could be we just stop exports to Europe, just focus on other countries if they (the EU) are giving us all a difficult time to export to them,” he said.

Environmental activists blame the industry for rampant clearing of South-east Asian rainforests, though Indonesia and Malaysia have created sustainability certification standards mandatory for all plantations.

The industry is a major employer, and provides a source of income for smallholder farmers.

Mr Fadillah, who is also deputy prime minister, urged members of the Council of Palm Oil Producing Countries (CPOPC) to work together against the new law and to combat “baseless allegations” by the EU and the United States about palm oil’s sustainability.

CPOPC, which is led by Indonesia and Malaysia, has previously accused the EU of unfairly targeting palm oil.

Responding to Mr Fadillah, the EU’s ambassador to Malaysia said the EU was not banning any imports of palm oil from the country and denied that its deforestation law created barriers to Malaysian exports. “(The law) applies equally to commodities produced in any country, including EU member states, and aims to ensure that commodity production does not drive further deforestation and forest degradation,” EU Ambassador Michalis Rokas told Reuters.

Mr Rokas added that he looked forward to meeting Mr Fadillah to ease Malaysia’s concerns.

EU demand for palm oil is expected to decline significantly over the next 10 years even before the new law was agreed to.

In 2018, an EU renewable-energy directive required phasing out palm-based transportation fuels by 2030 because of their perceived link to deforestation.

Indonesia and Malaysia have launched separate cases with the World Trade Organisation, saying the fuels measure is discriminatory and constitutes a trade barrier.

Indonesian President Joko Widodo and Malaysian Prime Minister Anwar Ibrahim this week agreed to “fight discrimination against palm oil” and strengthen cooperation through CPOPC.

Mr Fadillah said: “This will mean that we will have to be more coordinated in our efforts in conveying our stand and stance on policy matters that will affect the socio-economic well-being of our respective countries.”

The EU is the world’s third-largest palm oil consumer, according to Malaysian Palm Oil Board data. It accounts for 9.4 per cent of Malaysia’s palm oil exports, taking 1.47 million tonnes in 2022, down 10.5 per cent from 2021. REUTERS

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