Malaysia weighs trade curbs to fight EU’s anti-palm oil policy

PUTRAJAYA – Malaysia, the world’s second-biggest palm oil producer, is weighing a range of trade curbs to strike back against what it calls an unfair policy of the European Union that blocks the tropical oil from EU markets.

The country will coordinate its response with Indonesia, the largest edible oil supplier globally. Strategies being considered include slowing commodity trade with Europe and reviewing imports from the bloc, according to Malaysia’s Deputy Prime Minister Fadillah Yusof. 

The EU agreed to a historic law last December that will stop products causing forest destruction from being sold in the shops and supermarkets of member states.

Products like wood, rubber, beef, leather, cocoa, coffee, palm oil and soya will not make it past the port unless proven to be deforestation-free. Malaysia and Indonesia are leading international criticism of the policy. 

“If they’re too firm on their decision, if they do not want to listen to us, I think one of the areas that we can be looking at together with Indonesia is how we should look at Europe,” Mr Fadillah, who is also Malaysia’s Minister of Plantation and Commodities, said in an interview on Tuesday. “If we are not fairly treated, I think there should be some counter-action by us.”

The two countries – which together make up more than 80 per cent of the world’s palm oil supply – say the rule is discriminatory. It will cut off market access to the EU for millions of small farmers across Asia, Latin America and Africa who do not have the means to meet the stricter traceability requirements.

Palm oil is used to make everything from chocolate to lipstick, soap and detergent. 

Indonesian talks

“The action by the EU is trying to phase out smallholders from the system,” Mr Fadillah said from his office in Putrajaya.

The bloc keeps introducing new requirements despite compliance from bigger plantations on international sustainability standards, and the Malaysian government’s commitment to a greener economy and limiting new plantation areas, he said.

He will head for Jakarta on Wednesday to discuss strategies with Indonesia. The two countries will hold a joint ministerial press conference on Thursday.

On possible trade measures, Mr Fadillah did not want to go into details of what Malaysia and Indonesia may do, but said it would be part of the discussion. 

“Together with Indonesia, we want to make the European Union realise their action is a one-sided, unilateral decision,” he said. Bloomberg