The European Parliament’s decision to ban palm oil, Malaysia’s biggest export item, is “drastic and discriminatory” and Kuala Lumpur is ready to retaliate with its own trade measures against Europe’s products if the ban takes effect, Malaysia’s Minister Datuk Seri Mah Siew Keong told EURACTIV.com on Tuesday (12 February).
One of the potential measures could be a referral of the case to the World Trade Organisation, he said but added Malaysia would first seek to resolve the issue through dialogue.
Datuk Seri Mah Siew Keong, Malaysia’s minister of plantation industries and commodities, spoke with EURACTIV’s Sarantis Michalopoulos before meeting European Commission officials in Brussels.
The European Parliament has decided to end palm oil by 2021. What will be the impact on Malaysia’s farming community?
The impact will be enormous because from the two million tonnes of palm oil we export to Europe, more than 30% is used for biodiesel. We are very disappointed with this vote.
Europe’s market for palm oil products from Malaysia is around 2.2 billion euros and the effect will be tremendous. We have always stressed that palm oil is the backbone of our economy, as it’s the biggest export item. Not only the big producers but also the small farmers will be negatively affected. Malaysia has 650,000 small farmers.
More than 40% of the land the palm oil is cultivated on is run by small farmers, so the perception that only big producers will be affected is not correct.
What is the feedback that you get from the European Commission?
We are meeting Commission officials later in the day. The European Parliament has decided to ban palm biofuels from 2021. This is drastic. The other vegetable oils would be phased out starting in 2030, a difference of 9 years.
2021 is not far from today. And obviously, our farmers are very worried about how we will make this adaptation in such a short period. I’ve discussed with the Commission, this is not equal treatment and we believe this is blatant discrimination.
Are you in collaboration with other countries in the region to jointly refer the case to the World Trade Organisation (WTO)?
We are working closely with Indonesia for instance. I have also talked to my Thai colleagues, other Asian and African countries as well as Latin America countries like Colombia. We will refer the case to the WTO if Europe forces us to do so.
What is next on a trade level? According to press reports in your country, you are mulling punitive trade measures.
Malaysia and the EU are in discussion for a free trade agreement and palm oil will definitely be on the top of the agenda. Trade is a two-way process. If Europe discriminates our biggest export item we will definitely take action if needed. I hope this will not be the case.
I hope fairness will prevail and I was told this is not the final decision. But honestly, if Europe implements this discriminatory act, then Malaysia will have to retaliate against goods from Europe.
Do you have a ready plan for specific products?
We have huge and various imports from Europe and we are looking at it.
Is it true that you are looking at the EU wine?
Wine is very popular but it’s a very small amount exported to Malaysia. We are not currently looking at specific products because the EU Parliament decision was only last month. And it shocked us.
What about the EU governments? Have you contacted them?
We have talked to a number of EU member states on an individual basis and so far the response has been good as we explained to them the various effects. We cannot understand why there is a need to discriminate against palm oil. I think we have conveyed our message and we will keep on doing that: how palm oil affects the livelihood of small farmers and the decision by Europe will lead to increased poverty and a retreat from the United Nations Sustainable Development Goals.
Right after the EU Parliament decision, nearly 350,000 farmers signed a petition and took to the streets of Kuala Lumpur, urging the EU not to destroy their lives.
On an environmental basis, I think Malaysia has already done a lot to make sure that the cultivation of palm oil does not destroy the environment. We are very strict, we have put in place many rules and laws to ensure that there is no destruction of the forests.
In the event the EU demands further sustainability measures to be taken in order to provide you with additional time, are you ready to do that?
Yes of course. Last year, we announced the Malaysian Sustainable Palm Oil (MSPO) Certification that we will make it mandatory for everyone in the field including the 650,000 small farmers. It’s not easy; it’s a costly exercise. Small farmers will all have to go through auditing but they are committed to that.
We want to work closely with EU countries. We want them to provide guidance because we want to be sustainable as it is important primarily for our country itself. We want to work with Europe to secure the acceptance of the MSPO certification. But let me point out that instead of encouraging Malaysian small farmers and working with Malaysia, the EU Parliament decision is taking the wrong direction and sending the wrong message.
Do you believe that this is just the first step for palm oil? Do you fear this ban could gradually be imposed on other products as well, like on food for instance?
The basis to ban palm oil is not valid and we think we will face more challenges in the future. The Commission is considering further regulations of palm oil; this will be strongly challenged and could be yet further discrimination and unequal treatment.
Palm oil is the most efficient and cost-effective crop in the world. Ten years ago, palm oil had 20-30% of the market share and today it has 60% of the vegetable oils market.
Palm oil has, for instance, vitamin E, vitamin A and it’s a very competitive oil. Due to its leadership in the vegetable oils market, there have always been attempts to bring it down.
I think it’s by competing vegetable oils, which feel threatened by the increasing market share of palm oil. We will continue to face this kind of challenges.