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Malaysia and the EU have a lot to gain from bilateral relations. Malaysia exports commodities that the EU needs and has the ability to absorb. However, this synergy is not automatic. There are instances where they must understand that they are better off when the priorities of one are also priorities of the other.

For Malaysia to succeed at the negotiating table, the first step is to ensure that all interested parties act in perfect synchrony. Palm oil provides the perfect backdrop to illustrate this idea. Regardless of how varied its stakeholders are, they all have one important thing in common: to make the most of palm oil, both in Malaysia and across the globe.

Malaysia has pooled, over the years, considerable effort and resources to successfully build its palm oil network. The infrastructure consists of bodies ranging from private organisations to public or semi-public agencies entrusted to engage with the competent authorities for specific purposes.

The existence and effective operation of this network proves that the only way for Malaysian palm oil to move forward is if all actors, and all their associated interests, walk hand in hand.

Malaysia produces between 15 and 20 million tonnes of palm oil yearly, worth almost EUR 12 billion. This amounts to 39% of global production and 44% of world exports. In recent years, the EU has imported up to 2 million tonnes of palm oil from Malaysia annually, valued at nearly EUR 1.5 billion.

Clearly, these figures are the result of palm oil having become fundamental in the modern way of life. They also reflect important market-access initiatives for Malaysian palm oil.

Negotiating around obstacles

palm-oil-worker-whellbarrowPalm oil is important, but it also competes with other vegetable oils in the EU. Eco-friendly biofuels can be produced from rapeseed oil or soybean oil, for example, while foodstuffs can be prepared with sunflower oil.

It is undeniable that certain EU measures affect imports of Malaysian palm oil in a negative manner. In particular, the biofuel framework is based on values and sustainability criteria that appear to be discretionary and to arbitrarily punish palm oil, by placing it in an unfavourable position vis-à-vis other biofuel feedstocks.

In addition, a recent amendment caps the amount of crop-based (including palm-based) biofuels that can contribute to the emissions reduction targets required by EU legislation. Moreover, it introduces indirect land-use change factors in member-states’ monitoring and reporting obligations; these may be made stricter in the future, with further distortive and discriminatory effects on palm oil.

When it comes to food policies, a new requirement started to apply in December 2014, whereby all foodstuffs need to carry a label indicating the specific vegetable origin of the oil used. In principle, this requirement simply seeks to provide enhanced information to consumers.

However, when coupled with the harmful ‘no palm oil’ or ‘palm oil-free’ labels that some food manufacturers and retailers affix to their food products, the resulting scenario is anything but promising for palm oil.

Although recourse to these labels is a private initiative, it constitutes an illegal practice under EU and member-states’ law. The governments involved should not be excused for not exercising their administrative and market surveillance powers to end these anti-competitive, fraudulent and illegal practices.

It is clear that the waters in which shipments of Malaysian palm oil navigate are anything but calm. It is critical that all stakeholders understand that they must act and move in the same direction.

This is particularly important when it comes to pursuing the right strategies in international trade negotiations, regulatory action and commercial promotion, competition and protection.

Fratini Vergano
European Lawyers

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