Malaysia warns of retaliatory trade action following France and Norway’s anti-palm oil stance

02 Jan 2019 --- As 2019 gets underway, the spotlight is back on the palm oil industry as Malaysian government officials condemn the recent French National Assembly’s vote to exclude palm oil biofuels as “unwarranted and unjust.” The decision threatens the livelihoods of more than 650,000 Malaysian small farmers who rely on palm oil, according to the country’s government – and the move by France could spark trade retaliation – as Malaysia strongly protests and plans to “muster support from other key palm oil producers.”

The proposal by the French National Assembly is causing major concern for the Malaysian government as the country, alongside Indonesia, is one of the world’s largest producers of palm oil. It comes as Norway has also taken a similar step against palm oil.

Minister of Malaysia’s Primary Industries, Teresa Kok, states that the move by the French parliament to exclude palm oil as an approved biofuel is an unwelcome decision that goes against free trade and would have a devastating impact on Malaysian farmers. Additionally, the ban on palm oil biofuels will threaten French exports to Asia and hurt diplomatic relations between France and palm oil-producing countries.

“This is a most unwelcome decision and goes against the very principles of free and fair trade. The vote by the Parliamentarians is alarming and deserves the strongest condemnation,” claims Kok. 

“Their action to ultimately exclude the usage and importation of palm oil as part of the approved renewable energy mix could consequently affect our bilateral trade relations. Malaysia plans to protest strongly against this action and will also muster support from other key palm oil producers.”

“I appeal to the French authorities to reconsider this anti-palm oil vote or be ready to face retaliatory actions on bilateral trade and other ongoing collaborations from all palm oil producers,” she adds. 

Norway has also recently moved to ban palm-based biodiesel, prompting more reaction from Malaysia which says this could also hinder long-running trade talks with the European Free Trade Association. 

Norway recommended to ban biodiesel “with high deforestation risk” last month and from 2020, the Norwegian government is expected to impose taxes and policies to exclude biofuels linked to deforestation risk.

Malaysia and Indonesia have also previously condemned the EU for supporting a ban on the use of palm oil in biofuels from 2021. The EU later agreed that palm oil usage in transport fuels would be capped at 2019 levels until 2023 and reduced to zero by 2030.

Mounting pressure from Europe

Crop-based biofuels are facing mounting criticism in Europe with opponents claiming some crops that are grown on plantations cause deforestation. At the same time, Europe remains the leading market for sustainable palm oil and environmental and sustainability issues continue to be a topic of debate among consumers and policymakers. People are looking for greater levels of transparency, commitment and sustainability which has prompted many key players to step up their sustainability commitments and pledge to create a deforestation-free industry. 

The Roundtable on Sustainable Palm Oil (RSPO) is working towards making sustainable palm oil the norm through a process of market transformation and has a goal to reach 100 percent certified Sustainable Palm Oil in Europe by 2020. This target is echoed in national industry initiatives and signatories to the Amsterdam Declarations governments such as the UK, Denmark, France, Germany, Italy, Norway and the Netherlands.

Palm oil is sure to be a dominating and controversial theme throughout 2019. The rapid expansion of palm plantations comes at the expense of tropical ecosystems, native populations, land degradation and carbon emissions, argue environmentalists and campaigners. The debate is leading to more global consumers making ethical choices about products containing palm oil while UK retailer Iceland banned using the crop in its own-label brands in April last year. 

In September, Nestlé stepped up its game when it comes to no-deforestation commitment by becoming the first food company to use a high-tech satellite-based service to monitor its palm oil supply chains. In a bid to distance itself from the controversy associated with deforestation and hit its 2020 no-deforestation targets, Nestlé implemented Starling, a global verification system using cutting-edge technology combining high-resolution radar and optical satellite imagery to provide constant unbiased monitoring of land cover changes and forest cover disturbances.

This followed the Swiss food giant being suspended from the RSPO in June for breaching its code of conduct. At the time, Nestlé said the organization’s approach “is not conducive to achieving the levels of industry transparency and transformation the sector so urgently needs” and pointed out that although the company shares RSPO’s ambition for improving the social and environmental performance of the palm oil sector, “our approaches to this do differ.”

The following month, the sustainable palm oil body reinstated Nestlé’s membership after the company submitted its action plan to achieve 100 percent RSPO-certified sustainable palm oil.

Also last June, a report examining palm oil said its production is a disaster for tropical rainforests and trashing the habitats of orangutans and tigers – but alternatives like soy, corn and rapeseed could be even worse because these crops are much more land-hungry. The report “Oil palm and biodiversity” is an in-depth analysis by the International Union for the Conservation of Nature (IUCN) Oil Palm Task Force which delves into the many challenges of palm oil production in countries like Malaysia and Indonesia. 

The moves by France and Norway sets an example towards market-based deforestation combating policies and demonstrates the polarizing and complicated nature of this edible vegetable oil which goes into so much of the world’s food products and is used to produce both methyl ester and hydrodeoxygenated biodiesel as well as in the cosmetics and personal care industries, among others. 

By Gaynor Selby