Palm oil battle could drag for 5 years

The govt is looking at diverting the palm oil export destination to fill the demand gap should the WTO rule against Malaysia


MALAYSIA could bring up the European Union’s (EU) mistreatment against palm oil to the Dispute Settlement Body of the World Trade Organisation (WTO), but an industry expert warned that the dispute could drag up to five years, costing millions of ringgit in legal expenses.

“The case will be a lengthy process depending on how (the EU) wants to defend its position. For this case, Malaysia is looking at about five years.

“The WTO route is a legally and internationally accepted course of action. Both Malaysia and Indonesia have succeeded in bringing our case to the WTO,” the industry insider told The Malaysian Reserve recently.

“It is legally binding as most of the countries are a member of the WTO,” the expert, who spoke under the condition of anonymity, explained.

The WTO had established a dispute settlement system that independently resolves and provides recommendations on trade-related disputes among its 164 members. It is the most sought-after tribunal body by global economies and has issued 153 reports and legal findings on trade dispute.

The intergovernmental organisation had ruled in favour of Malaysia and three other countries when they collectively lodged a complaint in 1997 over the US’ prohibition of seafood imports from non-certified countries, including Malaysia.

In July, Primary Industries Minister Teresa Kok said Malaysia will be lodging the complaint to the Dispute Settlement Body as early as November.

While pursuing the dispute settlement, the industry expert said the government is looking at diverting the palm oil export destination to fill the demand gap should the WTO rule against Malaysia.

“That is the intention of the EU to set the effective implementation of phasing out our palm oil in the biofuel sector by 2030.

“By that time, our palm oil exports must have been diverted somewhere else as we cannot wait for the WTO’s decision. The EU will still get what they want that ‘non’ or less palm oil is being exported to the EU. This is their strategy game,” he said.

He added that Malaysia could be spending millions of ringgit in legal expenses in getting advice and assistance for the hearing, as well as in appointing lawyers and representatives.

“Battling this palm oil situation through the WTO route is worth it because someone wanted to demonise Malaysia’s palm oil industry that is currently worth RM80 billion in terms of exports earnings every year.

“However, it could cost millions of ringgit easily, depending on how much the Primary Industries Ministry wants to commit as the government needs to engage with lawyers to specify the terms and send representatives to the hearings,” he said.

“That is why the government is referring to the Attorney General’s Chambers (AGC) to get their advice on the legal cost and the outside legal expertise that is needed.”

At the previous WTO Committee on Trade and Environment’s (CTE) meeting attended by palm oil exporting and importing countries on May 15, the organisation said its members had expressed concerns over the sustainability of the palm oil production.

WTO added that the EU considers the production to be complex, while noting that it remains a source of income for a large community and faces challenges concerning deforestation and biodiversity loss.

WTO said the CTE meeting is scheduled to reconvene on Nov 26.

The EU has adopted a delegated act proposal that implements the Renewable Energy Directive II which will gradually limit and phase out biofuel imports into the bloc until 2030.

Malaysia and Indonesia are the world’s top producers of the commodity, supplying about 85% of global demand.

The EU countries are the second-largest buyers for both countries after India, as Europe currently consumes 7.5 million tonnes of palm oil a year — about 10% to 15% of the global palm oil demand.