Seek bilateral talks for palm oil apart from WTO

Malaysia ought to look at bilateral and multilateral avenues which are expected to result in a better outcome


MALAYSIA should seek other diplomatic avenues in resolving the palm oil conflict with the European Union (EU) as the World Trade Organisation’s (WTO) Appellate Body is “paralysed” due to its limited panel members.

The arbitrator lost its power to rule in a trade dispute when two of its three remaining judges — the minimum number of panels needed to hear a case, met their terms’ expiration last week.

Economist Prof Dr Rajah Rasiah said Malaysia should begin to look at bilateral and multilateral avenues, which are expected to result in a better outcome.

“Malaysia should now pursue its case both bilaterally and multilaterally with the EU. The country can also seek support from the Asean Economic Community, especially with Indonesia being the world’s largest crude palm oil (CPO) producer.

“The dispute settlement mechanism, in a way, has created a highly asymmetric court in which proceedings and judgements favour the larger and richer countries, and countries that are less trade-reliant.

“It will be good if we could pursue a fairer settlement for such disputes, which is difficult to achieve in the presence of large belligerent countries,” he told The Malaysian Reserve (TMR).

However, Rajah said it is imperative to emphasise Malaysia’s standpoint in the negotiations to alter the deceptive perception of the palm oil industry.

“We have to show that palm oil has the highest edible oil output per hectare of land and that it produces higher efficiency in relation to the inputs.

“In making its case, the government should also show the reliance of the poor and middle-income households on the palm oil industry, Malaysia’s initiatives to regulate deforestation and the waste-to-energy effort using biomass.”

The absence of WTO’s position to adjudicate new cases could impede Malaysia’s chances to seek a fair outcome out of the dispute settlement and put Malaysia’s palm oil industry at risk, Rajah said.

“The WTO’s dispute settlement court generally leaves smaller economies at a disadvantage owing to asymmetric powers enjoyed by bigger countries and their trade union.

“When the judgement places the EU as being guilty of pursuing anti-trade measures, it has only offered infringed countries to impose counter measures.

“However, for a highly trade-oriented country such as Malaysia, this is not very helpful. The dispute settlement court had its limitations, but scrapping it following the pressure from the US is the worst thing to happen,” he said.

The arbiter is currently caught in a crisis as its appellate body lost its ability to rule on new dispute cases due to the blockage of its judges’ new appointment by the US.

At present, the panel has only one judge due to the blockage.

Despite the recent development, Indonesia has reportedly filed its lawsuit against the EU through WTO on the basis of biased policy on the bloc’s biofuel policy.

Malaysian Palm Oil Association CEO Datuk Nageeb Wahab said Malaysia will likely to exhaust all of its negotiations before proceeding with arbitration avenues.

“The complaint has not been filed yet. We are still talking to the EU countries and the body being paralysed now will lower the chance of our lawsuit.

“Malaysian government wants to exhaust all of its avenues…and Malaysia is negotiating with every EU country as we have been sending delegates to negotiate,” he told TMR.

Nageeb said the government is of the view that the negotiations have helped to pacify some of the EU countries’ biofuel policy.

“The biofuel ban previously was to be enforced in 2020 and some countries are committed to that. After numerous negotiation sessions and internal pressure by the large industry players, I think some of the country members of the EU have rescinded and deferred the decision.

“The Malaysian government feels that it is the effect of its negotiation and it may work if they continue to do that,” he said.