Malaysia-EU FTA talks hinge on palm oil dispute resolution

This article first appeared in The Edge Financial Daily, on April 17, 2019.
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KUALA LUMPUR: Talks between Malaysia and the European Union (EU) over establishing a free trade area (FTA) will likely remain frozen until the country’s palm oil dispute with the region is resolved amicably, according to deputy secretary-general (trade) to the ministry of international trade and industries, Datuk Seri Norazman Ayob. Talks for the potential FTA started in 2010, but have stalled since 2012.

He said FTA talks with the EU remain suspended due to unfair treatment of Malaysian palm oil and its products, and that Malaysia and Indonesia have written to all leaders in Asean to suspend the elevation of Asean-EU partnership until the edible oil issue is resolved.

Indonesia, meanwhile, plans to challenge the EU’s gradual ban on using palm oil in biofuel, which the EU Parliament had passed as legislation, at the World Trade Organization, he said.

“Malaysia supports international rules on trade, hence it should be fairly applied. Asean leaders have heard our views and agreed to suspend the elevation of that partnership. We hope the issue can be resolved.

“We do not refute the possibility of taking other measures with far-reaching implications on trade relations with some EU countries,” Norazman said during his speech at the EU-Malaysia Trade and Investment Forum 2019 yesterday.

He said palm oil is singled out for contributing to high carbon emissions due to deforestation, while other things contributing more to carbon emissions are not subject to the same rules.

“How is it possible that crops such as soybean, rapeseed and sunflower oil, produced in the EU, are not subject to the same treatment as palm oil?” Norazman asked.

At the event, French ambassador to Malaysia Frédéric Laplanche, in his speech after Norazman’s, said he is “convinced that we will find a positive outcome” for the palm oil dispute.

Meanwhile, he said the EU — the second-largest export destination for the edible oil — will still buy Malaysian palm oil.

At a press conference later where Norazman was notably absent, Laplanche — on whether the EU-Malaysia trade relations’ tone has changed — said trade relations are dynamic and varied in different industries.

He also noted the EU has a trade deficit with Malaysia — the ninth-largest that it has worldwide — as it imports more Malaysian goods than what it exports to Malaysia. He added that Malaysia should not wait any longer to restart FTA talks with the EU, as regional peers such as Vietnam, Indonesia and Singapore are in discussions or close to implementing their respective FTAs with the EU.