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Malaysia could stop palm oil exports to EU after new restrictions

Malaysia on Thursday said it could stop exporting palm oil to the European Union in response to a new law in the bloc that aims at protecting forests by strictly regulating sale of the commodity.

Commodities Minister Fadillah Yusof said Malaysia and Indonesia would discuss the law, which bans sale of palm oil and other commodities linked to deforestation unless importers can show that production of their specific goods has not damaged forests.

Since the EU is a major palm oil importer, the law, agreed to in December, has raised an outcry from Indonesia and Malaysia, the top producers.

Environmental activists blame the industry for rampant clearing of Southeast Asian rainforests, though Indonesia and Malaysia have created sustainability certification standards mandatory for all plantations.

The industry is a major employer, and provides a source of income for smallholder farmers.

Fadillah, who is also deputy prime minister, urged the members of the Council of Palm Oil Producing Countries (CPOPC) to work together against the new law to combat “baseless allegations” made by the EU and United States about the sustainability of palm oil.

CPOPC, which is led by Indonesia and Malaysia, has previously accused the EU of unfairly targeting palm oil.

Indonesia and Malaysia have launched separate cases with the WTO, saying the fuels measure is discriminatory and constitutes a trade barrier.

The EU is the world’s third-largest palm oil consumer, this is according to Malaysian Palm Oil Board data as it accounts for 9.4 per cent of palm oil exports from Malaysia, taking 1.47 million tonnes in 2022, down 10.5 per cent from a year earlier. 

Writing by Tersoo Nicholas