Palm oil dispute won't have bearing on trade talks

A dispute between the European Union and major palm oil producers Indonesia and Malaysia over a new deforestation law will have no bearing on the two countries’ stalled negotiations with the bloc on free trade agreements, a Malaysian minister said on Thursday.

Responding to a Financial Times report which said the talks could be delayed over the palm oil issue, commodities minister Fadillah Yusof said Malaysia’s negotiations with the EU on a trade deal, which have been on hold since 2012, could be resumed if the EU would treat Malaysia with fairness and as a partner.

Fadillah also said Indonesia had been negotiating on an EU FTA for seven years and was “very patient” about waiting longer.

Top officials from Indonesia and Malaysia, the world’s biggest producers of palm oil, have been in Brussels voicing concern over an EU Deforestation Regulation (EUDR), which they believe could be detrimental to small farming businesses.

“The first step is to look into EUDR,” Fadillah, who is also deputy minister, told reporters in Brussels, a recording of which was provided by the ministry.

“We went to see them, we presented our case in particular the fair treatment and how they are going to respond as far as smallholders are concerned … if there is a good response from them, definitely FTA will be one of the areas that we are looking at.”

Indonesia’s economic ministry and trade ministry did not immediately respond to requests for comment.

Malaysia and Indonesia account for about 85% of global palm oil exports and the EU is their third-largest market.

Both Southeast Asian countries have accused the EU of discriminatory policies targeting palm oil and Malaysia had previously said it could stop exporting it to the EU over the deforestation law.

According to the EU, talks towards an FTA with Indonesia were launched in 2016, with the latest round in November 2021. Negotiations on a deal with Malaysia started in 2010 but were stopped two years later.

The EU’s landmark deforestation law bans imports into the bloc of coffee, beef, soy and other commodities unless companies could provide “verifiable” information the products were not grown on land that was deforested after 2020.

Indonesia’s Coordinating Minister for Economic Affairs Airlangga Hartarto said last month that the law would burden smallholders with onerous administrative procedures, which might see them excluded from the global supply chain.