Phase-out of palm oil biofuel puts ASEAN-EU FTA in jeopardy

KUALA LUMPUR (March 14): The European Union's (EU) decision to phase out palm oil from being used in biofuel within the bloc is putting the ASEAN-EU free trade agreement (FTA) negotiations in jeopardy.

The Ministry of International Trade and Industry's deputy secretary general (trade) Datuk Seri Norazman Ayob said the palm oil issue was a great concern to Malaysia as it was the country's biggest commodity export.

"If there is no green light on palm oil, it will be more challenging for the FTA to be concluded," he told reporters after the Malaysia Investment Performance Report release here today.

He said Malaysia and Indonesia had also lodged complaints with the World Trade Organisation regarding the discriminatory treatment of palm oil by the EU.

"In fact, during ASEAN-EU summit early this year, Malaysia and Indonesia have asked to put on hold the proposal to elevate the EU as associate partner until the palm oil issue is resolved," he disclosed.

Yesterday, the European Commission concluded that palm oil cultivation resulted in excessive deforestation and its use in transport fuel should be phased out.

The Commission published its criteria for determining what crops cause environmental harm, part of a new EU law to boost the share of renewable energy to 32 percent by 2030 and determine what are appropriate renewable sources.

The use of more harmful biofuel feedstocks will be capped at 2019 levels until 2023 and reduced to zero by 2030.

Malaysia and Indonesia made up 85 percent of the global palm oil supply.