Palm Oil Restrictions to Trigger Trade War between Malaysia and EU
Asia, Business

Palm Oil Restrictions to Trigger Trade War between Malaysia and EU 

Last updated on March 31st, 2019

The European Union risks trade war with Malaysia following the declaration of a policy that restricts the usage of palm oil. The Malaysian Prime Minister, Mahathir Bin Mohamad showed his disagreement over the policy and called it totally unfair.

Mahathir Mohamad said that the EU’s policy to restrict the production and usage of palm oil is extremely one-sided. The policy will affect the Malaysian economy adversely.

Transport & Environment (T&E), a Brussels’ NGO, claimed that palm oil based biodiesel releases greenhouse gases three times more than the fossil fuel based biodiesel. As an effort to minimise the usage of products causing deforestation, the NGO’s claim has forced the EU to categorize palm oil as unsustainable.

Mahathir Mohamad claims that EU’s ill-disposed attitude towards palm oil, the key ingredient used in every product from chocolate spread to lipstick, is to increase the production of the substitute rapeseed oil.

Malaysia, the world’s second largest producer, is dependent on the crop for billions of dollars in foreign exchange earnings. Palm oil is also responsible for creating and providing employment to hundreds of thousands of people.

According to the EU, palm oil is responsible for deforestation which is why its production and usage should completely end by 2030. The ban on the oil will adversely affect the economy of Malaysia as palm oil exports to the EU alone, comprises of 11.6 percent of total exports of the country.

The Malaysian prime minister mentioned in an interview with Reuters that “To do that kind of thing to win a trade war is unfair. Trade wars are not something we like to promote but on the other hand it is grossly unfair for rich people to try and impoverish poor people.”

When Mahathir Bin Mohamad came into power, he promised to recover the country from failing economy. He also promised to end the corruption that rose during Najib Razak’s – former Malaysian Prime Minister – government. Razak has been accused of squandering billions of dollars from Malaysian state fund 1Malaysia Development Berhad.

Approximately 630,000 signatures have been gathered by Transport & Environment in support of banning palm oil as Biofuel. The two largest producers, Malaysia and Indonesia, will fight the policy by bringing it in the notice of the World Trade Organisation.

Restricting the production and usage of oil will definitely affect the Malaysian economy. T&E is also right on their part as the necessary changes are needed to control the climate change. It should be kept in mind that the policies introduced to minimize the climate change, should not affect the economy or the development of a country or its citizens.

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