EU faces ‘trade war’ with Malaysia and Indonesia

EU faces ‘trade war’ with Malaysia and Indonesia

The European Union faces a trade war with Malaysia over its “grossly unfair” policies aimed at palm-oil exports, according to Malaysia’s returning prime minister, Mahathir Mohamad, said.

The European Commission announced in March that palm oil cultivation caused excessive deforestation and its use in biofuels should be phased out by 2030. The measures still need European parliamentary approval.

Brussels also says it plans to phase out palm oil’s use in biofuels at the World Trade Organisation.

Under the EU’s new renewable energy rules, the commission has to define criteria that are meant to control the use of the most environmentally harmful biofuels.

Malaysia, the world’s second-largest palm oil producer after Indonesia, relies on the versatile crop for billions of dollars in foreign exchange earnings and hundreds of thousands of jobs. Mahathir is currently grappling with debts of US$1 trillion that he inherited from the previous administration of Najib Razak and says Malaysia faces bankruptcy.

Indonesia and Malaysia, which together account for more than 80 per cent of global palm-oil production, say palm oil requires far less land to produce oil compared to other crops like soy and rapeseed.

The 93-year-old Mahathir, who first ruled Malaysia from 1981 to 2003, has said he might buy fighter jets from China instead of European arms manufacturers.

Mahathir threatened to look elsewhere to upgrade Malaysia’s ageing Russian Mig-29 fighters and abandon plans to buy France’s Rafale jet or the Eurofighter Typhoon.

“If they keep on taking action against us, we will think of buying airplanes from China or any other country,” the premier told the official Bernama news agency.

Mahathir said the EU’s attitude towards palm oil was an attempt to protect alternatives that Europe produced itself, like rapeseed oil.

“To do that kind of thing to win a trade war is unfair,” he said during a visit to the island of Langkawi.

“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.”




Indonesia has threatened to abandon the 2015 Paris climate agreement if the EU phases out palm oil as a renewable transport fuel after the commission’s classified palm oil as a risky crop that was responsible for significant deforestation.

Luhut Pandjaitan, an Indonesian natural resources minister, said Brussels “should not underestimate Indonesia” and pledged that Jakarta would defend its national interest.

“If the US and Brazil can leave the climate deal, we should consider that. Why not?” Pandjaitan said.

Under the Paris deal, Indonesia committed to reducing its greenhouse emissions unconditionally by 29 per cent by 2030.


Sumatran tigers have seen their habitats destroyed for palm oil cultivation. Picture credit: Wikimedia

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