World Trade Organisation To Rule On Malaysia-EU Palm Oil Spat

The WTO has agreed to establish an expert panel to resolve a row between Malaysia and the European Union over rules affecting the consumption of palm oil-based biofuels in the bloc.

Malaysia had requested a World Trade Organization arbitration panel back in January, charging that the EU, and in particular member states France and Lithuania, had imposed restrictive measures on the use of palm oil that violate international trade agreements.

Brussels blocked the initial demand for a panel, but the second request was granted Friday during a meeting of the organisation’s Dispute Settlement Board, according to a Geneva-based trade official.

Under WTO regulations, parties in a dispute can block a first request for the creation of an arbitration panel, but if the parties make a second request, it is all but guaranteed to go through.

Malaysia, the world’s second-largest producer of palm oil, initially filed a complaint with the WTO last July, balking at EU efforts to phase out its use as a biofuel.

The EU has embarked on a major plan committing member states to build a carbon-neutral economy by 2050, including by promoting the use of biofuels.

But it has deemed that palm oil production is not sustainable, and palm oil-based biofuels cannot be counted towards EU renewable targets.

By doing so, the bloc and its member states “confer unfair benefits to EU domestic producers of certain biofuel feedstocks, such as rapeseed oil and soy, and the biofuels produced therefrom, at the expense of palm oil and oil palm crop-based biofuels from Malaysia,” according to Kuala Lumpur’s complaint last year.

Palm oil is a key ingredient in a wide range of products from food to cosmetics but it has long been controversial.

Environmentalists say it drives deforestation, with huge swathes of rainforest logged in recent decades to make way for plantations.

Its use in food and cosmetics has already dropped in Europe, partly due to pressure from green groups on major corporations, but has been increasing in biofuels.