KUALA LUMPUR: After years of fighting tooth and nail, Malaysia has made its stand clear by winning the ruling and ensuring palm oil-based biofuel is removed from the European Union's (EU) trade restriction, said industry experts.
The World Trade Organisation's (WTO) decision generally in favour of Malaysia is "huge" given the discrimination against palm oil while other similar products available in the EU market are not subjected to similar restrictions.
This is important in safeguarding biodiesel producers and the economy overall, experts added.
"Malaysia can now market biofuel to the EU in wider capacity without being subjected to any form of discrimination with the prospect for sustainable aviation fuel (SAF) and marine biofuel requirement is growing," an industry expert told Business Times on condition of anonymity.
Malaysia will also be able to promote and educate the EU further on palm-based biofuel.
Now with the WTO overseeing things, it will become easier for Malaysia to challenge any unnecessary rules or limits imposed by the EU, making global trade fairer for everyone, said the industry expert.
"Local biofuel producers may safely increase production and market more to the EU, which means we can expect palm-based biofuel consumption to grow gradually," he added.
But the EU being allowed to keep rules on Indirect Land Use Change (ILUC), Malaysia may need to work further to manoeuvre safely in order to ensure palm-based biofuel is accepted fully.
Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani had on Wednesday said the WTO panel had on March 5 issued its final report and concluded that the EU's renewable energy policy, which restricted palm oil biofuels, was discriminatory.
"This ruling from WTO demonstrates that Malaysia's discrimination claims are justified. This vindicates Malaysia's pursuit of justice for our biodiesel traders, companies and employees," he said.
Cargill Malaysia senior merchant Cassendre Lau said the ruling on EU's biofuel policy could positively impact Malaysia's palm oil industry, as it is a major producer of palm oil used in biofuels.
"If the policy is deemed discriminatory, it could potentially open up more opportunities for Malaysian palm oil in the EU market. However, the extent of the impact would depend on the specifics of any changes resulting from the ruling and how they affect trade relations between Malaysia and the EU," she added.
Malaysia, a major palm oil producer, had in January 2021 requested WTO dispute consultations with the EU over measures adopted by the bloc and its member states affecting palm oil and palm crop-based biofuels.
"If the EU conforms with its WTO obligations, you may see changes in trade policies, tariff structures and regulations to align with international standards," said Lau.
This could lead to increased market access, fairer trade practices, and potentially more opportunities for businesses within the EU and globally, she added.
On the contrary, Singapore-based RaboResarch Food and Agribusiness senior analyst Oscar Tjakra said it is still too early to comment on this ruling as they do not know whether the EU will appeal against the WTO panel report.
"If the EU decides not to appeal against the WTO panel report, the EU will need to make adjustments to EU Delegated Act, but need not to change the RED II legal framework. We will need to see details of these adjustments to analyse the impact of this ruling," he told Business Times.
Meanwhile, in an interview with FMT on Thursday, Johari said Malaysia had won key parts of its dispute with the EU over the latter's renewable energy directive known as RED II.
Putrajaya was also successful in challenging several measures maintained by France, Johari added.
He said a three-member panel had ruled that several measures undertaken by the EU and France were "inconsistent with WTO rules".
Particularly, restrictions like the "high ILUC risk cap" and "phase-out" regulations violated trade agreements aimed at preventing unnecessary trade barriers, he told the portal.
The panel also noted that other similar products available in the EU market were not subject to the same restrictions.
"The EU and France must now bring their measures into conformity with their WTO obligations," he added.
Malaysian Palm Oil Board director-general Datuk Ahmad Parveez Ghulam Kadir echoed Johari's statement.
"The ruling highlights the EU's restrictions' inconsistency with WTO rules. This affirms Malaysia's persistent efforts to advocate for the sustainability of the palm oil supply chain.
"Anticipating the EU's obligation to conform to WTO rules, amendments to the EU's renewable energy policy are expected."
He said the board would monitor the EU's regulatory changes to align with the WTO's findings, fostering fair trade practices and recognising Malaysia's contributions to sustainable palm oil production.
