WTO sets up Malaysia-EU palm oil dispute panel

The World Trade Organisation (WTO) has granted Malaysia’s request for a panel to examine the EU’s phasing out and eventual ban on palm oil-based biofuels.

This was Malaysia’s second panel request since launching the action in January after the EU blocked the first at the WTO Dispute Settlement Body meeting on 28 April. Thailand, South Korea, Brazil, Russia, the UK, the US, Singapore, Guatemala, Australia, Colombia, Indonesia, Japan, Norway, China, Ukraine, India, El Salvador and Canada reserved their rights to participate as third parties in the proceedings.

The EU said it regretted Malaysia’s decision to renew its request for a panel but said the measures at stake were fully justified and that it was confident it would prevail in the dispute proceedings.

Under the Renewable Energy Directive (RED) II the EU will start phasing out the use of palm oil from biofuels in 2023 until it is completely halted by 2030 because of sustainability concerns. The European Commission cites high indirect land use change costs that raise the carbon footprint of palm in relation to other vegetable oils, although Kuala Lumpur regards this as discrimination.

As part of the case Malaysia is also pursuing action against France and Lithuania for implementing their own palm oil bans ahead of the RED II schedule. Since then several other EU member states such as Germany, Belgium and Austria have announced similar plans.

The EU said it was ready to discuss interim arrangements allowing for a possible appeal to be heard in the dispute. The WTO currently lacks an operational appeals body but has set up a multi-party interim appeal arrangement where three members of an agreed pool of 10 arbitrators will hear a plea and pursue a dispute settlement.

From the time the panel is set up it usually takes around six months for it to produce its final report and then a similar amount of time for it to be adopted if there is no appeal. If an appeal is lodged it could take an additional three months for a resolution.

Malaysia is also a third-party observer in a continuing similar case Indonesia brought to the WTO against the EU.

Malaysia and Indonesia combined exported 350,000t of palm-based biodiesel to the EU last year, down from more than 1mn t in 2019 with rising feedstock costs and increased domestic mandates.

AgrusMedia

Tags: Malaysia, WTO, palm oil