UK CPTPP Trade Deal A Boon for Malaysian Palm Oil Image Only
Datuk Seri Fadillah Yusof will be replacing Datuk Zuraida Kamaruddin who had served the ministry since August 2021 under former prime minister Datuk Seri Ismail Sabri Yaakob. — Bernama pic
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April 10, 2023
The UK’s agreement to waive import duties on Malaysian palm oil as a condition of its joining the CPTPP, has met with some criticism. Opinions can be read here or here.
The UK government published its opinion and celebrated another milestone in a trade deal with Malaysia.
CPTPP goes above and beyond the existing FTAs that we have with most CPTPP members. And joining CPTPP means the UK will have a trade deal with Malaysia for the first time. This will give UK businesses much better access to an economy worth £271 billion in GDP in 2021, which will support jobs across key sectors in the UK and could boost our services exports to Malaysia which were worth £1.4 million in the 4 quarters to the end of Q3 2022.[17] [18]
Tariffs of around 80% will be eliminated on UK exports of whisky to Malaysia over time, helping the UK to get a larger share of the market. UK car manufacturers will also benefit from the staged removal of tariffs of 30% on UK exports of cars to Malaysia.[19] UK businesses like Sheffield-based chilli paste manufacturer Mak Tok could benefit as it seeks greater access to the Malaysian market.
Industry leaders welcomed the UK CPTPP deal as reported by Global Trade Review. However, the concluding remark by Global Trade Review is a strong indicator that Malaysia needs better branding, to prove that Malaysian palm oil production is sustainable.
The UK CPTPP deal which gave Malaysian palm oil an exceptional tariff rate, came in the middle of the UK’s Due Diligence measures to tackle illegal deforestation through the Environment Act.
FERN, along with other NGOs have criticized the UK’s Environment Act.
This slow and insufficiently ambitious proposed action is not commensurate with the urgent need to address the climate and biodiversity emergencies or to meet the UK’s pledges on climate and nature. Under the options presented in the consultation, the UK could still be contributing to rainforest destruction the size of Berlin between now and 2030.
UK trade association, BRC, shared the findings of the public consultation on tackling illegal deforestation for British business. With the overwhelming vote for the UK to target two commodities in its legislation, it is more than likely that beef and palm oil would be picked.
UK CPTPP Deal Good Only for Malaysia’s Image
Groups like Greenpeace UK and the WWF need to take chill pill on the UK CPTPP deal for Malaysian palm oil. UK Trade Secretary Kemi Badenoch nailed it when she said “Moving the tariff from 2% to 0% is not what’s going to cause deforestation.”
The fact is that the UK imports on average, 400,000 metric tons of palm oil according to Statista.
In terms of monetary values and sources, OEC reported that “In 2021, United Kingdom imported $329M in Palm Oil, becoming the 33rd largest importer of Palm Oil in the world. At the same year, Palm Oil was the 324th most imported product in United Kingdom. United Kingdom imports Palm Oil primarily from: Papua New Guinea ($93.7M), Indonesia ($83.5M), Netherlands ($68M), Malaysia ($35.2M), and Germany ($26.4M).”
Being the 33rd largest importer of palm oil in the world with just a tad above 10% of that coming from Malaysia hardly warrants the hyperventilating displayed by Greenpeace or WWF. The UK could import all of its palm oil from Malaysia but its overall impact would be minimal as Malaysia gears up to tackle the EU problem.
What’s worth getting excited over, is the fact that the UK CPTPP created an opportunity for Malaysia to show off its sustainable palm oil production.
Having spent 50 million Malaysian ringgit to get Malaysian palm oil close to 100% certification under the national program, Malaysian Sustainable Palm Oil ( MSPO ), the UK CPTPP deal offers an excellent chance for Malaysia to showcase what it has accomplished in commodity certification.
Quoting Malaysia’s Deputy Prime Minister, Datuk Fadillah Yusof on sustainable palm oil:
"Malaysia's deforestation rate is effectively zero and the MSPO certification scheme exemplifies our commitment to comprehensive sustainability standards,"
Quoting Kemi Badenoch:
“And actually, the standards which are set by this government, by the Department for the Environment, is what’s going to dictate what comes into the country. But also, being in the trade bloc means that we’re going to have more influence on sustainability.”
Is the MSPO Ready?
So, what are Defra’s standards on sustainable palm oil and will the MSPO meet those standards?
According to Defra, “The UK introduced world-leading due diligence legislation through the Environment Act 2021 to tackle illegal deforestation in UK supply chains. This new law forms one part of a wider package of measures to improve the sustainability of our supply chains and will contribute to global efforts to protect forests and other ecosystems.”
The UK could further lead the EU on Due Diligence matters according to NGO FERN
"There is a danger that misguided investment and financial services could undo advances that have been painstakingly achieved through environmental legislation. In this spirit, the United Kingdom (UK) may be poised to do what the EU failed to accomplish in its recently adopted Regulation on deforestation-free products (FW 281) - extend the scope of anti-deforestation due diligence rules to encompass financial services."
Making it mandatory for the financial services sector to comply with deforestation-free rules makes absolute sense as companies which do not abide by the rules, should not receive financing to destroy forests. Removing illegal deforestation from Malaysian palm oil in UK supply chains should be easy as there is no illegal deforestation for palm oil in Malaysia. The 2020 revision of MSPO standards ensures that certified sustainable palm oil has not been produced from deforested land after December 2019.
The UK has a long history of pushing sustainable palm oil production using the standards of the Roundtable on Sustainable Palm Oil ( RSPO ) certification scheme. Unfortunately, voluntary certification schemes like the RSPO are unlikely to be accepted by the EU as credible. This creates a certification problem with palm oil being traded between the UK and EU countries, especially the Netherlands.
For their part, the Dutch government has been equally supportive of pushing sustainable palm oil with initiatives like NI-SCOPS, Malaysian National Initiative for Sustainable Climate Smart Oil Palm Smallholders which was implemented by Solidaridad and IDH, The Sustainable Trade Initiative.
Solidaridad Network Asia Senior Adviser Teoh Cheng Hai, has been quoted as saying that “national standards such as the Malaysian Certified Sustainable Palm Oil (MSPO) and Indonesian Certified Sustainable Palm Oil (ISPO) raise the floor in terms of sustainability performance and assurances of legal compliance. However, there is a need to strengthen the standards to enhance credibility and market acceptance.”
The standards for Malaysian palm oil have been strengthened since, with particular attention to labour rights and smallholders.
What else can Malaysia do to enhance credibility for the MSPO?
Getting the UK on board would be a good start as the MSPO is more than ready to meet the UK’s Due Diligence legislations where illegal deforestation and labour rights are the main concerns.
Getting the EU to accept the MSPO as a credible scheme will be trickier but not impossible. Backroom chats have identified key EU demands on the MSPO. Traceability to smallholders and accounting for their economic benefits in EU imports of Malaysian palm oil is a non-issue as blockchain technology platforms like Dibiz Global are ready.
The challenge here is to establish “goal posts.” Palm oil certification under the RSPO saw multiple revisions of standards ( goal posts ) which made compliance impossible.
Malaysia’s Deputy Prime Minister, Datuk Fadillah had said on the matter of sustainability, that it was vital to engage with international communities, consultants, industry players and governments on Malaysia's own practices to strike a balance between local and international standards and practices.
As Brussels continues to bicker about CSDDD, it might be more constructive for Malaysia to aim further than the EU’s Due Diligence Directive and work with the Netherlands. The Netherlands has its own Due Diligence proposals which has been said to be more punitive than that of the EU’s. This may work for Malaysia to aim further, just to fall short and yet meet the target that is the EU’s.
In an email statement received from the Malaysian Ministry of Plantations and Commodities to CSPO Watch:
“Malaysia is more than ready to meet any demands or requirements on the sustainability of Malaysian palm oil. The industry was developed in accordance with the United Nations Sustainable Development Goals, but taking into account current developments regarding climate change, we have revised our MSPO Certification to include the concerns of our buyers.
Malaysia has shown that even as foreign buyers shift the goal posts for sustainability, Malaysia has been able to meet these challenges. The EU must set clear, achievable goals, and make sure that they communicate clearly any new sustainability demands, so that we know what it is they are looking for. Once everything is clear, we can work towards finding a healthy balance between their requirements and the continued sustainable development of Malaysian industry.”
CSPO Watch
The UK’s agreement to waive import duties on Malaysian palm oil as a condition of its joining the CPTPP, has met with some criticism. Opinions can be read here or here.
The UK government published its opinion and celebrated another milestone in a trade deal with Malaysia.
CPTPP goes above and beyond the existing FTAs that we have with most CPTPP members. And joining CPTPP means the UK will have a trade deal with Malaysia for the first time. This will give UK businesses much better access to an economy worth £271 billion in GDP in 2021, which will support jobs across key sectors in the UK and could boost our services exports to Malaysia which were worth £1.4 million in the 4 quarters to the end of Q3 2022.[17] [18]
Tariffs of around 80% will be eliminated on UK exports of whisky to Malaysia over time, helping the UK to get a larger share of the market. UK car manufacturers will also benefit from the staged removal of tariffs of 30% on UK exports of cars to Malaysia.[19] UK businesses like Sheffield-based chilli paste manufacturer Mak Tok could benefit as it seeks greater access to the Malaysian market.
Industry leaders welcomed the UK CPTPP deal as reported by Global Trade Review. However, the concluding remark by Global Trade Review is a strong indicator that Malaysia needs better branding, to prove that Malaysian palm oil production is sustainable.
The UK CPTPP deal which gave Malaysian palm oil an exceptional tariff rate, came in the middle of the UK’s Due Diligence measures to tackle illegal deforestation through the Environment Act.
FERN, along with other NGOs have criticized the UK’s Environment Act.
This slow and insufficiently ambitious proposed action is not commensurate with the urgent need to address the climate and biodiversity emergencies or to meet the UK’s pledges on climate and nature. Under the options presented in the consultation, the UK could still be contributing to rainforest destruction the size of Berlin between now and 2030.
UK trade association, BRC, shared the findings of the public consultation on tackling illegal deforestation for British business. With the overwhelming vote for the UK to target two commodities in its legislation, it is more than likely that beef and palm oil would be picked.
UK CPTPP Deal Good Only for Malaysia’s Image
Groups like Greenpeace UK and the WWF need to take chill pill on the UK CPTPP deal for Malaysian palm oil. UK Trade Secretary Kemi Badenoch nailed it when she said “Moving the tariff from 2% to 0% is not what’s going to cause deforestation.”
The fact is that the UK imports on average, 400,000 metric tons of palm oil according to Statista.
In terms of monetary values and sources, OEC reported that “In 2021, United Kingdom imported $329M in Palm Oil, becoming the 33rd largest importer of Palm Oil in the world. At the same year, Palm Oil was the 324th most imported product in United Kingdom. United Kingdom imports Palm Oil primarily from: Papua New Guinea ($93.7M), Indonesia ($83.5M), Netherlands ($68M), Malaysia ($35.2M), and Germany ($26.4M).”
Being the 33rd largest importer of palm oil in the world with just a tad above 10% of that coming from Malaysia hardly warrants the hyperventilating displayed by Greenpeace or WWF. The UK could import all of its palm oil from Malaysia but its overall impact would be minimal as Malaysia gears up to tackle the EU problem.
What’s worth getting excited over, is the fact that the UK CPTPP created an opportunity for Malaysia to show off its sustainable palm oil production.
Having spent 50 million Malaysian ringgit to get Malaysian palm oil close to 100% certification under the national program, Malaysian Sustainable Palm Oil ( MSPO ), the UK CPTPP deal offers an excellent chance for Malaysia to showcase what it has accomplished in commodity certification.
Quoting Malaysia’s Deputy Prime Minister, Datuk Fadillah Yusof on sustainable palm oil:
"Malaysia's deforestation rate is effectively zero and the MSPO certification scheme exemplifies our commitment to comprehensive sustainability standards,"
Quoting Kemi Badenoch:
“And actually, the standards which are set by this government, by the Department for the Environment, is what’s going to dictate what comes into the country. But also, being in the trade bloc means that we’re going to have more influence on sustainability.”
Is the MSPO Ready?
So, what are Defra’s standards on sustainable palm oil and will the MSPO meet those standards?
According to Defra, “The UK introduced world-leading due diligence legislation through the Environment Act 2021 to tackle illegal deforestation in UK supply chains. This new law forms one part of a wider package of measures to improve the sustainability of our supply chains and will contribute to global efforts to protect forests and other ecosystems.”
The UK could further lead the EU on Due Diligence matters according to NGO FERN
"There is a danger that misguided investment and financial services could undo advances that have been painstakingly achieved through environmental legislation. In this spirit, the United Kingdom (UK) may be poised to do what the EU failed to accomplish in its recently adopted Regulation on deforestation-free products (FW 281) - extend the scope of anti-deforestation due diligence rules to encompass financial services."
Making it mandatory for the financial services sector to comply with deforestation-free rules makes absolute sense as companies which do not abide by the rules, should not receive financing to destroy forests. Removing illegal deforestation from Malaysian palm oil in UK supply chains should be easy as there is no illegal deforestation for palm oil in Malaysia. The 2020 revision of MSPO standards ensures that certified sustainable palm oil has not been produced from deforested land after December 2019.
The UK has a long history of pushing sustainable palm oil production using the standards of the Roundtable on Sustainable Palm Oil ( RSPO ) certification scheme. Unfortunately, voluntary certification schemes like the RSPO are unlikely to be accepted by the EU as credible. This creates a certification problem with palm oil being traded between the UK and EU countries, especially the Netherlands.
For their part, the Dutch government has been equally supportive of pushing sustainable palm oil with initiatives like NI-SCOPS, Malaysian National Initiative for Sustainable Climate Smart Oil Palm Smallholders which was implemented by Solidaridad and IDH, The Sustainable Trade Initiative.
Solidaridad Network Asia Senior Adviser Teoh Cheng Hai, has been quoted as saying that “national standards such as the Malaysian Certified Sustainable Palm Oil (MSPO) and Indonesian Certified Sustainable Palm Oil (ISPO) raise the floor in terms of sustainability performance and assurances of legal compliance. However, there is a need to strengthen the standards to enhance credibility and market acceptance.”
The standards for Malaysian palm oil have been strengthened since, with particular attention to labour rights and smallholders.
What else can Malaysia do to enhance credibility for the MSPO?
Getting the UK on board would be a good start as the MSPO is more than ready to meet the UK’s Due Diligence legislations where illegal deforestation and labour rights are the main concerns.
Getting the EU to accept the MSPO as a credible scheme will be trickier but not impossible. Backroom chats have identified key EU demands on the MSPO. Traceability to smallholders and accounting for their economic benefits in EU imports of Malaysian palm oil is a non-issue as blockchain technology platforms like Dibiz Global are ready.
The challenge here is to establish “goal posts.” Palm oil certification under the RSPO saw multiple revisions of standards ( goal posts ) which made compliance impossible.
Malaysia’s Deputy Prime Minister, Datuk Fadillah had said on the matter of sustainability, that it was vital to engage with international communities, consultants, industry players and governments on Malaysia's own practices to strike a balance between local and international standards and practices.
As Brussels continues to bicker about CSDDD, it might be more constructive for Malaysia to aim further than the EU’s Due Diligence Directive and work with the Netherlands. The Netherlands has its own Due Diligence proposals which has been said to be more punitive than that of the EU’s. This may work for Malaysia to aim further, just to fall short and yet meet the target that is the EU’s.
In an email statement received from the Malaysian Ministry of Plantations and Commodities to CSPO Watch:
“Malaysia is more than ready to meet any demands or requirements on the sustainability of Malaysian palm oil. The industry was developed in accordance with the United Nations Sustainable Development Goals, but taking into account current developments regarding climate change, we have revised our MSPO Certification to include the concerns of our buyers.
Malaysia has shown that even as foreign buyers shift the goal posts for sustainability, Malaysia has been able to meet these challenges. The EU must set clear, achievable goals, and make sure that they communicate clearly any new sustainability demands, so that we know what it is they are looking for. Once everything is clear, we can work towards finding a healthy balance between their requirements and the continued sustainable development of Malaysian industry.”
CSPO Watch
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