Malaysia worries new EU food rules could hurt palm oil exports

By Mei Mei Chu

KUALA LUMPUR (Reuters) - Malaysia's massive palm oil industry has warned that the European Union's (EU) recent proposal to make its food industry more sustainable could eventually lead to stricter regulations for imports of the world's most-consumed vegetable oil.

The Malaysian Palm Oil Council (MPOC) is worried that the EU, which is pushing for a "fair, healthy and environmentally-friendly food system" as part of its 2030 climate target plan, could decide to implement its own sustainability standard for palm oil.

The EU, the third-largest buyer of Malaysian palm oil, announced a so-called "Farm to Fork " in May, raising alarm bells in the Southeast Asian country that is the world's second biggest producer and exporter of the edible oil.

"Our fear is that (the strategy) will be extended beyond the EU borders," MPOC Chief Executive Kalyana Sundram told Reuters.

He said Malaysia would have to engage with the EU about the proposed initiatives before exports to the bloc become difficult.

Amongst the wide-ranging initiatives proposed are a sustainable food labelling framework, a reformulation of processed foods, and a sustainability chapter in all EU bilateral trade agreements.

The EU also plans to publish a proposal for a legislative framework for sustainable food systems by 2023 to ensure all foods on the EU market become increasingly sustainable.

Food use makes up 65% of global consumption of palm oil that is found in everything from bread to chocolate spread and instant noodles.

Neighbours Indonesia and Malaysia produce 85% of the world's palm oil, and have been battling criticism of rampant clearing out of tropical forest for palm cultivation by encouraging industry compliance with international and national palm oil sustainability certification standards.

The EU has already decided to phase out palm-based transport fuels from its consumption of renewables by 2030 and is expected to set new limits on food contaminant 3-MCPD esters found in refined fats and oils.

(Reporting by Mei Mei Chu in KUALA LUMPUR and Bernadette Christina in JAKARTA; editing by Emelia Sithole-Matarise)