INTERVIEW-Malaysia trade min: EU must clarify biofuel rules

Posted on July 12, 2011. Filed under: Forestry/Wetlands |

–Reuters–

* Malaysia says EU lacks transparency in rules for biofuels

* Malaysia does not want labour or green rules in trade pact

* Malaysian banks want more time before global competition

 

By Juliane von Reppert-Bismarck

BRUSSELS, July 12 (Reuters) – Europe must be more transparent about how it measures the environmental impact of biofuels before thinking of penalising palm oil exporters, a senior Malaysian minister said.

Trade and Industry Minister Mustapa Mohamed said the EU was revealing too little about its plans to limit imports of biofuels that it deems to be doing more harm than good to the environment.

“There has got to be transparency in the process,” Mohamed told Reuters in an interview ahead of talks between EU and Malaysian negotiators. Discussions began in Malaysia on Tuesday for a free trade deal, which the EU says must include strict environmental standards.

“As one of the biggest producers of palm oil we are watching this very closely to make sure our interests are not adversely affected. We don’t know exactly how these things are being calculated,” he added.

EU officials will decide this year whether to restrict imports of biofuels produced on former forest or farmland, even as the bloc debates the use of such fuels to cut emissions, battle climate change and reduce dependence on fossil fuels.

Palm oil is one of Malaysia’s main exports, making up 5 percent of its total exports to Europe last year for use in food and for conversion into biodiesel. But it is often cited as being grown on peatland whose conversion into plantations creates additional emissions.

“It is important for the EU to understand the position of developing countries,” Mohamed said.

Malaysia disputes EU research that deems its biofuel production unsustainable.

NO SOCIAL CLAUSES

While early talks for a trade deal have been “smooth sailing”, there will be obstacles ahead, Mohamed said.

A deal, which the EU and Malaysia hope to conclude next year, should not include environmental or social targets, he said.

“We will never agree that trade in goods should be linked to sustainability and labour standards, that remains our position. They are separate issues,” he said.

European negotiators have run into fierce opposition to attempts to include such provisions in trade deals currently under discussion. India, with which Europe hopes to reach agreement this year, has also said it will not accept such clauses, which raise production costs.

When talks with Malaysia began last October, the European Commission, which negotiates trade deals on behalf of the bloc’s 27 member states, said: “Trade can no longer take place in isolation from the wider objective of sustainable development.”

The EU is Malaysia’s biggest source of foreign direct investment and the Asian country hopes a deal will further boost investment in its manufacturing. A free trade deal would boost Malaysia’s GDP by 8 percent by 2020, according to EU figures.

The European Union in turn wants access to Malaysian procurement deals and its fast-growing financial sector, where foreign ownership is currently limited to 20 percent. Foreign ownership in other sectors is limited to 30 percent — another rule the EU would like eased.

“Foreign banks want more opening up, and we are open to that, but it’s got to be done in stages,” Mohamed said.

Malaysia’s top two lenders, Maybank and CIMB , are expanding across Southeast Asia, but they are not yet ready to compete on the global stage, he said.

“We want to make sure they are in a position to further expand their capabilities and withstand competition. They are strong, but they need a bit more time.”

A deal would allow Europe to tap another of the region’s fast-growing economies. A pact with South Korea was launched last month, and talks are under way for deals with India, Singapore, Vietnam, Thailand, Japan and Indonesia.

The EU had hoped for a single regional agreement with the Association of Southeast Asian Nations (ASEAN), but postponed that in 2009 in favour of simpler individual bilateral agreements.

(Reporting by Juliane von Reppert-Bismarck; Editing by Rex Merrifield and Tim Pearce)

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