MALAYSIA and Indonesia should take the European Union’s plan to ban palm oil imports by 2021 seriously.

Although the World Trade Organisation has ruled in favour of Indonesia on challenges to anti-dumping duties imposed on its biodiesel exports to the EU earlier this year, EU is continuing its policy of banning palm oil products.

Indonesia and Malaysia are the two largest producers of palm oil, contributing to 85-90 per cent of global production. Palm oil is a strategic commodity for Indonesia and Malaysia, hence, trade barriers to palm oil are a threat to the countries’ national interests.

It is urgent for Indonesia and Malaysia to formulate a roadmap of economic diplomacy — a reactive and sustainable and long-term palm oil diplomacy.

Indonesia and Malaysia have a very strategic and important bargaining position with EU, especially through the Council of Palm Oil Producer Countries (CPOPC).

CPOPC’s position becomes a very decisive variable as it controls more than 90 per cent of the global palm oil supply. The question is, how can CPOPC be a force in palm oil diplomacy?

CPOPC’s position as a tool to repel EU policies that harm Indonesia’s palm oil exports will have a strong bargaining power if, firstly, Indonesia cooperates with Malaysia through CPOPC against the EU’s palm oil policy.

Secondly, CPOPC should no longer function as a demand management organisation, but must transform into something akin to the Organisation of the Petroleum Exporting Countries (OPEC).

OPEC, which controls only 81.5 per cent of the global oil production, has become a global oil trading organisation that is influential in the international relations arena. OPEC can control prices and influence the supply-demand economics of oil-consuming countries.

It is politically urgent to reform CPOPC’s position and function. Otherwise, it will forever be on the losing side of the supply-demand equation. Indonesia’s and Malaysia’s role in bringing about this reform is crucial.