MALAYSIA has filed a complaint with the World Trade Organisation (WTO) over the measures adopted by the European Union (EU) affecting the consumption of palm oil and palm crop-based biofuels, according to a document circulated among member countries on Tuesday.

Malaysia has requested WTO dispute consultations with the EU, and in particular its member states France and Lithuania, challenging that their restrictive measures on the use of palm oil violate international trade agreements.

Under its European Union Renewable Energy Directive II (EU RED II), the EU halted the use of crops that cause deforestation in transportation fuel, deeming palm oil production as unsustainable. In its bid to build a carbon neutral economy by 2050, the EU said usage of palm oil as biofuel will not be counted towards the renewable energy targets of the member states.

In a complaint filed on 15-01-2021, Malaysia, the world's second largest palm oil producer, said the EU laws to phase out the use of palm oil as a biofuel are inconsistent with the WTO's Agreement on Technical Barriers to Trade, the General Agreement on Tariffs and Trade 1994, and the Agreement on Subsidies and Countervailing Measures.

Malaysia added that that the EU measures may also "discriminate against Malaysian palm oil and oil palm crop-based biofuels in favour of 'like products' from third countries."

"Malaysia submits that the measures adopted by the EU and its member States currently already limit and will increasingly limit the volume of Malaysian palm oil and oil palm crop-based biofuels that can be counted towards reaching EU renewable energy targets and, consequently, that will be sold in the EU market," it said in the filing.

This is the second dispute complaint targeting the EU's palm oil-related measures after Indonesia termed the EU renewable energy directive "discriminatory" and requested consultations to help reach a resolution on 09-12-2019.

Palm oil-producing countries claim REDD II does not take into account the sustainability measures being implemented in the industry while conferring unfair benefits to EU domestic producers of biofuel feedstocks, such as rapeseed oil and soy.

The request for consultations marks the first step in the WTO dispute system, and is aimed at giving the parties an opportunity to hold discussion and find a solution without moving forward with litigation.

After 60 days, if the consultations fail to resolve the dispute, the complainant may request adjudication by a panel.