The Oil Palm

Bad Swiss Timing on Palm Oil Harms Trade Prospects

A bizarre decision by a local school board in Switzerland could have significant ramifications for a trade deal between some non-EU European countries and Malaysia. The Italian Swiss Canton School Board has decided to ban palm oil from public schools, in a knee-jerk response to some anti-palm oil campaigns. That the decision has no scientific rationale behind it whatsoever should be one concern – not to mention that it will restrict consumer choice for no good reason. On a bigger scale, such discrimination against imported products (in this case palm oil) could have negative ramifications not just for Switzerland, but for its trading partners also.

The European Free Trade Association (EFTA) is an association comprising Switzerland, Norway, Lichtenstein and Iceland: countries who are all outside of the EU, but club together on some areas such as trade policy.

Negotiations for a trade deal between EFTA and Malaysia has been underway since 2012, and have made steady progress – the most recent round of talks was held in Geneva earlier this year. As a relatively small country, trade agreements are critical for Switzerland – as they can increase investment, generate new export markets and reduce the costs of imported goods.

Malaysia’s biggest single export, globally, is palm oil. And yet the Italian Swiss Canton has implemented discriminatory bans on this export. Such a ban would clearly be fundamentally incompatible with any EFTA-Malaysia trade agreement. Unless the ban is rescinded (no sign yet of that happening), this action by a tiny, uninformed minority will negatively cloud future trade negotiations for the whole of EFTA.

EFTA Governments will do well to take note – because this is not just about Malaysia. Indonesia is the world’s other large palm oil exporter. Trade between EFTA nations and Indonesia is rising fast, and although trade talks are on hold, this may change now that Indonesia has also opened new trade talks with the European Union. A basic rule in trade policy is try not to insult your trading partners’ culture or products. The Italian Swiss Canton just did that, for two major trading partners.

Such retribution – from the EU, Malaysia or anyone else – would clearly harm Switzerland, and potentially other EFTA countries as well. The last time there were serious anti-palm oil moves in Switzerland was in 2012 when a little-known MP Dominique de Buman, called for palm oil to be banned. His attempt was overwhelmingly rejected by his better-informed colleagues.

Anti-palm oil literature is available, in Switzerland and elsewhere. The Italian Swiss Canton needs to learn that the answer is not to give in to siren calls – but rather to look at the facts; examine the science; balance the benefit or cost to the wider economy. Over $1bn of Swiss exports went to Malaysia and Indonesia in 2014, according to EFTA. That $1bn represents jobs and companies across Switzerland that would benefit from increased trade with those nations. Jobs and companies that would be harmed if the trade deal cannot be completed. The Canton’s actions against palm oil have already cost Switzerland credibility in South-East Asia, and may yet cost more than that.