KUALA LUMPUR, Dec 23 (Reuters)Malaysia, the world’s second largest palm oil producer, on Friday accused the European Union (EU) of blocking market access of the edible oil with a new law that prevents the sale of commodities linked to deforestation in the 27-country bloc.

The EU earlier this month agreed on a new law that requires companies to produce a due diligence statement showing their supply chains are not contributing to the destruction of forests, or risk hefty fines.

The regulation will apply to soy, beef, palm oil, wood, cocoa and coffee and some derived products.

Malaysia’s Deputy Prime Minister and Commodities Minister Fadillah Yusof said on Friday this will affect free and fair trade, and adversely impact the global supply chain.

“The Deforestation-Free Products Regulation is a deliberate act by Europe to block market access, hurt small farmers and protect a domestic oilseeds market that is inefficient and cannot compete with the cost of palm oil,” he said in a statement.

Palm oil, which is used to make everything from cookies to cosmetics and fuel, is the world’s cheapest vegetable oil. But environmental groups have blamed its cultivation for widespread deforestation.

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EU Ambassador to Malaysia Michalis Rokas had on Wednesday in a response to the nation’s palm oil board said that claims of a ban on palm oil is untrue and misleading.

“Deforestation-free and legally produced palm oil will continue to be placed on the EU market,” Rokas said.

Many palm oil firms in top producers Indonesia and Malaysia have already adopted global and national sustainability certification standards and have committed to no-deforestation policies.

However, minister Yusof said the regulation will place additional burden on Malaysian exporters. “It would be offensive to Malaysia if either palm oil, or the country, is designated high risk by the EU Regulation,” he said.

The new law comes on top of a EU renewable energy directive requiring palm oil-based fuels to be phased out by 2030. As a result, EU’s palm oil imports have shrunk in recent years.

Malaysia and Indonesia have in recent years launched separate cases with the World Trade Organisation, saying the EU measures were discriminatory.

(Reporting by Mei Mei Chu; Editing by Arun Koyyur)

((meifong.chu@thomsonreuters.com; +603-2333-8005; Reuters Messaging: @meixchu on Twitter))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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