Malaysia and US slipping and sliding over palm oil exports

A protracted battle over palm oil exports to the United States is receiving wide attention around East Asia. The outcome is certain to have an impact on economic growth, and may affect trade issues on both sides of the Pacific. The controversy is intertwined with dietary issues, and experts foresee a ripple effect on America's food processing industry.

Palm oil is one of several edible oils, including safflower, coconut, and soybean, used as cooking ingredients and in making a wide range of consumer goods, especially cookies and cakes.

Malaysia has launched an extensive publicity drive to promote palm oil, and it charges that protectionist interests, notably the American Soybean Association, resist imports on grounds of economic self-interest.

Campaigns mounted by both sides have focused on the proportion of saturated fat in edible oils. What had been a trade and economic issue is rapidly being pushed into the arena of debate over public health. Palm oil has more saturated fat than soybean, safflower, olive, and corn oils, nutritionists say.

Palm oil, more than 95 percent of which comes from Southeast Asia, takes up a fifth of all edible oils, which totaled 65 million tons last year. East Asia exported about $280 million of edible oils, mostly palm and coconut, to the US.

While Malaysia's exports are only 3 percent of all imports of edible oils, consumption is rising rapidly around the world. Experts at the World Bank see palm oil as reaching half of all edible oil sales worldwide in 15 years. Sales in the US are watched carefully. One Malaysian official says, ``The outcome of this battle ... could spell victory or defeat for world exports'' over the next decade.

Malaysia considers the US a better market than Western Europe, which will likely retain its staunch anti-import agricultural policy.

Meanwhile, farm lobbies in America are concerned over Asian retaliation, since agricultural sales to leading palm-oil-producing nations total $290 million.

The heavy publicity campaigns on both sides ignore one fundamental fact: More than 60 percent of palm oil imports are channeled for industrial uses. Spokesmen for industry associations believe wider industrial use for lubricants is feasible, which diminishes the controversy being promoted about health issues.

Malaysia's palm oil production lagged during the 1950s and '60s, but investments in new production techniques boosted the crop substantially in following years. This year, 4.5 million tons will be harvested. This is important, since other commodities such as natural rubber and tin have had great price declines.

East Asia hoped palm oil exports would make up some of the difference. In Malaysia, 65 percent of the 20 million acres under crop cultivation are allotted for rubber and palm oil.

``Palm oil helps us integrate nearly a million farmers into modern agriculture,'' asserts Lim Keng Yaik, the Malaysian minister for primary industries. ``This crop is keeping small farmers and their families above the poverty line,'' a figure that is equivalent to $1,700 annually for a family of four. Palm oil fortunes rose during this decade, and the 1987 price of $800 a ton is more than enough to compensate for production costs, usually $500 a ton.

With Malaysia struggling to achieve healthy growth rates, palm oil profits are a component of the overall economic development plan. ``It is no exaggeration to say the controversy in the US is a sensitive issue for us,'' insists Dr. Lim.

For Malaysia and its neighbors, more is at stake than economic vitality alone. ``The fight runs into political stability in these countries,'' says Mark van Fleet, director of Asian-Pacific Affairs at the US Chamber of Commerce. He thinks the Philippines ``is really worried'' about drops in US palm oil purchases. Indonesian output is 1.4 million tons, and that government has based rural development plans in part on edible oils production.

Uncertainties over consumer acceptance in the US further delay commitments to invest in palm oil. Proposed labeling requirements discussed by Congress and the Food and Drug Administration would heavily influence that acceptance - as well as the perception of palm oil as healthful or unhealthful.

Recent steps by Rep. Dan Glickman (D) of Kansas and others on Capitol Hill might usher in itemized labeling of all oils contained in foods. Congress and the FDA have been held up from reaching a decision because of the intense lobbying battle on both sides.

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