The Hidden Battlefield: Political and Economic Power Beyond Tariffs
In today’s global trade landscape, conflicts extend beyond tariffs, involving tactics like lobbying, strategic alliances, and market influence. Countries engage in a complex ‘war’ that includes manipulating supply chains, leveraging international institutions, and using non-tariff barriers such as regulations and environmental policies. This article explores how nations, like Malaysia, navigate these indirect strategies to maintain political and economic leverage in a competitive global market.
Figure 1: Palm oil industry in ASEAN
ASEAN plays a pivotal role in the global palm oil market, accounting for nearly 80% of global production. Within this dynamic landscape, strategic positioning in key markets such as Indonesia, Malaysia, and Thailand allow players in the industry to capitalize on the region’s growing demand. This demand, projected to grow at an annual rate of 4-5%, is driven by factors such as population growth, urbanization, and shifting dietary trends. In addition to natural demand drivers, the ASEAN Free Trade Area (AFTA) provides a competitive edge by reducing tariffs and trade barriers. AFTA facilitates smoother access to markets within the bloc, enabling companies to tap into a consumer base of over 600 million people across ASEAN, with a combined GDP of approximately $3.3 trillion.
Figure 2: Asean Free Trade Area (AFTA)’s
Yet, the real battle goes beyond tariff reductions. By integrating deeply into ASEAN’s economic structure, businesses gain resilience against global market fluctuations. With diverse product offerings in biofuels, food, and industrial uses, companies within the region are well-positioned to adapt to varying market needs and trends. This strategic positioning ensures sustained growth and profitability, even as global trade dynamics evolve.
Figure 3: China’s Q1 palm oil imports (MT)
As China experiences rapid urbanization and an expanding middle class with rising incomes, the demand for edible oils, particularly palm oil, is set to surge. In 2023, China’s edible oil consumption reached approximately 28.7 million metric tons, and projections suggest this will grow at an annual rate of 5-6% over the next decade. Palm oil, valued for its affordability and versatility, is poised to play a significant role in this increase, particularly within the food and beverage sectors. With China’s increasing reliance on palm oil for food production, demand is expected to grow by more than 2 million metric tons in the next five years.
This presents a unique strategic opportunity for companies in the palm oil sector. As China positions itself as a key player in global food production, with the industry valued at over USD 2 trillion in 2024, foreign palm oil producers can tap into this booming market. Through direct exports and forming strategic alliances with Chinese food and beverage manufacturers, companies can secure a consistent and expanding revenue stream.
China’s emphasis on food security and self-sufficiency in recent years further enhances the opportunity for foreign palm oil to meet the needs of its growing food processing industry. By aligning with key players in China’s food sector, palm oil companies can position themselves for long-term contracts, significantly boosting their market share and ensuring their role in China’s rapidly expanding market. In this “war” for market dominance, establishing strong partnerships will be crucial for success.