In this article, the authors estimate effects of trade restrictiveness on Indonesian and Malaysian palm oil exports. Previous studies used only simple measurements to estimate this effect, but the authors utilise complex trade restrictiveness index. The article will assist policymakers in Malaysia and Indonesia to pursue correct policies and will further expand reaserch on palm oil industry.

Over the course of the 20th century, Malaysia and Indonesia have become the largest exporters of palm oil in globally. As the tariffs were gradually reduced along the GATT and WTO negotiations, countries are now increasingly turning to non-tariff barriers. This is also relevant for trade in palm oil, NTMs for which have greatly increased during previous decades. These are mostly SPS and TBT measures.

Data includes time-series for Malaysia and Indonesia from 2009 to 2019, as well as for 59 major importers. The trade restrictiveness index includes both technical and non-technical NTMs. The estimation is performed using the gravity model. The authors augment it with the trade restrictiveness index and trade agreement dummies. Pseudo-Poisson maximum likelihood estimation is used here.

The authors come to the following results. Firstly, the trade restrictiveness index was found to be larger for Malaysia than for Indonesia, which means that importers generally impose less restrictive measures against Indonesian palm oil. Secondly, technical and non-technical NTMs have different trends for Malaysia and for Indonesia. Technical barriers against Malaysian palm oil has been rising since 2009, while for Indonesian case they were decreasing. Thirdly, both the trade restrictiveness index and technical NTMs significantly and negatively influence Malaysian exports. In case of Indonesia, they, however, showed significant and positive influence. Finally, both Malaysia and Indonesia benefit from involvement in international trade agreements.

The authors also make some policy recommendations. Firstly, more holistic approach should be pursued in importing countries when creating policies for imports regulations. Trade restrictiveness index is one of such instruments. Secondly, Malaysia government and producers should more actively fulfill requirements demanded by importing countries to be able to more fully penetrate those markets. Indonesian policymakers, for their part, should take into consideration that current restrictive policies of importing countries do not negatively influence its exports.

Hamidi, Hakimah Nur Ahmad, Norlin Khalid, and Zulkefly Abdul Karim. "Palm oil trade restrictiveness index and its impact on world palm oil exports." Agricultural Economics 70.3 (2024): 101-111