Malaysian Palm Oil Comment on USTR’s Trade Strategy to Combat Forced Labor


Key Highlights:

  • Malaysia and the United States should convene a bilateral forum that specifically addresses forced labour in supply chains.
  • Malaysia and the United States should leverage existing standards infrastructure to create a framework for forced labour and palm oil that is compatible with trade agreements and raise labour standards in trade agreements. This framework should be based on international standards (i.e. ISO) and the Malaysian Sustainable Palm Oil (MSPO) standard.


What actions could the U.S. Government pursue with like-minded trade partners and allies to combat forced labor as an unfair trade practice?

How can the U.S. Government make the development of trade policy on forced labor a more inclusive process?

Malaysia and the United States should convene a bilateral forum that specifically addresses forced labour in supply chains.

MPOC has observed that there is a distinct lack of communication between the U.S. Government and the Malaysian Government and Malaysian stakeholders more broadly when it comes to labour rights and the palm oil sector.

This has resulted in an ongoing misunderstanding of the Malaysian rural and agricultural (specifically palm oil) sectors, and their distinction from urban manufacturing processes (such as those found in the rubber glove industry). This can be attributed to the dispersed nature of oil palm harvesting and processing operations across Malaysia, and the lack of direct visibility of those operations to U.S. Government staff.

It is both our belief and experience that U.S. Government staff across all agencies receive the bulk of their information regarding the palm oil sector from third parties, resulting in incomplete and inaccurate official reporting of the palm oil sector. The incomplete nature of this reporting has resulted in these agencies overlooking significant steps taken by both the Malaysian government, private sector and civil society to combat forced labour. These inaccuracies have been documented across reports from the U.S. State Department, U.S. Department of Labor, and U.S. Customs and Border Protection (Response to Labour and Child Rights Allegations).

Unfortunately, the State Department is disinclined to enter into a dialogue regarding these issues that are critical to Malaysia’s economy and broader economic development.

We therefore consider the establishment of an interagency bilateral forum between Malaysia and the United States on forced labour and worker rights to be the most simple and straightforward activity that could be undertaken by Malaysia and the United States. This forum should:

  • Meet twice annually;
  • Include representatives from each government from trade, labour, state/foreign affairs, customs authorities, overseas development;
  • Exchange information and coordinate on trade policy, labour policy, broader external policy, compliance issues;
  • Act as a forum for dispute resolution; and
  • Include scope for sectoral focus (e.g. palm oil or agriculture).

This is a low-cost and effective method of ensuring appropriate, open and direct communications on a government-to-government basis, which has been lacking.

How can the U.S. Government bolster the forced labor components of trade agreements and trade preference programs to have greater effect?

What new and innovative trade tools can the U.S. Government develop and utilize to advance efforts to combat forced labor in traded goods and services?

Malaysia and the United States should leverage existing standards infrastructure to create a framework for forced labour and palm oil that is compatible with trade agreements and raise labour standards in trade agreements. This framework should be based on international standards (i.e. International Organization for Standardization) and the Malaysian Sustainable Palm Oil (MSPO) standard.

Malaysia is currently participating in the Indo-Pacific Economic Framework (IPEF) meetings. As the meetings are at an early stage, there is considerable room to ensure workable solutions are included that do not negatively impact the trade liberalising ambitions of the agreement. Arguably, the worst outcome would be an agreement that increases compliance requirements for Malaysian companies exporting to the United States.

Malaysia has recently updated and revised its national standard for palm oil production, Malaysia Sustainable Palm Oil (MSPO),[1] to include specific provisions on forced and labour and labour rights (Overview of MSPO Standards; Revised MSPO Standard).

The IPEF should not ‘reinvent the wheel’ when it comes to defining labour standards and preventing forced labour within trade agreements. It has the opportunity to take a novel and innovative approach and seek to utilise existing standards infrastructure. There are three aspects to this:

  • Globally, there are a number of mandatory and voluntary sustainability schemes and standards for commodities such as palm oil that include requirements on forced labour; these have been widely adopted by the private sector, some of which are used as a reference point by US authorities such as Customs and Border Protection;
  • IPEF can utilise existing norms and standards infrastructure (international/national standards, national standards bodies, accreditation bodies) to ensure the robustness of these standards and their compatibility with norms on technical barriers to trade, such as the WTO TBT Agreement; and
  • IPEF can incorporate such schemes in an innovative manner under a ‘Labor’ chapter and/or a chapter on ‘Standards, Technical Regulations and Conformity Assessment Procedures’ or similar.

It is therefore feasible for the IPEF agreement to introduce a mutual recognition process and eventual agreement for labour standards that can be effective because it recognises international norms in the following:

  • Prohibitions of forced labour and labour rights according to international (ILO) norms;
  • Institutions that are internationally recognised under umbrella organisations for standardisation and accreditation;
  • Standards that have been developed according to international principles for standards development and follow international norms established under the WTO TBT Agreement; and
  • Certification and accreditation procedures that follow international standards.


  • For Malaysia and the international community, the key benchmark for the adequacy of a standard for forced labour is a general prohibition on indicators of forced labour as defined by the International Labor Organisation.[2]
  • The indicators are: Abuse of vulnerability; Deception; Restriction of movement; Isolation; Physical and sexual violence; Intimidation and threats; Retention of identity documents; Withholding of wages; Debt bondage; Abusive working and living conditions; Excessive overtime. The revised national MSPO standard specifically includes prohibitions on these indicators.


  • The MSPO standard was developed by an independent standard-setting body according to the standard-setting procedures of the Department of Standards Malaysia (DSM, similar to the American National Standards Institute, ANSI), which is a member of the International Organization for Standardization.[3]


  • DSM principles for Malaysian standard development are based on Annex 3 to the WTO TBT Agreement (i.e. ISO/IEC Guide 59 and ISO/IEC Guide 21). The standard therefore follows international norms for standards and standards development.

Accreditation and certification

  • Accreditation and certification procedures determines the suitability and competency of certifiers and auditors in assessing whether firms meet labour standards. Accreditation can only take place under the auspices of Standards Malaysia, which is a member of the International Accreditation Forum (equivalent to ANSI National Accreditation Board);[4] certification bodies must meet the requirements of ISO 17021 and ISO 17065.

The benefit of such an approach will be that it utilises existing, effective infrastructure in a novel and innovative way. It has significant potential to be applied to other commodities and other economies.  Rather than attempting to reinvent effective institutions and processes, it seeks to leverage them to raise standards for labour.