Geopolitical Dimensions of Global Crude Palm Oil Trade: AReview on Trade Policy, Environmental Governance, and StrategicCompetition

Abstract

This study critically examines the geopolitical forces reshaping the dynamics of global Crude Palm Oil (CPO) trade. The palm oil sector, dominated by Indonesia and Malaysia, which together supply approximately 83 per cent of global output, is increasingly shaped by the interplay of trade policy, environmental regulation, and strategic state behaviour, extending well beyond conventional market mechanisms. Employing a Structured Critical Literature Review (SCLR) approach drawing on peer-reviewed articles from the Scopus and Web of Science databases for the period 2000–2026, the study synthesizes findings across
four thematic domains: (1) the economic foundations and competitive dynamics of the global palm oil market, (2) trade policy instruments and regulatory barriers, (3) vegetable oil market competition and substitution dynamics, and (4) emerging geopolitical narratives framing palm oil as a strategic commodity. The analysis reveals that policy instruments—including India’s tariff adjustments, Indonesia’s B40 biodiesel mandate, and the European Union Deforestation Regulation (EUDR) function as geopolitical mechanisms that redistribute market access, reshape supply chains, and create structural asymmetries between developed importing and developing exporting nations. Sustainability certification regimes such as the Roundtable on Sustainable Palm Oil (RSPO) and the Indonesian Sustainable Palm Oil (ISPO) standard are shown to operate as both environmental governance tools and de facto instruments of market power, often imposing disproportionate compliance costs on smallholder producers. The study further demonstrates that downstream industrialisation and market diversificationparticularly through South–South trade corridors with China and BRICS nations represent critical geoeconomic strategies for producing countries seeking to reduce vulnerability to regulatory pressures from traditional Western markets. The article contributes to the international political economy literature by establishing that CPO competitiveness is no longer determined solely by production efficiency or cost advantages but is increasingly contingent upon the capacity to navigate complex global regulatory architectures and to project economic sovereignty through strategic trade diplomacy.