EU and Malaysia relaunch free trade talks amid global uncertainty

January 20, 2025 — EU and Malaysia have announced the resumption of negotiations for a Free Trade Agreement (FTA), marking a significant step towards closer economic ties and cooperation. The announcement coincided with Malaysian Prime Minister Anwar bin Ibrahim's visit to Europe.

At a time of rising geopolitical tensions and increasing global instability, the move signals a commitment by both parties to forge stronger partnerships and create new opportunities, the announcement from EU President von der Leyen states.

The EU is a major trading partner for Malaysia, consistently ranking among its top partners. Conversely, Malaysia is an important trading partner for the EU within the ASEAN region.

The trade relationship is largely dominated by trade in goods, with industrial products constituting the majority of exchanges. Key EU exports to Malaysia include machinery and appliances, chemical products, and transport equipment. Malaysia's primary exports to the EU consist of machinery and appliances, animal and vegetable fats and oils (particularly palm oil), and chemical products. While trade in services has been less prominent, it is a growing area with potential for expansion, especially with Malaysia's ongoing liberalization policies.

The potential FTA promises to significantly boost the existing trade relationship, which is already valued at €45 billion annually. Data from Eurostat reveals a strong upward trend in bilateral trade. EU imports from Malaysia have doubled between 2010 and 2023, reaching €30 billion. EU exports to Malaysia have also seen significant growth, rising from €10 billion in 2010 to €15.7 billion in 2023. This robust exchange of goods and services underscores the existing strength of the trade relationship, which has evolved significantly over time due to various economic and political factors.

EU-Malaysia trade relationship has also faced certain challenges. One prominent issue is the EU's concerns regarding the sustainability of palm oil production in Malaysia. The EU has implemented regulations aimed at combating deforestation, which has raised concerns in Malaysia about potential impacts on its palm oil exports. This issue has been a key point of discussion in recent trade negotiations.

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