EU-Malaysia Free Trade Agreement (FTA) negotiations
Malaysia is the second ASEAN country to have started free trade negotiations with the EU. A future EU-Malaysia Free Trade Agreement (FTA) will create a long-term, stable legal framework for bilateral trade between two equal partners.
The FTA negotiations are ambitious and comprehensive, covering tariffs and non-tariff barriers for goods and services, as well as commitments on other trade-related areas, notably procurement, competition and sustainable development. The FTA will remove tariffs on most goods, open up trade in services beyond current GATS commitments and boost bilateral investment, encouraging EU and Malaysian companies to expand their business into both regions. The preferential access that Malaysia would gain will enhance benefits to the robust and vibrant developing Malaysian economy.
EU Trade Commissioner Karel de Gucht welcomed the launch of the FTA negotiations on 5 October 2010, stating he expected the agreement to "provide Malaysia with quality investment from Europe and open up new market opportunities for Malaysian and European businesses. On the occasion of the 13th AEM-EU Trade Commissioner Consultations, held in Kuala Lumpur on 26 April 2015, Trade Commissioner Cecilia Malmström gave a speech which highlighted the importance of ASEAN, and Malaysia in particular to the EU, advocating for further trade liberalisation between the two regions.
The EU remains a staunch supporter of ASEAN integration. Recently concluded bilateral FTAs with individual ASEAN members such as Vietnam and Singapore, will pave the way for an EU-ASEAN region-to-region FTA.
Frequently Asked Questions
What would be the benefits to Malaysian companies and industries, once the FTA is concluded?
The FTA would give Malaysia preferential access to the EU, the world's largest market. With its 506.9 million prosperous consumers, the EU is an attractive destination for Malaysian exports. Trading with the EU gives access to this immense, closely-knit market place, in which goods, services, capital and people are able to move freely without borders.
The agreement would also create a long-term, stable trading relationship between Malaysia and the EU. The potential gains of such an FTA could be very significant. A study conducted in 2006 indicated that Malaysia would be a clear winner as a result of an ambitious and comprehensive FTA. The broader the scope of the FTA and the deeper the degree of liberalisation, the greater the potential gains which could be expected, especially in the services area.
What would the EU gain from an FTA with Malaysia?
For the EU, Malaysia represents a growing market for exports and investment, as well as a crucial link to the wider ASEAN region. European companies which are thinking of setting up production units in one of the ASEAN countries would be encouraged by the FTA to do so in Malaysia. FTAs naturally promote bilateral investment. The EU would gain by improving market access conditions for its economic operators in Malaysia, both in goods and in services. Moreover, by creating an enduring contractual relationship between the parties, the FTA would ensure a stable and secure business environment for European exporters and investors.
What are the priority areas the EU would like to address under the FTA?
Bilateral trade deals must be compatible with and supportive of the multilateral trading system (WTO). This means that they must be trade creating, not trade diverting. To make sure that this is the case, FTAs must cover "substantially all trade" and integrate the economies of the negotiating parties. This means that any FTA must also address sensitive issues, where liberalisation and opening up to competition may be politically and economically more difficult.
To summarise, the EU's priority is to negotiate an ambitious, far reaching FTA, covering trade in goods, technical standards, services, investment, rules on intellectual property and competition, and gradual opening of the government procurement markets. Moreover, the concept of sustainable development will be taken into account in various aspects of the agreement.