Malaysia-EU trade deal 80pct done, palm oil and autos remain key hurdles

KUALA LUMPUR: Negotiations for a free trade agreement (FTA) between Malaysia and the European Union (EU) are nearly 80 per cent complete, with both sides targeting to conclude the deal by June 2027, Investment, Trade and Industry Minister Datuk Seri Johari Abdul Ghani said.

He said the remaining 20 per cent involves outstanding issues, including palm oil and the automotive sector, which require further agreement between the two sides.

Johari expressed confidence that the differences could be resolved, paving the way for the Malaysia-EU Free Trade Agreement (MEUFTA) to be signed by the end of June next year.

"Basically, I can say that almost 80 per cent has been completed and agreed upon by both parties. Only 20 per cent remains, involving several matters concerning the EU and Malaysia.

"I think these matters can be ironed out, but negotiations are still ongoing. I believe we can resolve them," he told reporters at a press conference during EU-Malaysia Business Day 2026: Selangor in Focus here today.

He said Malaysia and the EU had held five rounds of negotiations, with the government aiming to sign the agreement by the end of June 2027 at the latest.

One of the key issues requiring attention is the EU Deforestation Regulation (EUDR), whose repeated postponements have increased costs and created uncertainty for Malaysian palm oil exporters.

Johari said Malaysian palm oil companies had invested millions of ringgit to prepare for the regulation's stringent requirements, only to incur additional costs with each postponement that businesses could not recover.

"Regulatory certainty and predictability are therefore essential in our shared commitment to sustainability," he said.

He described the repeated delays as a missed opportunity for Malaysia to demonstrate its capabilities in sustainable palm oil production.

Malaysia's palm oil exports amounted to RM124.9 billion in 2025, of which RM20.1 billion, or about 16 per cent, went to the EU, making the bloc the commodity's largest export destination.

Johari said Malaysian exporters continued to work towards meeting global sustainability standards, including requirements on deforestation, supply chain traceability and responsible labour practices in line with the International Labour Organisation's 11 indicators of forced labour.

While Malaysia shared the EU's commitment to sustainability, he said regulations affecting trading partners should be practical and proportionate, taking into account producers' circumstances, particularly those of smallholders and smaller enterprises in developing economies.

He said these concerns underscored the need for mutual understanding as both sides worked towards a comprehensive, balanced and mutually beneficial agreement that would strengthen market access and facilitate trade and investment.

Negotiations remained challenging amid the current geopolitical and geoeconomic environment, particularly given the EU's 27 member states and their diverse economic structures and policy priorities.

Malaysia also had its own economic circumstances and sensitivities, requiring both sides to recognise their respective stages of economic development and policy objectives.

"Ultimately, a successful MEUFTA must be founded on mutual understanding and a shared commitment to achieving outcomes that are commercially meaningful and economically beneficial for both sides," he said.

Johari said sufficient political will and constructive engagement would help bridge differences and bring the negotiations to a successful conclusion.

If concluded, the agreement would be Malaysia's 18th FTA, providing wider market access for exporters and businesses on both sides.

"When we sign an FTA, the objective is to provide freer market access between Malaysia and the EU.

"The economy operates differently today compared with the past. The more open markets we can access, the better it is for the country," he said.

Beyond boosting bilateral trade, Johari said the agreement would strengthen Malaysia's position as an investment destination and a gateway for European businesses seeking to expand across Asean.

Total trade between Malaysia and the EU stood at RM228.1 billion in 2025, comprising exports of RM129.3 billion and imports of RM98.9 billion, resulting in a trade surplus of about RM30.3 billion.

He said European companies had helped develop Malaysia's industrial base through advanced technology and job creation, while Malaysia offered investors an established manufacturing ecosystem, a skilled workforce and access to the wider Asean market.

Malaysia also sought closer cooperation with the EU in semiconductors, advanced manufacturing, renewable energy, and green and digital technologies, alongside efforts to diversify trade relationships and strengthen supply chain resilience.

Meanwhile, EU Commissioner for International Partnerships Jozef Síkela said the resumption of Malaysia-EU FTA negotiations was an important step towards strengthening economic and trade ties.

He said the agreement could create more trade and investment opportunities and open new avenues for economic cooperation.

"The FTA currently being negotiated will open up a new dimension of opportunities for both sides," he said.

Síkela also expressed the EU's hope that negotiations could be concluded by the end of 2027 at the latest.

Separately, EU Ambassador to Malaysia Rafael Daerr said bilateral trade continued to grow, with Malaysia's exports to the EU rising 28 per cent in the first half of 2026, while imports from the bloc increased 12 per cent.

He said the growth highlighted the importance of Malaysia-EU trade relations as both sides sought to expand economic cooperation amid an increasingly challenging global environment.