Malaysia and the European Union are in the final stages of concluding a Free Trade Agreement (FTA), alongside a broader partnership framework intended to enhance economic cooperation and bilateral relations.
Malaysia’s Foreign Minister, Mohamad Hasan, indicated that progress has accelerated as the EU increasingly views Southeast Asia as a strategically important region. This shift comes amid global trade tensions, including unilateral tariff measures by the United States and ongoing geopolitical instability linked to the Russia-Ukraine conflict.
While no specific timeline has been confirmed, Malaysia has expressed its intention to finalise the agreement promptly, highlighting its potential to expand trade flows between both parties. The matter was discussed during a bilateral meeting between Mohamad Hasan and Kaja Kallas on the sidelines of the ASEAN-EU Ministerial Meeting.
Earlier statements by EU Trade Commissioner Maroš Šefčovič suggested that the agreement could be completed within the year. Trade between Malaysia and the EU has already reached approximately €46 billion and is expected to grow further following implementation of the FTA.
EU and Malaysia are eyeing concluding talks on a trade agreeement by October 2027 – but it won't be plain sailing, the commission admitted today. More by me for Borderlex subscribers below https://t.co/qBLprjNg9p
— Rob Francis (@RobFrancisEU) April 16, 2026
Material progress in the combat against deforestation
During discussions, Malaysia also raised concerns regarding ongoing anti-palm oil campaigns in Europe. Malaysian officials argue that such campaigns are not grounded in scientific evidence but are instead influenced by competing industry interests. They have also criticised certain product labelling practices, stating that they may conflict with established trade norms.
The EU side acknowledged Malaysia’s concerns and indicated a willingness to engage further on the issue. In addition, Malaysia highlighted its position on the EU Deforestation Regulation (EUDR), urging that its domestic sustainability standards be assessed independently rather than grouped with practices in other countries.
According to Malaysian authorities, more than 55% of the country’s land remains covered by tropical forest, and oil palm cultivation is not a primary driver of deforestation. The industry is largely managed by established plantation companies that adhere to the Malaysian Sustainable Palm Oil (MSPO) certification framework.
Malaysia has called on the EU to undertake a detailed evaluation of its palm oil sector before introducing measures that could be perceived as discriminatory. At the same time, the country is increasingly focusing on exporting higher value-added palm oil products, which are used in a wide range of industries, including food processing and manufacturing. The EU remains a significant market for these processed goods.
More broadly, trade relations between the EU and several partners have been affected by regulatory developments. In addition to tariffs, the EU has expanded the use of environmental standards in its trade policy. The EUDR requires exporters of commodities such as cocoa, coffee, soy, palm oil, and beef to demonstrate that their production has not contributed to deforestation after 2020.
These requirements have introduced additional administrative burdens and have contributed to tensions with countries including Brazil and the United States. They have also strained relations with Southeast Asian exporters such as Malaysia and Indonesia, both of which are key economic partners in the region.
Recent data suggests that deforestation rates in Malaysia have declined. Some non-governmental organisations report a reduction of approximately 13% by 2024, while data from Global Forest Watch indicates that Malaysia lost about 0.56% of its remaining primary forest in 2024. This compares with a higher percentage loss reported in some European countries.
Despite these developments, concerns persist among exporting countries regarding the consistency of EU policy implementation, particularly in cases where certain trading partners have been granted partial exemptions. Such issues continue to shape discussions as both sides work toward finalising the FTA and strengthening long-term economic ties.