Brussels, 26/11/2014 (Agence Europe) - The EU and Malaysia are looking to resume their free-trade negotiations at the start of next year. European and Malaysian chief negotiators could decide next week to restart the bilateral talks.
The free-trade negotiations opened in October 2010 with Malaysia, the EU's second largest trading partner within the ASEAN area (and 24th largest globally) but have been on hold since the general elections in Malaysia in the spring of 2013. Efforts to get them going again have speeded up since Malaysian Prime Minister Najib Razak indicated on the sidelines of the ASEM summit in Milan in mid-October that he was keen to resume talks. Both sides, however, would like to see greater flexibility from the other on matters that Malaysia sees as sensitive: access to the services market, access to public contracts, protection of intellectual property rights and sustainable development.
“We reached a half-way point. However, the most difficult issues still remain to be resolved”, a source at the Commission recently said. “The EU is fully committed to negotiate an FTA (free-trade agreement) with Malaysia and welcomes these developments. But we also need to ensure that we restart on a basis that will allow us to conclude an ambitious and comprehensive agreement soon. This includes the necessary flexibility on the Malaysian side to address areas that are of key interest to the EU”, the source went on to say.
“We agree to negotiate on the chapters that are sensitive for Malaysia but the extent of ambition is different. There is a gap”, was the word this week from the Malaysian side. However, Malaysia wants to include a chapter in the hoped-for agreement on investment, on which the Commission was not empowered to speak when the talks opened in 2010. “We want clarity on how our existing bilateral investment agreements with 19 member states will be treated”, a diplomatic source close to the matter said.
In the meantime, European and Malaysian negotiators could resume their negotiations on the basis of an already sound package on some of the 14 chapters covered by the talks, including, in addition to tariff liberalisation for goods, access to services and public contracts markets, non-tariff and technical trade barriers, health and plant health measures, competition and sustainable development.
In terms of goods, there are “landing zones”. “There was already an emerging package when we stopped, in terms of tariff concessions”, the Malaysian side has told us. Two very sensitive products for Malaysia are motor vehicles and alcoholic drinks. The offensive interests of this, the second largest economy of the ASEAN area, are in palm oil and palm oil-based products, fishing, including for shrimp, timber and furniture.
Bilateral trade in goods, dominated by industrial products (90%), was worth €32.7 billion in 2013. With its €14.3 billion in exports, the EU ran a €4.1 billion trade deficit. The EU imports mainly machinery and equipment and mainly exports electrical equipment and machinery. Plastics and rubber, animal and vegetable fats, palm oil and mechanical goods are the other main Malaysian export sectors to the EU.
Bilateral trade in services, worth €6.8 billion in 2012, €3.9 of that being EU exports, fall far short of that between the EU and Singapore (€28.6 billion in 2012). For the Commission, however, better use could be made of the opportunities opened up by the liberalisation policies pursued in Malaysia before 2010 through a free-trade deal. The same goes for investment flows. The stock of foreign direct investment into Malaysia amounted to €18.2 billion in 2012 (compared with €1.1 billion in 2009) and the stock from Malaysia into the EU was €7.2 billion.
EU trade preferences stopped being granted to Malaysia in 2010. (EH)