TRADE POLICY
EU-Malaysia: Liberalising trade in palm oil
During the fourth round of negotiations on a free trade agreement between the EU and Malaysia (held in Kuala Lumpur from 8 to 12 June), palm oil was also discussed, according to a public report published by the European Commission. The negotiations, which resumed in 2025, are expected to enter a new phase later this summer. At that stage, the first substantive discussions on market access and tariffs are expected to begin, forming the core of the future trade agreement.
Following the successful conclusion of the Comprehensive Economic Partnership Agreement (CEPA) between the European Union and Indonesia in September 2025, which includes far-reaching liberalisation of trade in palm oil and palm kernel oil, pressure has increased on Malaysia to reach a similar agreement with the EU. The EU-Indonesia CEPA is widely expected to enter into force in early 2027. Under the agreement, the EU will eliminate import duties on products including palm oil, palm kernel oil and their derivatives (with the exception of biodiesel) from the date of entry into force. In return, Indonesia will provide duty-free export quotas for palm oil and palm kernel oil destined for the EU.
Malaysian products face a tariff disadvantage
As a result, Malaysian exporters are expected to face higher EU import duties than their Indonesian competitors for a transitional period. Even if the EU and Malaysia successfully conclude their free trade negotiations in 2027, the agreement is unlikely to be applied before the second half of 2029. The legal review (legal scrubbing), translation of the agreement into all official EU languages and ratification process are expected to take at least 18 to 24 months.
Negotiations delayed by a prolonged pause
Malaysia began free trade negotiations with the EU in 2010, well before Indonesia, which started negotiations in 2016. However, Malaysia decided to put the talks on hold between 2012 and 2025, leaving the country at a competitive disadvantage compared with Indonesia.
First tariff offers expected this summer
The EU and Malaysia are expected to exchange their first tariff offers before or during the fifth negotiating round, scheduled to take place in Brussels in September. This represents an important milestone in the negotiations, with both parties expected to present proposals for the gradual elimination of customs duties on specific products and tariff lines over an agreed transition period.
Inter-sessional meetings
The two parties have also agreed to hold a series of virtual inter-sessional meetings ahead of the formal fifth negotiating round. These discussions are expected to help maintain momentum and could lead to further substantive progress before negotiations resume in Brussels.
For more information: Frans Köster 
