As Europe stumbles, Malaysia gains the upper hand in trade talks
New Straits Times (04/01/2026) - THE past years can hardly be called a golden age of European trade negotiations.
The famed agreement with the Mercosur bloc of South American nations, long seen as the "Crown Jewel" of Brussels' negotiators, is where it has been for the past decades: at a standstill.
The latest failed opportunity to sign the European Union-Mercosur Free Trade Agreement was a much greater blow to Brussels than it was to its South American counterparts.
The EU's successive failures to sign and ratify trade agreements due to internal disagreements, and the tumultuous external policy pursued by Ursula von der Leyen, the European Commission president, brought Brussels to a political stalemate.
The results of von der Leyen's push to build a "geopolitical commission", from Ukraine to the Middle East, have been underwhelming at best.
Its action felt incomplete, narrow and limited to rhetorical and "normative" grandstanding.
Seeing the ever-growing crisis in the bloc's standing beyond its Western partners, some European decision-makers have been pushing for a return to trade as a cornerstone of European politics.
Progress on that front, too, had slowed down significantly, with negotiations either stalling over diverging interests or lingering on in diplomatic limbo.
One region where the EU had remarkable success in this decade, however, is Southeast Asia. Singapore and Vietnam have had free trade agreements in force since 2019 and 2020, respectively.
Indonesia completed negotiations with Brussels last June, with the two parties now moving towards the signature and ratification process. And, with Malaysia, negotiations were reopened last January after a 13-year break.
Beyond trade, the EU and Asean have had a "strategic partnership" since 2020, which has only grown in relevance as trade, human and cultural links between the two blocs deepened.
The EU's rush for new trade agreements and renewed focus on Southeast Asia gives Kuala Lumpur unprecedented leverage in its dealings with Brussels.
Talks had been suspended in 2012, at Malaysia's request, over divergences regarding European environmental law and its application to Malaysian palm oil.
Though the palm oil industry is not short of controversies, the EU's tactic of using environmental arguments to push for trade concessions is well-known.
That the talks were resumed now, in the wake of the finalisation of those with Indonesia, attests to Brussels' willingness and urgency to negotiate and conclude trade agreements soon.
In this new round, palm oil has given way to semiconductors, scientific instruments and other manufactured goods that Malaysia already exports to Europe.
It is precisely for these products that Brussels, ever more willing to distance itself from China, has approached Asean instead.
Malaysia's burgeoning profile as a powerhouse of the electronic industry has turned it from a desirable trading partner to an indispensable part of any European country's Southeast Asia policy.
This interest is not limited to Brussels, either.
European national governments, notably that of Hungary, have dedicated significant time and political capital to an "Eastward" political and economic expansion.
Budapest's strategy, based on bilateral engagement and the development of trade and investment ties, has yielded positive results across Asean.
With Kuala Lumpur itself, there is a growing interest on Hungary's side to expand ties and to develop.
Both the EU and Malaysia expect negotiations to be concluded by the end of this year — or, at the latest, by next year.
Time, the growth of strategic industries within Malaysia, and the ebb and flow of global markets are on Malaysia's side.
More so than in the past decade, Kuala Lumpur has an unprecedented opportunity in its negotiations with Brussels and in engaging with interested partners such as Hungary.
Malaysian negotiators should use it wisely.