Malaysia - Trade AgreementsMalaysia - Trade Agreements
Malaysia has always been a trading nation. Strategically located along the Straits of Malacca, it sits on a major shipping channel that connects the Indian Ocean to the west and the Pacific Ocean to the east. Malaysia recognizes the importance of international trade and relations to the nation’s growth and development. This is reflected in its gross exports of goods and services.
Given Malaysia’s reliance on international trade, Malaysia has adopted liberal trade policies and puts a high emphasis on regional and bilateral trade agreements. Malaysia joined the General Agreement on Trade and Tariff (GATT) in 1957, and was therefore a founding member of the World Trade Organization (WTO), which replaced the GATT.
Currently, Malaysia has seven bilateral Free Trade Agreements (FTAs) with the following countries: Australia, Chile, India, Japan, New Zealand, Pakistan, and Turkey.
The Association of Southeast Asian Nations (ASEAN) members have established the ASEAN Free Trade Area. The ASEAN Free Trade Area (AFTA) is a trade bloc agreement to support local manufacturing in all ASEAN countries. The primary goal of AFTA is to increase ASEAN's competitive edge as a production base in the world market. The secondary goal is to attract more foreign direct investment to ASEAN. The Common Effective Preferential Tariff and elimination of tariffs and non-tariff barriers among ASEAN members are the main instruments in achieving its goals. In 2018, ASEAN collectively represents a market with a GDP of more than US$3.1 trillion and a population of 655 million people. ASEAN members are: Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.
Through ASEAN, Malaysia has regional FTAs with: China, Japan, Korea, India, Australia and New Zealand, and also participates in the ASEAN Trade In Goods Agreement (ATIGA).
Other concluded trade agreements include: Trade Preferential System-Organization of Islamic Conference (TPS-OIC), and Developing Eight (D-8) Preferential Tariff Agreements (PTA).
FTAs signed pending ratification and entry into force
ASEAN - Hong Kong Free Trade Agreement (AHKFTA) was signed on November 2017 with target entry into force in 2019.
The Trans-Pacific Partnership Agreement (TPPA) was signed on Feb 4, 2016. Since the United States’s formal withdrawal from TPP in 2017, the remaining TPP countries formed the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP).
The CPTPP was signed on March 8, 2018 by all 11 participating countries - Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Signing of the agreement signifies that these countries will start the domestic ratification process so as to bring the agreement into force.
The CPTPP was entered into force by these countries on 30 December 2018: Australia, Canada, Japan, Mexico, New Zealand, Singapore, and Vietnam in January 14, 2019. The CPTPP will enter into force for Brunei Darussalam, Chile, Malaysia and Peru 60 days after they complete their respective ratification process. In the case of Malaysia, the new government is still evaluating the agreement and has has yet to set a specific date for ratification.
FTAs currently under negotiation:
- Regional Comprehensive Economic Partnership (RCEP)
- Malaysia-Iran Preferential Trade Agreement (MIPTA)
- Malaysia-European Free Trade Area Economic Partnership Agreement (MEEPA)
- Malaysia-EU Free Trade Agreement (MEUFTA)
Malaysia is party to the Regional Comprehensive Economic Partnership (RCEP) negotiations, which is a FTA between the ten ASEAN members and six countries with which ASEAN has existing FTAs. The goal of the RCEP is a more comprehensive regional economic integration among its members. The RCEP also aims to simplify and harmonize the member countries’ respective bilateral FTAs.
The RCEP negotiating members are: Australia, Brunei, Cambodia, China, India, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam. If the RCEP is accepted, it will be Malaysia’s largest multilateral agreement, comprising about 29 percent of world trade. The previous government had stated its intent to conclude the RCEP agreement in 2018, but that interntion was not reiterated by the new government.
The Malaysia-Iran Preferential Trade Agreement (MIPTA) was initiated by the previous Malaysian government. The initiation of the negotiation was announced during a Malaysian trade mission to Iran back in May 2016. Since then, there was no publicly available updates on MIPTA.
The Malaysia-EU FTA (MEUFTA) negotiation was formally launched on 5 October 2010. After several rounds of negotiations, the negotiations reached an impasse in 2012. However, both sides had greed that negotiations will resume when a fresh mandate and/or flexibilities become available at a later date. The new government has yet to take a position on the possible resumption of MEUFTA negotiations.
On a side note, Malaysia and the EU have concluded the Agreement on Partnership and Cooperation (PCA) in December 2015.
Malaysia and the EU had intentions to sign this PCA in January 2019. A PCA is a comprehensive agreement on bilateral and multilateral cooperation comprising politics, economics, trade, investment, justice, culture, education, science and technology, healthcare, agriculture, tourism, energy, traffic, and environment. Individual ASEAN members will first need to sign a PCA with the EU to qualify for the free-trade agreement (FTA).
Additionally, Malaysia is also in ongoing negotiation with the European Free Trade Association Partnership. The European Free Trade Association (EFTA) countries consisting of Iceland, Liechtenstein, Norway and Switzerland. These members are not a member of the European Union. Negotiations between EFTA and Malaysia are still going on.
Malaysia Trade Development and Promotion Trade Agreements