The Political Economy of an EU-Malaysia FTA

In September 2010, the European Union (EU) and Malaysia began negotiating a free trade agreement (FTA). This paper examines the prospects and challenges facing the EU-Malaysia FTA negotiations from a political economy perspective. It will argue two points. First, while a deep FTA would offer significant welfare gains to Malaysia, a deep agreement is unlikely to be negotiated. This is because of the difficulty Malaysia would have in opening its services markets and changing investment regulations. Second, even a deep FTA would be of little economic or strategic use for the EU. Both points beg the question: why bother negotiating an FTA?