European bloc turns to Southeast Asia in bid to hedge protectionism
Nikkei Asia | 28 April 2025
European bloc turns to Southeast Asia in bid to hedge protectionism
by NORMAN GOH
KUALA LUMPUR — A European bloc comprising Iceland, Liechtenstein, Norway and Switzerland is doubling down on Malaysia and other Southeast Asian economies as strategic partners, seeking to hedge against resurgent U.S. protectionism under President Donald Trump.
This month, the four-member European Free Trade Association (EFTA) concluded an economic partnership agreement with Malaysia — a deal more than a decade in the making — accelerating cooperation in areas like goods trade, investment and government procurement.
"In these times when trade wars loom, it’s good that we have friends and allies who promote a rule-based trading system," Trine Lise Sundnes, a Norwegian member of parliament, told reporters during a press briefing by EFTA representatives held in Kuala Lumpur on Thursday. "We’ve been through economic turmoil, the financial crisis, the pandemic, and it’s becoming clearer that diversity and balance in trade partnerships are crucial."
Their negotiations began in 2014 but were marked by multiple delays stemming from domestic political transitions and the COVID-19 pandemic. The deal was finally concluded on April 11 and is expected to be signed in Norway on June 23 before proceeding to ratification by the parliaments of EFTA nations.
Under the agreement, for example, key export products of EFTA states, such as chocolate and non-alcoholic beverages, will receive duty-free market access into the Malaysian market, while Switzerland grants Malaysia "limited preferential market access" for Malaysian palm oil, the Southeast Asian nation’s major export item, with reduced duty rates.
Trade between EFTA countries and Malaysia was recorded at $2.35 billion in 2024, a three-fold increase from $550 million in 2019. The EFTA’s exports to Malaysia included machinery, pharmaceuticals, electrical machines, precision instruments, clocks and watches. Imports from Malaysia were dominated by electrical and mechanical machinery, precision instruments and rubber.
The EFTA was established in 1960 to promote free trade and economic cooperation. To date, the EFTA has concluded trade agreements with several countries and economies in Asia, including Singapore (2002), South Korea (2005), Hong Kong (2011), the Philippines (2016), Indonesia (2018) and India (2024). Most recently, Thailand signed a deal with the EFTA as part of Bangkok’s strategy to hedge against rising U.S. tariffs and diversify its trade ties. The bloc is also in talks with Vietnam for a similar economic agreement.
Grimur Grimsson, an Icelandic MP, told reporters that Malaysia’s geopolitical positioning could offer opportunities. "Malaysia is described by its own officials as ’the man in the middle’ with good ties to both China and the U.S." That positioning, he said, makes Malaysia a compelling partner for countries like those in the EFTA, which seek to hedge against global volatility.
Switzerland, which has signed trade agreements with five Southeast Asian countries to date, sees Malaysia as an important addition to its regional footprint. "Malaysia offers a great alternative. It’s similar to Singapore but cheaper, and it’s clearly more developed than Vietnam," Swiss MP Thomas Aeschi said. He also confirmed that Switzerland is negotiating a bilateral investment protection agreement with Malaysia that is expected to be signed later this year.
Liechtenstein, the smallest economy of the four EFTA members, is also optimistic. "We are a small country with no natural resources, but free trade is essential for us to grow," said MP Sebastian Gassner. "It’s mandatory that we use talents from all over the world, including here in Malaysia. We should develop them, include them in R&D (research and development), and that helps scale up new technologies," he told Nikkei Asia.
The EFTA delegation’s visit to Malaysia also highlighted areas for future collaboration, particularly in technology transfer and research, with the EFTA parliamentarians pointing to Malaysia’s growing role in decarbonization and its potential in the carbon capture and storage (CCS) space.
"We have 50 years of CCS experience in the North Sea, [and] a very high and specialized tech environment in Norway. As you know, we are an oil- and gas-producing country, which we also have in common with Malaysia," said Norway’s Sundnes.
