Malaysian Cabinet Gives Green Light to Join TPP

According to a news report (Item 1), the Malaysian Cabinet had given the go-ahead to join the Trans-Pacific Partnership (TPP) and it is now up to the member countries of the regional grouping to decide on Malaysia's entry.

The TPP currently comprises eight countries, namely, the US, Australia, Brunei, Chile, New Zealand, Peru, Singapore and Vietnam. So far, they have held two meetings and they hope that a framework will be developed by end-2011 when the Asia-Pacific Economic Cooperation meets.

Key areas that Malaysia are prepared to negotiate reportedly include services and government procurement, the latter being one of the most contentious issues that is believed to have caused the impasse in the currently stalled Malaysia-US FTA negotiations. According to reports, the Malaysian government is performing a cost-benefit analysis of an eventual TPP agreement, focused on these sensitive areas and considering how the TPP agreement would fit into Malaysia's broader economic strategy (Item 2).

US trade officials were in Kuala Lumpur recently to discuss the TPP and other trade-related with their Malaysian counterparts (Item 3).

 

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Item 1

Malaysia seeks TPP members' nod to join pact

By Rupa Damodaran

Business Times, 31 July 2010

MALAYSIA is keen to join the Trans Pacific Partnership (TPP), a regional trade pact, but it needs the nod from the eight-member countries to do so, said International Trade and Industry Minister Datuk Seri Mustapa Mohamed.

"It is up to the member countries to decide (on Malaysia's entry)," he said at a media briefing in Kuala Lumpur yesterday.

The eight countries are Australia, Brunei, Chile, New Zealand, Peru, Singapore and Vietnam. They have held two meetings so far.

Malaysia's Cabinet had given the mandate to join the regional group two weeks ago.

"In the area of government procurement, we have said that we are prepared to discuss it further. Of course, there will be issues which will affect our local manufacturers.

"In the case of services, we are prepared to discuss further, by looking at the negative list," he said.

The Malaysia-US FTA talks were put on hold following the Obama Administration's shift in trade policy, favouring a regional trade presence in the Asia Pacific.

The TPP talks, which started in March this year, will be held in Peru in June before the third round in October in Brunei and the fourth round at the end of this year.

New Zealand is driving the discussions. Issues discussed included achieving regulatory coherence, streamlining regional supply chain and how to help small businesses raise their share of regional trade.

The US hopes a framework could take shape before end-2011 when it hosts the Asia-Pacific Economic Cooperation (Apec) meeting.

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Item 2

Inside U.S. Trade - 7/23/2010

Malaysia Nearing Final Decision On Whether To Join TPP Negotiations

The Malaysian government this week conducted intense, inter-agency deliberations on whether to make a request to join the negotiations to establish a Trans-Pacific Partnership (TPP) agreement, and a decision could be made as early as next week, according to an informed source.

Deputy U.S. Trade Representative Demetrios Marantis and Assistant USTR Barbara Weisel are scheduled to meet in Malaysia with Trade Minister Mustapa Mohamed on July 27, at which point Mustapa will likely have a definitive answer on whether the Malaysian government seeks to join the TPP talks, this source said.

Marantis and Weisel will be in Malaysia next week as part of a trip to South and Southeast Asia. They will first stop in Indonesia July 25-26, and will then travel to Malaysia July 26-28 before finishing their trip with a stop in India July 28-30, according to a U.S. trade official.

"Malaysia is considering whether to join the TPP, and we would expect to discuss the status of their domestic deliberations," the U.S. trade official said.

Malaysia has already publicly signaled its interest in joining (Inside U.S. Trade, April 16), and Malaysian Prime Minister Najib Tun Razak is personally keen to have his country join the talks. The Malaysian cabinet will likely take a formal position prior to the meeting between the trade minister and USTR officials next week, the informed source said.

The Malaysian government is performing a cost-benefit analysis of an eventual TPP agreement, focused on various sensitive areas for Malaysia like financial services and government procurement. Malaysian officials are also considering how the TPP agreement would fit into Malaysia's broader economic strategy, this source said.

For instance, officials are examining the agreement's compatibility with Malaysia's five-year plan to modernize the economy, unveiled in June. They are also examining how it would relate to the draft New Economic Model proposed last March by the nation's National Economic Advisory Council, this source said (Inside U.S. Trade, April 2). A key issue will be how Malaysia deals with affirmative action programs and investment restrictions meant to benefit the bumiputra ethnic Malay majority.

Along with the prime minister, the Malaysian trade minister and the ambassador in Washington, DC are both keen to have Malaysia join the TPP talks. However, this position has faced resistance in Malaysia from politicians wary of the effects of trade liberalization, one private-sector source said.

On the U.S. side, there is also interest. Senate Finance Committee Chairman Max Baucus (D-MT) said in July 21 speech that he hopes Malaysia joins TPP. "I hope and expect that the TPP agreement will expand to include additional countries like Malaysia. Since its independence in 1957, Malaysia's economy has grown by an average of nearly six and a half percent annually, doubling in size every eleven years. Malaysia, like Vietnam, demonstrates TPP's potential for U.S. exporters," he said.

If Malaysia were to formally decide to try to join the TPP negotiations, Malaysian officials would likely schedule a round of meetings with current TPP negotiating countries in order to address any concerns they may have, the informed source said. TPP negotiating members must agree by consensus on a new member joining the talks.

However, the process and timing under which Malaysia could actually join the ongoing negotiations remains unclear, this source said. Other sources this week said Malaysia could likely not formally join the talks until sometime next year, although one said it is unclear if Malaysian officials could observe negotiating rounds this year.

These sources said that, while it is no longer formally required to do so, and even though the U.S. already started, but never concluded, bilateral FTA negotiations with Malaysia, USTR may still follow the consultation procedures under the fast-track law, which expired in 2007.

Under that law, an administration could not begin new trade negotiations until 90 days after it had given notice to Congress. USTR followed this expired requirement for talks with the other TPP members.

Coupled with the need for Malaysia to consult with other TPP negotiating partners and express its formal intention to join the talks, these fast-track procedures would likely mean that Malaysia would not be in a position to join until next year, when TPP partners hope to hold five round of negotiations, sources said.

The U.S., Australia, Chile, New Zealand, Singapore, Brunei, Peru and Vietnam have already held two formal rounds of negotiations, with a third formal round to be held in October in Brunei. In addition, an inter-session meeting will take place next month in Peru to discuss the issue of market access.

Malaysia is still reviewing comments from stakeholders on the draft New Economic Model, which could ultimately address many of the issues that caused the U.S.-Malaysia FTA negotiations to be suspended in 2007, including affirmative action quotas for native ethnic Malays and caps on foreign direct investment.

The Malaysian government is still hammering out the details of the New Economic Model. However, that review process could conclude as early as next month, meaning that more details would be available, the informed source said.

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Item 3

According to the US Trade Representative office (http://www.ustr.gov/about-us/press-office/blog/2010/july):

Ambassador Marantis Discusses U.S.-Malaysia Economic Relations in Kuala Lumpur

07/28/2010 2:11 PM

Deputy USTR Demetrios Marantis held a second day of meetings today in Kuala Lumpur and Putrajaya, Malaysia, to discuss U.S.-Malaysia economic relations and related issues. He met with Ministry of Finance officials to discuss Malaysia's government procurement policy. He also met with the Ministry of Agriculture officials to discuss bilateral trade issues, including Malaysia's new halal requirements and their potential impact on U.S-Malaysia trade. In addition, Ambassador Marantis conducted an in-depth seminar with members of the Malaysia Institute of Strategic and International Studies, on U.S. trade policy, including the National Export Initiative, U.S.-Malaysia trade, and the Trans-Pacific Partnership.

Ambassador Marantis Meets with Government Officials in Kuala Lumpur, Malaysia

07/27/2010 1:46 PM

Deputy USTR Demetrios Marantis arrived in Kuala Lumpur Monday night for two days of meetings with Malaysian Government officials and business leaders. His government meetings on Tuesday -- with Bank Negara (Malaysia's central bank), the Ministry of Domestic Trade, and the Ministry of International Trade -- focused on Malaysia's planned market opening in the financial sector. U.S. Treasury Deputy Assistant Secretary Sharon Yuan and other Treasury Department officials joined him for those meetings. Ambassador Marantis also addressed implementation of Malaysia's new competition law and efforts to strengthen Malaysia's intellectual property regime. He updated his Malaysian Government counterparts on the Obama Administration's trade policy goals, including the Trans-Pacific Partnership. Ambassador Marantis also met with representatives of the American and Malaysian private sectors.

U.S. goods exports to Malaysia in 2009 were $10.4 billion. The top export categories in 2009 were electrical machinery, machinery, aircraft, optic and medical instruments, and iron and steel. U.S. goods and services trade with Malaysia totaled $47 billion in 2008.