September 2006 update on the Australia-Malaysia Free Trade Agreement negotiations

MAFTA inter-sessional meetings were held in Canberra from 12 to 15 September 2006.  Discussions focused on goods, rules of origin, investment, intellectual property and economic cooperation.  Malaysia provided a senior team of negotiators comprising 25 officials from various Ministries and Departments.

Both countries had tabled initial tariff offers at their last meeting in July.  The September inter-sessional meeting provided an opportunity to comment on the offers and begin the process of identifying areas where they could be improved.  It was agreed that the two sides will exchange further information on their priorities for improvements in the offers for consideration at the next meeting.  Australian officials will be seeking further input from industry to assist this process.

Australia sought further information on Malaysia’s import licensing system noting it could impede the market access brought about by reducing import tariffs.  There were a number of products of interest to Australia where import licensing could pose a problem.  There were useful discussions on the automotive sector where both sides see significant complementarities in our respective trade interests.  This included Malaysia’s current excise duties on automotive products which will be further addressed at the next meeting.

There was continued progress on drafting the texts of the various chapters of the FTA related to trade in goods, including those relating to: Customs Procedures; Standards, Technical Regulations and Conformity Assessment Procedures; and Sanitary and Phytosanitary Measures.  Both sides agreed on the importance of these Chapters to the overall benefits of the FTA.

Discussions on rules of origin were fruitful with movement to a single, square-bracketed text.  There are a number of differences which will need to be resolved.  Concerns on consignment related to avoiding abuse of the system while allowing current business practices to be recognised.  The meeting also considered Australia’s draft proposals for the product-specific rules based on the Change in Tariff Classification approach.  We intend to arrange meetings with Australian industry to discuss the proposals.

There was a very productive exchange on intellectual property (IP) issues, with areas of difference continuing to narrow.  The meeting also provided the opportunity for the Malaysian delegation to attend useful side meetings with counterparts.  The meeting hosted by IP Australia focused on trade mark issues, while the meeting hosted by the Attorney-General’s Department provided an opportunity for a useful exchange on approaches to IP enforcement.

Malaysia was very engaged in discussions on investment.  We are working through a number of issues affecting the scope of an investment chapter, including coverage of investment in services (mode 3) and portfolio investment, and have settled or are close to settling several standard post-establishment protection provisions.  While we have yet to agree on a common approach to scheduling commitments, Malaysia has shown some interest in our preferred “two annex” negative list approach (used in AUSFTA and SAFTA), which we consider provides a more predictable, transparent and “business friendly” approach to scheduling.

Malaysia continued to underscore the importance of a separate chapter on economic cooperation.  Malaysia has tabled a number of proposals, some of which have merit and we are seeking to advance, but not necessarily under the auspices of the FTA.  Australia has expressed reservations about the inclusion of a stand-alone economic cooperation chapter in MAFTA, noting that such cooperation could best be facilitated by already existing mechanisms, or included under the relevant chapters in the Agreement.