Malaysia FTA on fast track
National Business Review, New Zealand
Malaysia FTA on fast track
31 March 2005
The government wants to fast track a newly emerged free trade agreement proposal with Malaysia, getting it done within a year.
Prime Minister Helen Clark said today that Malaysia and New Zealand wiould begin negotiations on a free trade agreement "as soon as possible.}
Malaysian Prime Minister Abdullah Badawi, who is visiting New Zealand, met Helen Clark today. Prime Minister Abdullah Badawi was later joined by the five Malaysian ministers accompanying him for discussions with the New Zealand Cabinet.
The announcement follows studies in both New Zealand and Malaysia on the benefits of an FTA. New Zealand’s study concluded that the two economies are complementary and that such an agreement would benefit the people and economies of both countries.
"We both have strong and relatively open economies, but there is scope for improvement particularly in the services sector and with investment flows,’ Helen Clark said.
"An ambitious and forward-looking bilateral trade agreement with Malaysia will provide impetus to the free trade negotiations that New Zealand, together with Australia, has launched with the ten ASEAN countries."
"The ASEAN/Australia/New Zealand agreement, when concluded, will encompass more than 500 million people.
"It should help strengthen the economies of all twelve countries involved, including those less developed countries in ASEAN whose economic advancement is important for the prosperity of our region," she said.
Malaysia is New Zealand’s largest ASEAN trading partner and New Zealand’s tenth largest trading partner globally.
Two-way trade in goods between New Zealand and Malaysia is worth over $1.2 billion a year, the government said, with Malaysia supplying petroleum and electric and electronic goods.
Malaysia also exports timber and furniture and a variety of agricultural commodities and prepared foods.
New Zealand’s main exports to Malaysia are dairy products, high quality meat and other foods.
Helen Clark said aspects of this trade are reflected in investment patterns: Malaysia is a major investor in New Zealand forestry; New Zealand has invested in the Malaysian dairy sector.
"There is scope to broaden and deepen our economic partnership.
"The agreement to launch negotiations towards an FTA should result in a greater opportunities for both sides to build our already good business links and to open new horizons, she said.
Meat & Wool New Zealand Chief Executive Mark Jeffries welcomed the announcement, saying an FTA would deepen existing trade relationships.
In 2004 exports of sheepmeat, beef and wool totalled approximately $78 million or 15 per cent of New Zealand’s total exports to Malaysia.
Malaysia is New Zealand’s second largest market for beef offals and eighth largest market for beef by value.
New Zealand is also the main supplier of sheepmeat to Malaysia.
New Zealand high quality meat cuts supply the Malaysian hotel and restaurant trade, while other meat products are imported for further processing. Bilateral trade in wool products is currently small but has shown recent rapid growth, Mr Jeffries said.
The Dairy Companies Association of New Zealand (DCANZ) was similarly enthusiastic.
"With Malaysia being New Zealand’s main trading partner within the Association of South East Asian Nations (ASEAN), and one of the top ten markets for New Zealand dairy products in the world, we strongly support building a closer economic relationship with them," DCANZ Chairman Earl Rattray said.
Mr Rattray said that although multilateral trade liberalisation remained DCANZ’s foremost objective, bilateral negotiations could also deliver useful benefits.
"While Malaysia’s tariffs on dairy imports are low by world standards, we would like to see them go to zero to improve the competitiveness of New Zealand-origin product. Moreover an FTA can significantly improve the in-market business environment by aligning our policies and practices in areas such as regulation and standards," he said.
Malaysia is the largest market for New Zealand’s dairy products in the South East Asia region. Dairy products represent around half of New Zealand’s total exports to Malaysia.
Malaysia has a large milk recombining and processing industry, supplying both local and overseas markets, which relies on imported dairy ingredients.
There were voices raised in opposition, however.
The Greens said the government had no business negotiating a favourable trade deal with a country that "has no minimum wage, refuses to protect their workers’ right to organise, allows discrimination in the work place, and supports forced labour."
"By opening the door to more Malaysian imports without requiring Malaysia to ratify these conventions, the Labour Government is undermining the status of New Zealand workers and the viability of New Zealand businesses.
"A Malaysian free-trade deal is yet another example of the Government favouring primary exporters over manufacturing workers. It’s one thing to pick winners, but doing it at the expense of other sectors of the economy is cruel and callous," said Green Co-Leader Rod Donald.
New Zealand has had a trade deficit with Malaysia since 1997. Last year it was a record $316 million, he noted.
According to New Straits Times, Malaysia and India are also set to sign an FTA within a year — most likely before the end of 2005.
