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New Zealand and Malaysia are leading players in regional and global trade liberalisation and economic reform.
The familiarity and common understandings that have developed during a long history of working together in AFTA/CER, APEC and the WTO would underpin the negotiation of a bilateral FTA. At the same time, it would be important to ensure that an agreement supports rather than impedes future regional and multilateral liberalisation. Given the expansion of trade agreements in the Asia-Pacific region, it would also be important to take into account the compatibility of a New Zealand–Malaysia FTA with other agreements. Of particular importance is the ASEAN–Australia/New Zealand FTA, which is under negotiation, and other arrangements to which both countries are party.
At the same time as showing a commitment to regional and multilateral initiatives, bilateral trade agreements provide the opportunity for countries to explore innovative approaches that can serve as examples of good practice.
New Zealand and Malaysia are active participants in the AFTA/CER Closer Economic Partnership (CEP). Malaysia is a leader in economic reform and trade liberalisation in ASEAN. Through its work programme the AFTA/CER CEP provides the principal mechanism for achieving AFTA/CER's objective of increasing regional trade and investment flows.
The November 2004 decision at the Vientiane Summit by leaders of ASEAN countries, Australia and New Zealand that the 12 countries should negotiate an FTA will lift the AFTA/CER CEP from its current focus on trade facilitation and capacity building towards trade liberalisation and greater regional economic integration. In negotiating a comprehensive bilateral FTA, New Zealand and Malaysia could demonstrate the possible road forward for an ASEAN–Australia–New Zealand FTA. The experience and knowledge of each other's economies derived from negotiating an FTA should aid New Zealand and Malaysia in the regional FTA context.
New Zealand and Malaysia are both active members of APEC and subscribe to the APEC Bogor Goals of free and open trade and investment within the region by 2010 for industrialised economies and 2020 for developing economies.
In recent years there has been a proliferation of preferential trade agreements in the APEC region. New Zealand recognises the importance of being involved in such initiatives but also acknowledges the need to ensure that bilateral agreements ultimately contribute to the APEC principle of open regionalism. Establishing a comprehensive bilateral FTA would enable New Zealand and Malaysia to promote high standards for FTAs in the APEC region.
Achievement of the Bogor Goals is expected to generate significant benefits for member economies through improved trading conditions and technical cooperation. A bilateral FTA between New Zealand and Malaysia would bring forward some of those economic benefits. Gains would come from improved market access, business facilitation and greater efficiency in domestic production in both countries. Through early trade liberalisation in a bilateral FTA, New Zealand and Malaysian producers would have time to adjust, become more efficient and therefore be in more competitive positions to capitalise on future multilateral liberalisation.
APEC encourages cooperation among members in technical areas (eg. customs, business mobility, e-commerce, plant and animal health, food safety and standards). In a bilateral FTA such cooperation could be concentrated in areas of direct interest to New Zealand and Malaysia. An FTA should therefore look for opportunities for building on APEC principles of cooperation. Possible areas for consideration are outlined in Chapter Nine.
Both New Zealand and Malaysia are committed to a rules-based multilateral trading system: liberalisation through the WTO is the primary international trade policy objective. New Zealand believes that the greatest gains from trade liberalisation will accrue from successful multilateral negotiations. Successful conclusion of the Doha Round of negotiations is in the interests of both countries. A high-quality FTA between New Zealand and Malaysia could be expected to add impetus to the Doha negotiations.
Under the rules of the WTO, preferential trade agreements between members must be notified to the organisation. In order to ensure that such agreements support the multilateral liberalisation process, Article XXIV of the General Agreement on Tariffs and Trade requires that FTAs between members cover tariff removal on substantially all trade. Article V of the General Agreement on Trade in Services requires that agreements liberalising trade in services have substantial sectoral coverage. In the case of both goods and services, FTAs should not raise barriers to trade with non-members.
Comprehensive sector coverage offers the best assurance of bilateral preferential trade deals supporting rather than undermining multilateral trade liberalisation. As agricultural exporting countries, New Zealand and Malaysia cooperate closely in the Cairns Group of WTO members, presenting a common position in the agriculture negotiations. Liberalisation of agricultural trade is, however, one of the most sensitive and difficult issues in the Doha Round. A comprehensive bilateral FTA between New Zealand and Malaysia that includes agriculture would send a strong signal of the two countries’ commitment to real trade liberalisation and demonstrate the benefits of opening agricultural trade.
