C O N F I D E N T I A L SECTION 01 OF 02 KUALA LUMPUR 001643

SIPDIS

SIPDIS

STATE PASS USTR FOR B. WEISEL AND J. JENSEN
COMMERCE FOR 4430/MAC/EAP/J. BAKER
TREASURY FOR OASIA
GENEVA FOR USTR

E.O. 12958: DECL: 09/01/2016
TAGS: ETRD EFIN EINV MY WTO
SUBJECT: USTR SCHWAB MEETINGS WITH MALAYSIAN POLICYMAKERS

Classified By: Chrage' David B. Shear for reasons 1.4 (b & d).


1. (C) Summary: Malaysian Cabinet ministers assured USTR
Schwab that they understood U.S. objectives for the FTA and
that the Malaysian government remains committed to the
negotiations. MITI Minister Rafidah conceded no ground on
the key substantive issues that have surfaced so far, but
acknowledged Schwab's position that the agreement needs to be
comprehensive. While uncomfortable with using a "negative
list" for services, she yielded to Schwab's insistence on
this approach. Minister Rafidah expressed frustration with
media and NGO criticism of the FTA and observed that some of
her public statements were necessary to deal with political
pressures she is facing. Schwab and Rafidah also discussed
the Doha Round and Schwab's ideas for reviving these
negotiations. End Summary.


2. (U) U.S. Trade Representative Ambassador Susan Schwab
visited Malaysia August 23-26 for the ASEAN Economic
Ministerial (AEM) Meeting. Outside the AEM she engaged in a
series of meetings with Malaysian Cabinet ministers,
including two meetings with Minister of International Trade
and Industry (MITI) Rafidah Aziz, Malaysian and American
business representatives, and local labor leaders. She also
visited Penang, where she met with Chief Minister Koh Tsu
Koon and representatives of U.S. businesses with facilities
there.


3. (U) USTR Schwab's calls on Malaysian policymakers focused
on our negotiations on a bilateral free trade agreement
(FTA). She was accompanied on all her ministerial calls by:
Ambassador Christopher Lafleur, Assistant USTR Barbara
Weisel, USTR Chief of Staff Timothy Keeler, USTR Press
Advisor Sean Spicer, and Economic Counselor Colin Helmer
(notetaker).

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Ministers Affirm Commitment to FTA Negotiations

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4. (C) USTR Schwab met with most of Malaysia's top economic
policymakers, including Deputy Prime Minister Najib Tun
Razak, MITI Minister Rafidah, Finance Minister II Nor Mohamed
Yakcop, Minister of Domestic Trade and Consumer Affairs
Shafie Apdal and Bank Negara Governor Zeti Akhtar Aziz. In
all her meetings, Ambassador Schwab stressed how the FTA is
consistent with and supportive of Malaysia's economic
development plans. She suggested that we have a common view
of the ultimate outcomes we want to achieve in the FTA, and
that the negotiations thus should be largely about the scope,
sequencing and pace of implementation.


5. (C) All of the Malaysian ministers deferred to MITI
Minister Rafidah on the details of the negotiations, but
assured USTR Schwab that they understood U.S. objectives for
the FTA and that the Malaysian government remains committed
to the negotiations. DPM Najib noted the FTA is "a very good
opportunity for us." He observed that Malaysia "wants to be
seen as investor friendly" and that "as a small country we
need to do more to get on the radar screen." Ambassador
Schwab assured him that the FTA "would provide a spotlight
for the business community."

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Rafidah Talks Tough, But Says It's For the Gallery
-------------- --------------


6. (C) Taking her customarily tough line, Minister Rafidah
conceded no ground on the key issues that have surfaced so
far in the negotiations. However, in response to Ambassador
Schwab's comment that "everything has to be on the table, but
not everything has to change," Rafidah acknowledged the need
for a comprehensive agreement. Rafidah also acceded to the
use of a negative list for services -- a point Schwab
stresseded as "a deal breaker" for the U.S. -- but clearly
was uncomfortable with this type of approach. She and Schwab
discussed alternatives for using some term other than
"negative list," but she did not appear satisfied with any of
the options suggested. Schwab set milestones of exchanging
market access offers in the third round and having a second
exchange of offers before the fourth round. She also called
for agreement on a bracketed text in the third round.
Rafidah acknowledged Schwab's targets.


7. (C) Rafidah complained at length about the pressure she is

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getting from the media and anti-globalization NGOs. "They
don't want to understand," she said, "they just want to fuel
the fire." She also complained about former-Prime Minister
Mahathir, saying "the same source that is the problem with
Singapore is going to be a source of problems with the U.S.
(FTA)." Referring to some of her own public comments on the
FTA she said "the pressure sometimes makes you do things you
don't want to do." She assured Schwab that "I think we are
like minded. Our officers need to be more practical when it
comes to the details."

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Discussion of Doha
--------------


8. (C) Ambassador Schwab urged Rafidah to come to a meeting
of the Cairns Group in Australia next month, not for the
formal discussions but for conversations on the Doha Round
that will be held on the margins. Schwab observed that the
current negotiating structure has broken down and that
something needs to replace it. Rafidah agreed with Schwab
that Indian Minister Kamal Nath is a big part of the problem
and complained about her own dealings with him. Schwab
proposed that a group of "open minded, not necessarily like
minded" parties get together to discuss Doha outside the
usual channels. Rafidah said she liked the idea of getting a
small group together to "grapple with the numbers" and would
look into whether she could come to Cairns.


9. (SBU) USTR has cleared this message.

SHEAR