USTR SCHWAB MEETINGS WITH MALAYSIAN POLICYMAKERS

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). -------------- -- Ministers Affirm Commitment to FTA Negotiations -------------- -- ¶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." -------------- -------------- 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 KUALA LUMP 00001643 002 OF 002 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." -------------- 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