AUSTRALIA-MALAYSIA FTA TALKS: A PREVIEW OF

C O N F I D E N T I A L SECTION 01 OF 02 KUALA LUMPUR 000570

SIPDIS

SIPDIS

STATE PASS USTR FOR WEISEL AND JENSEN
USDOC FOR 4430/MAC/EAP/BISBEE AND BAKER


E.O. 12958: DECL: 03/29/2016
TAGS: ETRD EAGR KIPR EINV MY AU
SUBJECT: AUSTRALIA-MALAYSIA FTA TALKS: A PREVIEW OF
U.S.-MALAYSIA FTA NEGOTIATIONS

REF: A. 2005 KUALA LUMPUR 4374

B. 2005 KUALA LUMPUR 4048

Classified By: Ambassador Christopher J. LaFleur for reasons 1.4 (b) an
d (d)


1. (C) Summary: Australian trade officials negotiating an
FTA with Malaysia believe their negotiations are back on
track after a four month hiatus. Recent talks in Canberra
led to progress on a goods chapter, and Australia recently
reached agreement with Malaysia on halal certification of
Australian beef exports. Malaysia continues to resist
significant opening on services, however, particularly in the
financial services sector. Malaysia also continues to stymie
Australia,s attempt to negotiate an FTA chapter on
government procurement. As our FTA discussions with Malaysia
will soon be moving in tandem, we will continue to engage
with Australia to share our experiences. End summary.


2. (C) In a March 22 breakfast hosted by Australian High
Commissioner James Wise, Australian trade officials discussed
their ongoing efforts to secure an FTA with Malaysia.
Michael Mugliston, the Australian lead negotiator (he heads
the Asia Trade Task Force in the Australian Department of
Foreign Affairs and Trade),told the Ambassador and emboffs
that last week,s FTA round with Malaysia in Canberra (their
first formal round of negotiations since November) saw
significant progress in the goods sector, but less progress
on negotiating a services chapter. Australia,s target date
for completing the FTA has now slipped from mid-year to the
end of 2006.


3. (C) Mugliston said that Australia was pleased at the
increased level of Malaysian government participation in last
week,s round compared to earlier rounds. He noted, however,
that the absence of officials from Bank Negara and the
Finance Ministry, due in part to their participation in the
U.S.-Malaysia FTA rollout in Washington, precluded any
progress on financial services or government procurement.
Mugliston said that, even with the appropriate officials
present, Australia has not so far been able to persuade
Malaysia to make any meaningful movement in either sector.
Among the other service sectors of particular importance to
Australia are legal services and educational services, but
Malaysia so far has continued to impede greater market access
in these areas as well. Mugliston said that even after
several rounds Malaysian officials remain circumspect about
Australia,s negative list approach to the negotiations,
neither rejecting it outright nor clearly agreeing to it.


4. (C) Australia is pleased with recent progress on halal
rules on agriculture, in particular regarding beef exports to
Malaysia. Mugliston acknowledged that the personal interest
of Prime Minister Abdullah had spurred the GOM to reach an
agreement with Australia to certify Australian slaughtering
techniques as halal. Australia still seeks Malaysia,s
commitment in an FTA to transparency and consultations for
any similar problems in the future, but the religious aspect
would continue to make this issue a delicate one. Mugliston
noted that, as in the United States, Australia relied on
non-government Islamic centers to certify its
slaughterhouses, which limits the Malaysian government,s
ability to control the process.


5. (C) Mugliston said that Malaysia is pushing strongly for a
separate chapter in the Australia FTA on economic
cooperation. The GOA is not enthusiastic about including a
chapter in an area not directly related to trade and
investment (Mugliston said that for similar reasons Australia
does not seek chapters on environment or labor either).
Australia provides significant capacity building to Malaysia
already; Mugliston mentioned the example of an upcoming IPR
training session as one in a series that Australia is
organizing. Although Malaysia is happy to participate in
such programs, the GOM is resisting Australia,s push to
include a separate IPR chapter in their FTA. The Ministry of
Domestic Trade and Consumer Affairs has not proven to be a
responsive negotiating partner on IPR, he added.


6. (C) Mugliston,s current visit to KL concerns ongoing
negotiations to forge an FTA among Australia, New Zealand,
and ASEAN. He noted that negotiating a plurilateral
agreement among 12 countries was slow-going, but that
Australia nevertheless hoped to reach an agreement by
mid-2007, in part to present completion of an FTA while

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Australia holds the APEC chair. Mugliston was hopeful that,
given Australia,s existing FTAs with Singapore and Thailand
and its near-FTA with Malaysia (the three Southeast Asian
countries represent the bulk of Australian trade with ASEAN),
an ASEAN FTA by mid 2007 was not an unreasonable expectation.


7. (C) Comment: Australia,s FTA negotiations with Malaysia
continue to preview some of the challenges that the U.S. will
face as we begin our own negotiations with Malaysia. Our
discussion with Australia,s trade negotiators revealed a few
surprises, such as Malaysia,s reluctance to negotiate an IPR
chapter; we have not heard similar comments from Malaysia
regarding our proposal to include an IPR chapter. Malaysia
likewise has not raised with us a possible chapter on
cooperation, though we had developed a significant program of
such assistance through our Trade and Investment Framework
Agreement that preceded the launch of our FTA talks. We
would not be surprised if finalization of the
Australia-Malaysia FTA continues to slip and perhaps even
falls behind U.S. talks with Malaysia. With the
U.S.-Malaysia FTA taking up more of the GOM,s resources,
Malaysia may not feel the need to rush through an agreement
with Australia (which does not operate under a deadline, as
we do under TPA). As our FTA negotiations begin to move in
tandem, Embassy will continue to engage our Australian
colleagues regarding our shared experiences. End comment.
LAFLEUR