WTO Trade Policy Review of Malaysia

WTO-TPRStatement by Mr. David Shark, Chargé d’Affaires, a.i.

January 25, 2010

Thank you, Chair.

The United States is pleased to greet the delegation of Malaysia and Secretary General Tan Sri Abdul Rahman Mamat of the Ministry of International Trade and Industry, who is leading the delegation. We also welcome Ambassador Harun and Senior Director Jayasiri of MITI’s Multilateral Division. We appreciate the reports that were prepared for this TPR, both by the government of Malaysia and by the Secretariat. We are also grateful to Ambassador Sun of China for his thoughtful contribution as our discussant this morning.

Malaysia is an important trading partner of the United States. It ranks as one of our top 15 trading partners, with two-way goods trade between us of more than $40 billion. Two-way trade in services adds another $3.3 billion. The accumulated stock of U.S. foreign direct investment in Malaysia is more than $13 billion, much of it in the manufacturing sector. We have a positive trade and investment dialogue on all fronts, and we are eager to continue working with Malaysia to broaden and deepen our economic relationship in the years ahead.

We recognize that the time period of this review has been a somewhat turbulent one for Malaysia, as it has been for many of us. After a long run of impressive growth, the global economic crisis and other factors – including fluctuating commodity prices – hit Malaysia’s export-led economy hard. Malaysia’s economy contracted in 2009, though we are pleased to learn from the Malaysian authorities that with the global economic recovery, Malaysia’s real economic growth is projected to rebound to a healthy 2-3 percent for 2010.

There have been significant and positive policy developments in Malaysia, despite the difficult macroeconomic environment. We note with interest that the government of Prime Minister Najib is embarking on a new economic model intended to shift from a reliance on a manufacturing base dependent on semi-skilled and low-cost labor to an economy centered on innovative services- and knowledge-based industries. This represents an important transition for Malaysia, which — if successful — will create a strong foundation for Malaysia to compete successfully regionally and internationally in the years ahead.

We commend the steps that Malaysia has taken to relax foreign investment restrictions in services such as investment banking, insurance, stock brokerages, and fund management. Recognizing the importance of the services sector for the Malaysian economy, and the government’s plans to increase services’ share of GDP to 60 percent by 2020, we would welcome an update from Malaysia’s delegation on any further plans that it may have for structural reform and market-opening in the services sector. We urge Malaysia to consider further liberalization in sectors where foreign equity restrictions remain and to extend the process of reform to sectors such as professional services where there have been few improvements.

There has been progress on intellectual property rights protection, including the creation of a dedicated intellectual property court in 2007. In addition, there have been creative efforts by the government to promote a greater awareness of the economic benefits of protecting intellectual property rights. These efforts are essential to the success of Malaysia’s efforts to build its innovative services- and knowledge-based industries. We would appreciate an update from the Malaysian delegation on its experience thus far with the courts as well as statistics on enforcement activity in 2008 and 2009.

Among the biggest challenges for Malaysia’s structural reform will come in sectors that have long been protected, such as automobiles, and on sensitive issues such as government procurement. In the automotive sector, recent reforms have been somewhat disappointing. The new automotive policy allows for the granting of new manufacturing licenses for luxury vehicles and hybrid electric vehicles, that is, only products that do not compete with national brands and are not currently made in Malaysia. The new policy also does not allow for imports of automotive products that compete with national champions such as Proton and Perodua; on the contrary, it retains the approved permit system for another ten years, effectively imposing quantitative restrictions for a broad class of motor vehicles until 2010. We urge Malaysia to take additional steps to promote structural reform, openness, and competition in this sector.

On import licensing, we welcome Malaysia’s phasing out of requirements for some tariff lines. Nevertheless, we remain concerned that Malaysia continues to expansively use non-automatic import licensing requirements across broad portions of its tariff schedule. The Secretariat Report says that these policies are sometimes intended to “regulate the flow of imports” and to “promote strategic industries.” We would appreciate further information from the delegation of Malaysia on the current scope of import licensing and the reasons why it continues to be necessary across so many products.

We would like to take a moment to acknowledge Malaysia’s engagement on its proposed conformity assessment regime for toys, which is much appreciated. The WTO Agreement on Technical Barriers to Trade calls for conformity assessment procedures to be based on relevant guides or recommendations issued by international standardizing bodies, where appropriate, and for their development to include opportunities for other Members to participate. Malaysia’s willingness to engage with us on this basis with respect to its toy safety regime is much appreciated. Specifically, we would like to acknowledge Malaysia’s recent decision to change the approach of its new conformity assessment regime from type approval to a more trade-facilitative approach based on suppliers’ self declaration of conformance.

We are pleased to note that Malaysia introduced advance customs rulings on classification and valuation in 2007. According to the Secretariat Report, your government is of the view that the advance notification of the rulings is helping with goods clearance and facilitating trade for the business community. We look forward to learning more about this change during the course of the TPR.

I would also like to emphasize that we continue to value our close work with Malaysia and our WTO partners to strengthen and build on the WTO’s rules-based and cooperative foundation. But more work is needed to reach a balanced and ambitious conclusion to the Doha Round. To achieve a Doha outcome that results in the global economic growth necessary to spur development, meaningful market-opening contributions will need to be made by all key players. Malaysia is an important and dynamic economy that stands to gain from new market access opportunities generated by the Round, particularly in advanced developing countries. We look forward to continuing our work with Malaysia and other Members to ensure these gains are realized.

In closing, the United States welcomes the progress Malaysia has made in reforming its trade regime and diversifying its economy over the past few years. These efforts are commendable, particularly given the global economic downturn and the pressure to respond to this uncertainty by imposing new barriers. We encourage Malaysia to continue its reform efforts, which will create a strong foundation for stable long-term growth, jobs, and higher living standards for its people.

We thank the delegation of Malaysia for its attention to our questions and for the answers provided, which we are reviewing, and we wish Malaysia a successful review. Thank you.