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I. STATE OF THE ENVIRONMENT IN MALAYSIA
[ I-A | I-B
| I-C ]
B. Overview of national development policies
[ B-1 | B-2
| B-3 | B-4 | B-5
]
4. Trade policy
Malaysia has a very open and outward-oriented economy. The share of international
trade in the GNP is relatively high by developing country standards, accounting
for 190 per cent of national income (GNP) in 1994. The trade regime of
Malaysia is fairly liberal, with the trade-weighted tariff for industrial
products having been reduced from 10.2 per cent in the pre-Uruguay Round
period to 8.9 per cent as a result of the Uruguay Round. Malaysia's participation
in trade policy regimes is both at the global and regional levels. At the
global level, Malaysia is a signatory to the General Agreement on Tariffs
and Trade (GATT) which was replaced by the World Trade Organization (WTO)
on 1 January 1995. Malaysia is a founding member of WTO. At the regional
level, Malaysia is a member of the ASEAN (Association of South East Asian
Nations) Free Trade Area (AFTA). Those two formal trade regimes govern
international trade by Malaysia; since Malaysia is an outward-oriented
economy, they are important to the overall performance of the Malaysian
economy.
Malaysia is also a member of the Asia Pacific Economic Cooperation (APEC)
forum which groups 18 Pacific rim countries in a trans-Pacific grouping.
Although not an explicit trading regime which stresses development cooperation
as well as trade facilitation programmes, trade and investment liberalization
matters currently constitute a major agenda of the grouping. In addition,
ASEAN members agreed in 1993 to implement the East
Asia Economic Caucus (EAEC) as a caucus within APEC. The caucus will focus
on economic cooperation within the region as well as on international economic
matters, including international trade, which have direct implications
for caucus members. EAEC is also expected to focus on trade and investment
liberalization issues, including the WTO work programme. EAEC is a Malaysian
initiative, and reflects Malaysian desire to present a united East Asian
voice against what it sees as the worrisome trend in the world trade body
to link trade with environmental and labour/social issues. Malaysia perceives
such efforts as attempts by developed countries to reduce the competitiveness
of East Asian countries as well as developing countries in other regions.
AFTA will be implemented via the Common Effective
Preferential Tariff (CEPT) scheme, with tariffs rates in the manufacturing
and agricultural sectors expected to fall to 0-5 per cent by 2003. AFTA
was originally scheduled to be completed by 2008 and to cover manufactured
and processed agricultural products only. ASEAN members decided in September
1994 to fast-track the establishment of the free trade area and AFTA is
now expected to become a reality by 2003. In addition, ASEAN members widened
the scope of AFTA to include non-processed agricultural products in the
tariff reduction scheme as well as working on customs harmonization, the
reduction of non-tariff barriers, as well as work out an agreement on the
protection of intellectual property rights. The acceleration of the AFTA
programme and its expansion reflects ASEAN desire to demonstrate its commitment
to strengthening regional trade and cooperation as well as reaffirm group
support for trade liberalization.
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