Free trade agreements (FTAs) are intended to stimulate trade between countries by reducing or eliminating restrictions such as tariffs, quotas, special fees and taxes. Their purpose is to facilitate transactions and promote more business between the countries or areas based on comparative economic advantages that should allow both sides to benefit. Free trade agreements can help more businesses enter and compete in the global marketplace by leveling the international playing field.
FTAs can help strengthen business climates and encourage economic growth by allowing for greater competition. By reducing tariffs and duties, the agreements reduce the cost for businesses in each country to sell their goods and services in the partner country, making it more profitable for them to compete. This can lead to more choices of products and lower prices for consumers, especially when there are relative competitive advantages between the partners to the agreement.
In addition to reducing the cost of transactions between countries, free trade agreements break down other procedural barriers to international trade. The governments of each country adopt nondiscriminatory rules and regulations and more transparent procedures. Free trade agreements can include provisions to protect intellectual property rights, open up government procurement opportunities, and ease foreign investment rules. There are generally provisions for facilitating customs procedures, granting access to financial services, easing restrictions on the entry of foreign nationals for business trips, and dispute settlement. Free trade agreements can also promote labor rights and environmental protection, promoting overall social wellbeing.
The Malaysian government such as MPIC and MTIB is making continuous efforts to increase the global market share for the Malaysian timber and timber products.
The Trans-Pacific Partnership (TPP) is an FTA initiative involving twelve (12) countries:
viii. New Zealand,
xi. United States and
xii. Viet Nam.
The Government views the TPP as an important initiative as Malaysia seeks to expand market access opportunities, enhance our competitive advantage, builds investor confidence in the country which draws foreign investments and builds capacity through FTAs.
There is also interest from foreign companies in non-TPP countries that are increasingly exploring Malaysia as a base of their operations to enjoy the benefits of the TPP. In addition, there are Malaysian companies that export to the US and Canada who are increasingly interested to see the negotiations concluded, especially since the graduation of Malaysia from the list of countries that enjoy from the General System of Preferences (GSP).
The TPP will also allow Malaysia to continue to be an integral part of the deepening economic integration taking place within the Asia Pacific region, but also enable Malaysia to engage in a more concrete way important trading partners such as the US, Canada, Mexico and Peru, with which Malaysia currently do not have any structured framework, such as trade agreements. As a member of the TPP, Malaysia will also be able to participate as an important link in the whole regional supply chain
The objective of the negotiations is to develop an FTA agreement which will be able to adapt and incorporate current issues, concerns and interests. Working groups have been established in the following areas:
• Market Access;
• Technical Barriers to Trade;
• Sanitary and Phytosanitary Measures;
• Rules of Origin;
• Customs Cooperation;
• Non-Conforming Measures;
• Financial Services;
• Business Mobility;
• Government Procurement;
• Intellectual Property;
• Capacity building;
• Trade Remedies; and
• Legal and Institutional.
The TPP negotiations is currently ongoing
Malaysia-Australia Free Trade Agreement (MAFTA)
Entry into Force Of MAFTA
MAFTA was signed on 22 May 2012 and entered into force on 1 January 2013, after both countries have completed their necessary domestic procedures. MAFTA marks another important milestone in Malaysia – Australia economic relations. In addition to complementing the ASEAN-Australia-New Zealand FTA (AANZFTA), MAFTA will open up new market opportunities for both countries and enhance trade and economic relations between the two countries. The scope of commitments under the MAFTA provides a more liberal and predictable operating business environment.
Business Opportunities for Exports of Malaysian Products
Under MAFTA, Australia has eliminate tariffs on 100% on her products upon entry into force of the Agreement (1st January 2013).
Malaysian companies are encouraged to take advantage of the business opportunities created by MAFTA and step up their promotional and marketing efforts to gain a strong foothold in the Australian market. Malaysian products with export potential into Australia include:
• iron and steel products;
• plastic products;
• apparel and clothing;
• wood products of furniture, fixtures etc
• palm oil and palm oil related products;
• cocoa and cocoa products;
• food products; and
• automotive products.
Lower cost for imports from Australia
Under MAFTA, Malaysia has committed to progressive elimination of import duties on 99% or 10,295 tariff lines by 2020:
• Most tariff lines will be fully eliminated upon entry into force. This include products such as articles of iron and steel, automotive parts and components, as well as glass and glassware; and
• Import duty on 357 tariff lines will be progressively eliminated by 2020. This includes products such as fruits, chemicals and chemical products, automotive vehicles and upstream iron and steel products.
Malaysian companies importing raw materials and intermediate goods or inputs from Australia will be able to import with lower prices. This will enable them to reduce their cost of production and improve their competitiveness.