Japanese, Malaysia agree on trade deal

Japanese, Malaysia agree on trade deal

Mari Yamaguchi, Associated Press/Tokyo

Leaders of Japan and Malaysia on Wednesday agreed on key elements
of a free trade pact covering automobiles and most other sectors
of their economies, in what could boost Japan's share of
Southeast Asia's largest passenger care market, the Foreign
Ministry announced.

Japan's Prime Minister Junichiro Koizumi and his visiting
counterpart, Abdullah Ahmad Badawi, agreed on the economic
partnership during talks on Wednesday that followed an agreement
struck by their trade ministers last weekend in Kuala Lumpur.

The two leaders "confirmed that they have reached agreement in
principle on the major elements" of the free trade pact, the
Foreign Ministry said.

The free trade agreement is expected to be formally launched
in December.

After launching free trade talks in January last year, the two
countries reached a basic accord on agricultural and marine
products.

On Wednesday, they resolved remaining issues, including an
agreement to give Malaysia until 2015 to fully eliminate tariffs
on imported vehicles. Japan earlier had pushed for an earlier
date.

But Kuala Lumpur agreed to immediately remove tariffs on auto
parts for vehicles that Japanese automakers assemble in Malaysia
and on vehicles that do not compete with Malaysian models.

Malaysia currently imposes high import and excise duties on
imported cars to protect its national Proton and Perodua cars
from competition.

The two carmakers jointly control 74 percent of the auto
market in Malaysia, Southeast Asia's biggest passenger car
market.

Malaysia has recently lowered its tariffs for cars produced in
Southeast Asian countries, but other countries still face high
barriers.

The opening of Malaysia's auto industry would be welcome news
for Japanese automakers, which are reeling from increasing
competition not only from U.S. rivals but also Asian companies,
especially Hyundai of South Korea.

Japan estimates that a free trade agreement with Malaysia
would lift Japan's real gross domestic product by as much as 0.08
percent or about US$3.4 billion, according to a joint study by
Japan and Malaysia.

Under the agreement, Malaysia will also abolish tariffs on
steel products used for vehicles and household appliances. Japan
will immediately remove tariffs on mangos, mangosteens, durians,
papayas and rambutans, while setting an upper limit of 1,000 tons
per year on fresh bananas.