Malaysia and the uruguay round of negotiations

MALAYSIA AND THE URUGUAY ROUND OF NEGOTIATIONS MICHELA ASTUTO (M.A. NUS) A THESIS SUBMITTED FOR THE DEGREE OF Ph.D SOUTHEAST ASIAN STUDIES PROGRAMME NATIONAL UNIVERSITY OF SINGAPORE 2009 i ACKNOWLEDGEMENTS I wish to express my profound appreciation and gratitude to the following persons and institutions: Associate Professor Goh Beng Lan, Head, Southeast Asian Studies Programme; Associate Professor Natasha Hamilton-Hart, for her valuable comments and constant guidance as my supervisor; Professor Chua Beng Huat, for his kind encouragement; Ambassador Sylvia Ostry, Centre for International Studies, University of Toronto for helping me at a very critical stage; The National University of Singapore for providing me with a scholarship which has enabled me to conduct this study; The Malaysian Institute of Economic Research, and Professor Mohamed Ariff in particular, for the welcome provided and the help extended to me; The Institute of Strategic and International Studies-Malaysia for generously granting me access to its library. The very helpful staff of the Southeast Asian Studies Programme; The very collaborative staff of the NUS libraries; My family and friends. ii TABLE OF CONTENTS ACKNOWLEDGEMENTS II TABLE OF CONTENTS III SUMMARY VI LIST OF ABBREVIATIONS VIII LIST OF TABLES XI CHAPTER 1: INTRODUCTION 1) RESEARCH PROBLEM 2) THE INTERNATIONAL TRADING SYSTEM IN THE EIGHTIES 3) THE GATT PRINCIPLES 4) ASEAN AND THE LAUNCHING OF THE ROUND 5) MALAYSIA 13 6) SUMMARY OF THE ARGUMENT OF THE RESEARCH 16 7) LITERATURE REVIEW 17 8) 26 SOURCES 9) OUTLINE OF THE WORK 27 CHAPTER 2: MALAYSIA’S NEGOTIATING POSITIONS 1) INTRODUCTION 31 2) AGRICULTURE 32 3) TEXTILES AND CLOTHING 46 4) SPECIAL & DIFFERENTIAL TREATMENT 52 5) SAFEGUARDS AND EXCEPTIONS 57 6) DISPUTE SETTLEMENT PROCEDURES 67 7) TRADE IN SERVICES 69 8) TRADE-RELATED INTELLECTUAL PROPERTY RIGHTS (TRIPS) 76 9) TRADE-RELATED INVESTMENT MEASURES (TRIMS) 83 iii CHAPTER 3: THE OUTCOME OF THE ROUND 1) INTRODUCTION 90 2) AGRICULTURE 93 3) TEXTILES AND CLOTHING 101 4) TARIFFS 103 5) SAFEGUARDS AND EXCEPTIONS 105 6) DISPUTE SETTLEMENT PROCEDURES 109 7) SERVICES 110 8) TRIPS 112 9) TRIMS 114 10) THE OUTCOME FOR MALAYSIA 115 CHAPTER 4: EXTERNAL FACTORS 1) INTRODUCTION 124 2) AFTER THE TOKYO ROUND 126 3) GLOBALIZATION 130 4) OLD AND NEW PROTECTIONIST POLICIES 133 5) THE ‘NEW REGIONALISM”: SAFETY IN NUMBERS? 159 CHAPTER 5: MALAYSIA’S PARTICIPATION IN BARGAINING COALITIONS 1) INTRODUCTION 166 2) ASEAN 169 3) THE CAFÉ’ AU LAIT COALITION 182 4) THE CAIRNS GROUP 189 5) THE APEC AND THE EAEG 196 6) CONCLUSION 209 iv CHAPTER 6: MALAYSIA’S TRADE POLICY-MAKING 1) INTRODUCTION 211 2) POLITICAL LEADERSHIP 212 3) THE FORMAL STRUCTURE 224 4) BRINGING IN THE PRIVATE SECTOR 241 5) CONCLUSION 255 CONCLUSION 1) MALAYSIA AND THE URUGUAY ROUND 258 2) AFTER THE NEGOTIATIONS 262 BIBLIOGRAPHY 267 v SUMMARY This research aims at examining Malaysia’s participation in the Uruguay Round of trade negotiations. Participation has many aspects. First, Malaysia had to decide if active participation was in its best interest. Second, the government had to determine priorities and specific negotiating positions. It was then necessary to provide Malaysian negotiators with reliable information, human and financial resources and the flexibility to adjust to the challenges arising from the negotiating process. Finally, Malaysia had to choose its partners and allies in order to achieve at least some of its negotiating goals. This research has shown that the outcome of the Uruguay Round was reasonably positive for Malaysia. The final act by and large reflected Malaysian negotiating positions. In the majority of the models used to predict or measure the impact of the round on world economies, Malaysia figures among the countries which benefited the most. This study argues that this favorable outcome was not the product of some ‘luck’ or benevolence on the part of other participants. The Malaysian government took a clear decision to participate in the talks in order to create a more stable, predictable and rule-based international trading system. It supported the launch of the Round, and entered coalitions of like-minded nations to get the negotiations started and to have a say on the agenda. At home, the government enhanced cooperation between the public and private sectors in order to gather reliable information and to reassure the domestic business community about its intentions. vi Malaysia used significant resources during the round to elaborate proposals and to make concessions, and determined to implement the agreements as swiftly as possible. Chapter introduces the research problem and the outcome of the study. The negotiating agenda of the Uruguay Round is considered in Chapter 2. First, market access problems such as trade in agriculture and textiles and clothing, and safeguards as well as systemic issues such as Special and Differential Treatment for developing countries and dispute settlement procedures are examined. Second, the ‘new issues’ of services, intellectual property rights and investment measures are described. In Chapter 3, the final agreements are analyzed. The Malaysian perspective on the outcome of the Uruguay Round is the subject of the third section of the chapter. Chapter is devoted to the description of the international environment before and during the trade negotiations. In Chapter Malaysian foreign policy strategy adopted during the Round is presented. The Malaysian government and its ASEAN partners joined several coalitions during the negotiations. The Malaysian trade-policy making system is the object of Chapter 6. The Conclusion introduces some of the criticisms leveled at the outcome of the round by some Malaysian observers. It also presents some of the new issues that industrial countries wished to include in the WTO work program. The attempts to link trade policy to non-trade objectives is one of the factors that caused a change in Malaysia’s stance towards the WTO, shifting from a position of ‘friend of the negotiations to one of developing country ‘hardliner.’ vii LIST OF ABBREVIATIONS ACP African, Caribbean and Pacific group AD Anti-dumping ADB Asian Development Bank AFTA ASEAN Free Trade Area AMS Aggregate Measure of Support APEC Asia-Pacific Economic Cooperation BOP Balance of payments CAP Common Agricultural Policy (of the EEC/EU) c.i.f. cost, insurance, and freight CSCAP Council for Security Cooperation in the Asia Pacific CVD Countervailing duty DSB Dispute Settlement Body (of the WTO) EAEC East Asian Economic Caucus EAEG East Asian Economic Group EC European Community (1991) EEC European Economic Community (1958) EFTA European Free Trade Association EPU Economic Planning Unit EPZ Export Processing Zone ERP Effective Rate of Protection EU European Union (1993) viii FDI Foreign direct investment f.o.b. free on board FTA Free Trade Area FTZ Free Trade Zone GATS General Agreement on Trade in Services GATT General Agreement on Tariffs and Trade GSP Generalized System of Preferences GDP Gross domestic product ICA International Commodity Agreement ILO International Labour Organization IMF International Monetary Fund IMP Industrial Master Plan INRA International Natural Rubber Agreement IP Intellectual Property IPC Integrated Program for Commodities IPRs Intellectual Property Rights MFA Multifibre Arrangement MFN Most Favorite Nation MICCI Malaysian International Chamber of Commerce and Industry MITI Ministry of International Trade and Industry MTN Multilateral trade negotiations NECC National Economic Consultative Council NEP New Economic Policy ix NICs Newly Industrializing Countries NIEO New International Economic Order NGO Non-government organization NTB Non-tariff barrier NTM Non-tariff measure NAFTA North American Free Trade Agreement OECD Organization for Economic Cooperation and Development OMAs Orderly Marketing Arrangements PBEC Pacific Basin Economic Council PECC Pacific Economic Cooperation Council (formerly Pacific Economic Cooperation Conference) QRs Quantitative Restrictions R&D Research and development RIA Regional integration agreement S&D Special and differential treatment (for developing countries) SPM Sanitary and phyto-sanitary measure TPRM Trade Policies Review Mechanism (of the WTO) TRIM Trade-related investment measure TRIPS Trade-relate intellectual property rights UNCTAD United Nations Conference on Trade and Development VER Voluntary export restraint WIPO World Intellectual Property Organization WTO World trade Organization x Bhagwati, Jagdish and Mathias Hirsch. 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London: MacMillan. 284 [...]... history of the Uruguay Round and the negotiations that paved the way to its launching see Croome John (1999), Reshaping the World Trading System The Hague: Kluver Law International Chapter 5 examines the role of Malaysia and ASEAN played in the negotiations to include the new issues in the Uruguay Round agenda 15 6) SUMMARY OF THE ARGUMENT OF THE RESEARCH AND MAIN FINDINGS This research has shown that the. .. fact, the Uruguay Round was launched because of the efforts of an alliance of smaller trading nations, the Cafe’ au Lait coalition The influence of such coalitions was greater in the pre-launch phase and during the first years of the negotiations The inclusion of the agricultural sector in the agenda of the round was made possible by the pressure exerted by the Cairns Group It is, therefore, strategically... issues to the Bonn Economic Summit.” 30 The ASEAN communiqué did not hide the disappointment of its members with the outcome of the Bonn Summit, and stated that the foreign ministers “felt that the concern of ASEAN and the other developing countries had not been adequately dealt with.” 31 The support of the Southeast Asian nations for the new round was motivated by a common concern for the state of international... outcome of the Uruguay Round was reasonably positive for Malaysia The final act by and large reflected Malaysian negotiating positions In the majority of the models used to predict or measure the impact of the round on world economies, Malaysia figures among the countries which benefited the most This study argues that this favorable outcome was not the product of some ‘luck’ or benevolence on the part of. .. 7 It is noteworthy that the first government to publicly ask for the start of preparations for a new round of multilateral trade negotiations was the Japanese government at the end of 1983 8 For a review of the trade policies of the industrialized countries in the 1970s and early 1980s, see Lydia Dunn et al., (1983), In the Kingdom of the Blind: A Report on Protectionism and the Asian-Pacific Region,... redistribution of economic opportunities as the principal reason for the preference accorded to foreign investors by the Malay ruling elite 58 The difficult relations between the state and the Chinese business community are the subject of many studies; Sieh-Lee Mei Ling in The Transformation of Malaysian Business Groups” gave a critical account of the marginalization of the Chinese business in Malaysia and the. .. only instrumental for the actual launching of the negotiations, but also enabled them to submit a common agenda at the ministerial meeting in Punta del Este in 1986, when the Uruguay Round was eventually launched In the statement by the Malaysian Minister of Trade and Industry, presented on behalf of ASEAN at Punta del Este, the Southeast Asian nations asked for the establishment of a special negotiating... countries, including Malaysia, had not fully participated in the previous rounds of multilateral trade negotiations The Uruguay Round saw the active participation of many developing countries and, more importantly, their governments accepted to engage in reciprocal exchanges of concessions with the other GATT contracting parties In 1986, when the Uruguay Round was launched, it was agreed that the outcome was... the start of a new round of trade negotiations France had openly opposed the setting of a date and this setback had put the American administration under growing pressure from the protectionist-oriented Congress Although there was still some optimism about the possibility of launching of the round in 1986, the pessimists would point to the difficulties that France could cause to its EEC partners, and. .. noted earlier, the Malaysian government had ambitious plans for the economic transformation of the country It was also politically necessary to maintain a rate of growth that could allow for the continuation of the New Economic Policy The recession of the early 1980s had put into question its sustainability In Ethnicity and the State, Jesudason described the role of the NEP and its goals of ethnic redistribution . Chapter 3, the final agreements are analyzed. The Malaysian perspective on the outcome of the Uruguay Round is the subject of the third section of the chapter. Chapter 4 is devoted to the description. during the negotiations. The Malaysian trade-policy making system is the object of Chapter 6. The Conclusion introduces some of the criticisms leveled at the outcome of the round by some Malaysian. during the first years of the negotiations. The inclusion of the agricultural sector in the agenda of the round was made possible by the pressure exerted by the Cairns Group. It is, therefore,