Consumers in Malaysia who have been counting the months to the opening of the Malaysian auto sector under the ASEAN free Trade Area (AFTA) agreement in 2003 will now have to add 24 months to that deadline. The decision to ask for an extension had already been announced at the end of last year by the Malaysian government which said that it needed extra time for its auto industry to recover from the severe effects of the recent recession.
On May 1st, ASEAN trade ministers who gathered in Myanmar for an informal round of talks gave the green light for Malaysia’s request to extend its deadline for the reduction of tariffs to between 0% and 5% for intra-ASEAN automobiles and related products.
The acceptance of Malaysia’s request appears to have been made grudgingly as members like Thailand had declared their unhappiness over the matter and even threatened reciprocal action by not allowing Malaysia’s palm oil exports in on the 0% – 5% basis. But Malaysia has also indicated its strong commitment to AFTA by having 60% of its product lines made tariff-free on January 1st this year, the most extensive of any of the members and 5 years earlier than the latest date agreed.
While Malaysia’s request was made under Article 6 of the AFTA Agreement signed in 1992 (extract of Article 6), the other ASEAN trade ministers want to review that provision which, according to meeting chairman George Yeo (Trade Minister of Singapore), “should be invoked only when the needs are clearly over-riding”. The structure of the exemption will be formulated before 32nd ASEAN Economic Ministers meeting in Thailand in October.
(Extract from AFTA Agreement signed in 1992)
Article 6: EMERGENCY MEASURES
1 . If, as a result of the implementation of this Agreement, import of a particular product eligible under the CEPT Scheme is increasing in such a manner as to cause or threaten to cause serious injury to sectors producing like or directly competitive products in the importing Member States, the importing Member States may, to the extent and for such time as may be necessary to prevent or to remedy such injury, suspend preferences provisionally and without discrimination, subject to Article 6 (3) of this Agreement. Such suspension of preferences shall be consistent with the GATT.
2. Without prejudice to existing international obligations, a Member State, which finds it necessary to create or intensify quantitative restrictions or other measures limiting imports with a view to forestalling the threat of or stopping a serious decline of its monetary reserves, shall endeavour to do so in a manner, which safeguards the value of the concessions agreed upon.
3. Where emergency measures are taken pursuant to this Article, immediate notice of such action shall be given to the Council referred to in Article 7 of this Agreement, and such action may be the subject of consultation as provided for in Article 8 of this Agreement.