Malaysia urged to diversify trade pacts beyond Asean
September 13 2006
MALAYSIA should diversify its trade agreements beyond its traditional trading bloc in the Asean region and focus on expanding liberalisation of trade policies to enhance its competitiveness in global trade.
Executive director of the Malaysian Institute of Economic Research (MIER), Professor Mohamed Ariff, said Malaysia should not rely on trade within the Asean or Asean Free Trade Agreement (AFTA) alone but look for new markets to increase opportunities globally.
"Exploration of new markets in Brazil and expansion of trade with India are some of the new trade opportunities," he said during the 8th Annual Conference of the Economic Freedom Network Asia seminar in Kuala Lumpur yesterday.
He reiterated that trade should not be excluded and concentrated solely on one member country, as trade practices showed that with market forces, more countries would have to open up, pursue bilateral free trade agreement (BFTA) and liberalise their trade policies.
"The fact, however, remains that the proliferation of bilateral free trade agreement (BFTA) seen today is a very new phenomenon," he said.
"It was Singapore that set off the current trend by signing a BFTA with Japan, with others subsequently joining the bandwagon," he said.
Mohamed Ariff said the opportunity cost for Malaysia for not signing a similar agreement, as Singapore enters into one or more bilateral deals, would be very high. The country runs the risk of losing its export market share to Singapore, he said.
"The prospect of Asean member countries individually pursuing bilateral trade deals with third parties, and their implications for Asean as a grouping are frighteningly serious," he said.
"For starters, it will weaken Asean’s regional solidarity. It will also allow third countries to take on Asean members one by one and extract deals that would tilt the scale in their favour," he elaborated.
"BFTA offers a fast track. The problem, however, is that they are all by design discriminatory, trade-distorting, messy and cumbersome," he said.
However on a positive note, he added that BFTA often went beyond trade matters into other areas including good governance, capacity building and development cooperation.