EU, Malaysia aim to wrap up free trade talks by June 2012 despite controversial policy

Below is an article from our Affirmative Action Media Monitoring Project. These articles represent a wide variety of views. These views do not necessarily represent the views of AAPF but instead are intended to provide you with an overview of the current affirmative action debate.

March 14, 2011

KUALA LUMPUR, Malaysia (AP) – Malaysia and the European Union said Monday they hope to wrap up free trade talks by June 2012, an ambitious target amid sensitivities over Kuala Lumpur’s government procurement policy favoring ethnic Malays.

Trade Commissioner Karel De Gucht said the EU hopes to find a “win-win situation” to the Malaysian policy of awarding most state contracts to companies owned by the ethnic Malay majority under an affirmative action program. The policy has largely kept foreign companies from bidding for state contracts.

He said the trade pact will let Malaysian companies access a market of 500 million people and bid for more than 300 billion euros ($418 billion) worth of contracts in EU nations.

“Compromises will have to be made but … there are obvious advantages to Malaysia. The EU has a very open public procurement market. Over 300 billion euros are open for bidding. I think we can create a win-win situation,” Gucht told reporters.

Two rounds of talks have been held since December, with the third session slated in May in Brussels.

Malaysian Trade Minister Mustapa Mohamed said government procurement is a delicate subject as it involves billions of dollars. The two sides have different levels of development, which could put Malaysian firms at a disadvantage, he said.

Government procurement has so far been excluded from Malaysia’s free trade pacts with other countries including Japan, New Zealand and India. The thorny issue thwarted its talks with Washington, prompting Malaysia to instead join negotiations for an Asia-Pacific trade agreement last year that also included the U.S.

Gucht said studies showed that free trade with the EU could bolster Malaysia’s economy by up to 7.5 percent of its gross domestic product once fully implemented.

The EU is Malaysia’s fourth largest trading partner, with two-way trade rising 11 percent in 2009 to nearly 123 billion ringgit ($40.5 billion). Malaysia is the EU’s second largest trading partner in Southeast Asia.

Some activists staged a protest during the second round of talks in Malaysia last month, citing fears that strict intellectual property provisions under the agreement could block the sale of low-cost generic drugs in the country or make them more expensive.

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