Australia, Malaysia Sign Free-Trade Pact

The Australian auto industry cautiously welcomes the signing of a free-trade agreement between Australia and Malaysia.

The Federal Chamber of Automotive Industries says in a short unattributed statement it recognizes the Department of Foreign Affairs and Trade’s efforts to reduce automotive non-tariff barriers.

But the statement indicates the industry organization believes more work needs to be done on the FTA signed by Australian Trade Minister Craig Emerson in Kuala Lumpur and due to take effect Jan. 1, 2013.

“The FCAI looks forward to working with representatives of the Malaysian and Australian governments to further strengthening MAFTA through the ongoing Automotive Industry Dialogue process,” the statement says.

The Australian Automotive Cooperative Research Center says the FTA signals the next step in a rapidly strengthening relationship between the two countries, with strong links already established in a collaborative arrangement between AutoCRC and the Malaysian Automotive Institute.

The relationship was bolstered by the recent election of MAI CEO Madani Sahari to the AutoCRC board.

“The bilateral pact…will promote collaboration opportunities in automotive technology and processes, particularly in the key areas of lightweight composite materials, virtual engineering tools for reduced development time, alternative-fuel powertrains and storage systems and improved energy consumption and safety in vehicle manufacture,” AutoCRC says in a statement.

AutoCRC General Manager Ian Christensen says the relationship with MAI and the Malaysia-Australia free-trade agreement creates a huge opportunity for the Australian automotive industry to expand its regional engagement.

He says the pact also aims to develop skills in automotive after-sales service industries and enhance trade between the two countries, most significantly for Australia with the immediate elimination of most tariffs on many Australian goods in Malaysia, including auto parts, components and vehicles.

The FTA will guarantee tariff-free entry for 97.6% of current goods exported from Australia once it takes effect. This rises to 99% by 2017.

Malaysian exporters gain duty-free entry to the Australian market, with auto maker Proton gaining a 5% reduction in import tariffs on cars shipped to Australia. That puts it on the same level as Thai manufacturers, who already have duty-free access to the Australian market.

The FTA ends Malaysian tariffs on Australian-built vehicles with engines above 2.0L. Tariffs on smaller vehicles will be phased out by 2016 and restrictions on import volumes will be ended.

However, Australian auto makers likely will delay any rush to Malaysia after their experience with the FTA signed with Thailand in 2005.

Although they gained duty-free access to the Southeast Asian country, shipments there have been limited by non-tariff barriers. The Australians likely will see a similar situation in Malaysia, where government policy is heavily slanted in favor of domestic producers.