Japan, Malaysia set to sign free trade pact
(AP)
Updated: 2005-12-13 16:58

Japan and Malaysia are signing a pact that will do away with almost all tariffs in 10 years, encouraging the flow of Japanese cars, Malaysian mangos and other products between the Asian nations.

The deal, set to be signed later Tuesday during an Asian summit in Kuala Lumpur, falls somewhat short of a full-fledged free trade agreement because of exemptions that amount to 3 percent of the value of trade between the two nations, Japanese officials said.

Some tariffs, such as those on Japanese pears and Malaysian papayas, will end immediately while others will end gradually.

Cuts on tariffs for cars that compete with Malaysia's national car, the Proton, will go into effect only in 2015, though they will be lifted for larger cars that don't compete with the Proton by 2010.

The thriving Asian market, including Malaysia, offers a huge potential for growth for Japan's booming automakers, such as Toyota Motor Corp. and Honda Motor Co.

The pact _ which also covers cooperation in services, education, investment, business promotion and science _ marks a big step toward the free flow of goods between the two nations whose mutual trade totals nearly 3 trillion yen (US$25 billion) a year, Japan says.

Japan has been nervous about falling behind China and South Korea on free trade agreements, and officials say they are speeding up efforts to reach deals with Asian nations.

Japan only has two free trade deals so far, with Mexico and Singapore, although it is in talks with the 10-member Association of Southeast Asian Nations, the Philippines, Thailand, South Korea, Indonesia and Canada.

It agreed during the meetings here to start talks with ASEAN member Brunei and Vietnam, and affirmed a commitment Tuesday to try to seal an accord with ASEAN by April 2007.

Earlier Tuesday, South Korea and Southeast Asia signed an accord that calls for completing negotiations by the end of 2006 on freeing up trade, though a major hurdle remains over Thai rice.

Japan imports mostly natural gas, agricultural products and machinery from Malaysia, while Malaysia imports machinery, steel and transport equipment.

Exceptions to the no-tariff rule that will remain after a decade include plywood from Malaysia and steel products from Japan, as well as bananas from Malaysia exceeding 1,000 tons a year, Japanese officials said. But the exceptions may be negotiated again, they said.