WORLD TRADE  
ORGANIZATION  WT/REG216/M/1 
4 May 2009 
 (09-2150) 
Committee on Regional Trade Agreements 
Fifty-third Session  
 
 
 
CONSIDERATION OF THE ECONOMIC PARTNERSHIP AGREEMENT  
BETWEEN JAPAN AND MALAYSIA, GOODS AND SERVICES  
 
Note on the Meeting of 20 April 2009  
 
Chairman:  Mr D. Brauns (Germany) 
  1. The meeting was convened in document WTO/AIR/3332/Rev.1, dated 1 April 2009. 
2. Under Agenda Item C.V of its 53
rd Session, the Committee on Regional Trade Agreements 
(hereinafter CRTA or the Committee) took up cons ideration of the Economic  Partnership Agreement 
between Japan and Malaysia (goods and services), (hereinafter the Agreement).  
3. The Chairman  noted that the Agreement had entered into force on 13 July 2006 and had been 
notified to the WTO on 12 July 2006 under Article  XXIV:7(a) of GATT 1994 and the Understanding 
on the Interpretation of GATT Article XXIV as an Agreement establishing a free trade area 
(document WT/REG216/N/1), and under GATS Article  V:7(a) as an Agreement providing for the 
liberalization of trade in services within th e meaning of Article V of the GATS (document 
S/C/N/371).  The text of the Agreement, together with its Annexes, was available on the Parties' official websites.  The Factual Presentation on the goods an d services aspects (doc ument WT/REG216/2, dated 
6 February 2009) had been prepared by the Secretariat on its own respons ibility in full consultation with 
the Parties, in accordance with paragraph 7(b) of the Transparency Mechanism (TM) for Regional Trade 
Agreements (document WT/L/671).  In addition, written questions and replies on the Agreement had 
been recently distributed in document WT/REG216/3,  dated 14 April 2009, and an outstanding answer 
by Japan had also been circulat ed as an addendum to this docu ment as WT/REG216/3/Add.1, dated 
14 April 2009.  He pr oposed to organize the consideration of the Agreement by asking first the Parties 
and then other Members to give any general comm ents.  The Committee would then to turn to the 
specifics of the Agreement using the Factual Presenta tion to guide the debate.  Given that the goods 
and services aspects of the Agreement were dealt with in a single Factual Presentation, he proposed to 
go through the Factual Presentation by section and then through the questions and replies document. 
4. The representative of Japan
 was grateful for the opportunity to present the Agreement and 
hoped that the discussions during the meeting would help Members to understand the Agreement, as 
well as Japan’s engagement in gl obal and regional trade liberaliza tion.  The Agreement covered a 
wide range of areas beyond trade in goods, includi ng investment, trade in services, intellectual 
property, competition, improvement  of business environment, and co-operation.  The Agreement was 
the third Economic Partnership Agreement (EPA ) concluded by Japan, following those with 
Singapore in 2002 and Mexico in 2005.  The two key objectives of the Agreement were the 
liberalization of trade and investment and the stre ngthening of economic relations between the Parties 
through the promotion of a comprehensive economic partnership that encompassed various matters.  In 2004, at the beginning of the negotiations, Malaysia had been Japan's tenth
 largest trading partner, 
while for Malaysia, Japan had been the largest import partner and the third largest export partner.  At 
that time, the number of Japanese companies operati ng in Malaysia had already exceeded 1,300, and WT/REG216/M/1 
Page 2  
 
  there were more than 10,000 Japanese people living in  Malaysia.  The Agreement had been expected 
to further strengthen such close economic ties be tween the Parties.  The Agreement established 
cooperation in seven different fields and ne w training programmes under the "Koizumi-Abdullah 
Training Programme for Economic Partnership".  Ja pan considered the Agreement to be a driving 
force to further enhance the cooperative relationshi p with Malaysia which it had cultivated, through, 
inter alia,  the “Look East Policy” of Malaysia.  It had also been expected that the Agreement would 
promote the then ongoing negotiations on the Japan-ASEAN collective EPA and would have a 
positive impact on the East Asian economies.  The negotiations had started in December 2003 at the 
Japan-Malaysia Summit held in Tokyo.  The first round of negotiations had been held in January 
2004, and in May 2005 the Prime Ministers of the Parties had confirmed the conclusion of 
negotiations.  The Agreement had been signed in Tokyo in December 2005, and had entered into 
force in July 2006.  
5. From Japan's point of view, the Agreemen t was a comprehensive economic partnership 
agreement which attained a high level of tariff liberal ization.  For example, within ten years it was due 
to eliminate up to 97% of tariffs in terms of 2003- 2005 bilateral trade volume.  The liberalization of 
trade in goods covered all the major sectors, and no restrictions on commerce had been introduced or 
maintained.  Consequently, Japan believed that  the Agreement met the GATT requirements of 
eliminating duties and other restrictive regulations of commerce on substantially all the trade.  The 
Agreement was also compatible with Article V of the GATS with its substantial sectoral coverage in providing national treatment.  Both Parties had made commitments beyond those in their GATS 
schedules.  She highlighted the establishment of the Joint Committee and other subordinate bodies, 
i.e., ten sub-committees and six wo rking groups ensuring effective implementation and operation of 
the Agreement.  Nine meetings of the sub-committe es and working groups, an d two meetings of the 
Joint Committee had already taken place since the Agre ement's entry into force.   The Agreement also 
established the Committee on Improvement of Busin ess Environment, comprised of representatives 
from government and the private sector which covere d any issues related to the business environment, 
with a view to promoting trade and investment activities of the private sector.  The Committee had 
already met three times and the participants had engaged in productive discussions.  Among the most 
recent developments, at the request of the business sector, a part of the product specific rules (PSR) 
provided in the Annex to the Agreement had b een amended by the Sub-Committee on Rules of 
Origin.  This amendment had taken effect in Ap ril 2009.  Most recently, a meeting of the Sub-
Committee on Trade in Services had taken place on April 14, 2009.  She concluded by reaffirming 
that the Agreement had laid a solid foundation for fu rther growth in bilateral trade and investment 
between the Parties and that it would contribute to regional and global trade liberalization.  
6. The representative of Malaysia
 thanked the Secretariat for having prepared the Factual 
Presentation and Members for their interest in the Agreement.  She noted that since 1998, Japan had 
been Malaysia's largest trading partner in East Asia, and since 2002 Japan had been Malaysia’s third 
largest global trading partner.   For ten consecutive years, Japan had been Malaysia's largest source of 
imports and third largest export destination.  In the last five years, Malaysia’s trade with Japan had 
grown on an average by 5.4%.   In 2008, trade between the Parties had amounted to US$41.1 billion, 
an increase of 17.1% from US$35.1 billion in the co rresponding period in 2007 .  Such growing trade 
links with strong investment and cooperation ties had formed the basis of the economic partnership 
agreement, which was the first bilate ral free trade agreement for Malaysia.   The Agreement 
encompassed substantial coverage in goods, wher e approximately 97% of duties on trade in goods 
would be eliminated.   For Malaysia, it meant immediate duty-fr ee treatment for 7,368 export products 
upon the entry into force of the Agreement.   The Parties had also committed to reduce and eliminate 
tariffs on almost all tariff lines within ten years a nd the implementation of the Agreement was already 
past its third year.   As regards  trade in services, the Agreement covered all four modes of supply.  
Malaysia's commitments went beyond its GATS specific commitments, including for  professional 
services;  computer related services;  other business services;  construction and related engineering 
services;  communication services; educational services;  financial services;  hospital services;  tourism  WT/REG216/M/1 
 Page 3 
 
 
  and travel related services; and  transport services.  The Agreement covered more than trade 
liberalization, including economic and technical c ooperation aiming at capacity-building.  One of the 
benefits for Malaysia was the cooperation pr ovisions, under which various projects had been 
implemented, particularly in the automotive s ector.  The Malaysia-Japan Automotive Industry 
Cooperation (MAJAICO) provided for progressive liberalization in the automotive sector, 
complemented by capacity building and technology transfer.  To date, a total of ten automotive 
cooperation projects had substantia lly benefited Malaysian automotiv e and component manufacturers.  
The Agreement had been established to further stre ngthen and expand trade and investment relations 
between the Parties and the initial analyses of its  performance had shown encouraging signs.  In 
conclusion, she reaffirmed the importance of transp arency in the WTO, and her delegation remained 
fully committed towards the TM, a nd was convinced that all WTO Members would benefit from this 
exercise.  
7. The representative of the United States  noted that while Japan had committed to eliminate 
duties on 90.1% of all tariff lines, covering 94.4% of  imports from Malaysia under the Agreement, it 
would eliminate duties on 96.4% of non-agricultural products and only on 63.6% of agricultural 
products.  In comparison, Malaysia had committed to eliminate duties on 98.9% of all tariff lines, 
covering 99.2% of imports from Ja pan.  In contrast to Japan's commitments, Malaysia would 
eliminate 99.3% of duties on non-agricultural product s and 95.4% of duties on agricultural products.  
As in Japan's other trade agreements with Chile a nd Mexico, the United States noted that Japan had a 
disproportionate level of liberalization between  non-agricultural and agricultural products.  The 
Agreement was all the more disappointing due to  the disproportional liberalization commitments 
between a developed country, Japan, and a developing country, Malaysia.  She also highlighted 
Japan's refusal to eliminate tariffs on more th an 63.3% of agricultural products, compared to 
Malaysia's appropriate figure of more than 95%.  Japan's selective coverage of agricultural products 
would create an adverse effect on trade with other Members and such continuous and systematic protection of agricultural products through Japan's FTAs would damage the multilateral liberalization 
process.  Referring to its response in the questi ons and replies document, the representative of 
Malaysia
 reiterated that Malaysia was satisfied with  Japan's market access offer for agricultural 
products, especially in light of the sensitivities of th e agricultural sector in Japan's economy.  She also 
noted that the products covered in Japan's liberali zation schedule were of specific export interest for 
Malaysia. 
8. The representative of the European Communities  (EC) asked about the ASEAN-Japan 
Comprehensive Economic Partnershi p Agreement, signed in April 2008.  She requested a more 
detailed response on the general implications of ha ving two agreements in place at the same time.  
Particularly, she questioned whether both agreemen ts had the same tariff and trade liberalization 
commitments; how economic agents were inform ed about the main differences between the 
agreements and how they could benefit most from each one; how the Parties had evaluated the 
transaction costs of maintaining two agreements; and why the Parties considered that maintaining two 
agreements would have not created further confusi on to the network of RTAs.  The representative of 
Japan  explained that in the Japan-ASEAN collectiv e agreement there were ten tariff schedules 
corresponding to bilateral commitments between Japan and each ASEAN member.  Any differences 
in the schedules of commitments between Japan a nd Malaysia under the two agreements would be 
resolved.  For example, if Malaysia's applie d tariff on imports from Japan was 0.5% and 0, 
respectively under the Japan-ASEAN collective agre ement and the bilatera l Economic Partnership 
Agreement, the latter would prevail.  As alread y mentioned in the written replies to the Chinese 
Taipei's question, in the case of differences in the tariff schedules the Parties would apply the lower of 
the two.   
9. With reference to question 15 in the questions and replies document, the representative of the 
United States  pointed out that Article 80.8 of the Agreement provided that the Parties may, in certain 
sectors, adopt investment measures inconsistent with the Agreement's national treatment and MFN WT/REG216/M/1 
Page 4  
 
  obligations, due to "exceptional financial, economic or industria l circumstances".  She asked the 
Parties to explain the meaning of "fateful crisis " in relation to exceptional industrial circumstances 
and to confirm whether, under the terms of the Ag reement, exceptional measures adopted pursuant to 
Article 80.8 could be maintained by a Part y indefinitely.  The representative of Japan
 answered that 
under Article 80.8, the adoption of exceptional measur es was subject to specific requirements:  first, 
the notification of the adoption of such a measure  to the Party concerned and, second the launch of 
consultations in good faith with a vi ew to finding mutual satisfaction.  The term "fateful crisis" had no 
a specific legal implication, but it could be read  as exceptional circumstances.  She said that the 
practical meaning of the provision would become clearer in the process of implementing the Agreement.   
10. The Chairman
 noted that the consideration of the goods and services aspects of the Economic 
Partnership Agreement between Japan and Malaysia  had allowed the Committee to clarify a number 
of questions and oral discussion of the Agr eement could be concluded in accordance with 
paragraph 11 of the TM.  If any delegations wished  to ask follow-up questions, they were invited to 
submit replies in writing by no later than 27 April 2009 and the Parties were asked to submit replies to 
the Secretariat no later than 4 May 2009.  In accordance with paragraph 13 of the TM all written 
submissions, as well as minutes of this meeting woul d be circulated promptly, in all WTO official 
languages, and would be made available on the WTO website. 
11. The Committee took note  of the comments made. 
__________