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Japan and Malaysia agreed Sunday to launch governmental working-level talks to look into concluding a bilateral free-trade agreement, Japanese officials said.

Malaysian International Trade and Industry Minister Rafidah Aziz was quoted as telling her Japanese counterpart that talks on the FTA should start at the working level because the two countries have sectors sensitive to further trade liberalization.

Economy, Trade and Industry Minister Takeo Hiranuma agreed with the view, the officials said.

A Japanese trade ministry official said the first meeting of the working group could be held as early as March.

In December, Prime Minister Junichiro Koizumi and Malaysian Prime Minister Mahathir Mohamad agreed to pursue a bilateral FTA.

The working-level talks should not be considered a start to formal negotiations, the official said, adding that formal discussions will be launched once issues necessary to conclude an agreement become more clear.

To advance FTA talks, Japan will have to consider freer imports of chipboards and palm oil from Malaysia.

As for Kuala Lumpur, its tough restrictions on foreign capital and high tariffs on automobiles are expected to be the most contentious issues.

Hiranuma suggested that Malaysia needs to take measures on automobile imports for a bilateral FTA, according to the Japanese officials.

He also indicated that the two countries need to address such issues as investment rules.

FTA unlikely: Australia

Australian Trade Minister Mark Vaile conceded Sunday that seeking a free-trade agreement with Japan may be difficult at the moment.

He called for creating a bilateral framework, however, to expand economic ties, a Japanese official said.

Vaile made the comments in a meeting with Foreign Minister Yoriko Kawaguchi on the sidelines of an informal three-day World Trade Organization meeting, the official told reporters. The “mini-ministerial” meeting began Friday in Tokyo.

Vaile pointed to “various problems,” the official said. He was apparently referring to Japan’s resistance to opening its agriculture and fisheries market.

Kawaguchi responded by saying that although there are certain issues that need to be cleared, Japan hopes to conduct further deliberations on the proposed economic framework, the official said.

In May last year, Prime Minister Junichiro Koizumi and Australian Prime Minister John Howard agreed that their governments should explore “all options” for deepening economic ties, with the ultimate objective being an FTA.

Meanwhile, Vaile reiterated Australia’s objection to Japan’s plan to raise tariffs on beef imports later this month.

Kawaguchi told Vaile that it is an automatic mechanism, and it would be undesirable to change the mechanism by discretion, the official said.

Under the WTO mechanism, Japan is allowed to invoke an automatic tariff hike because beef imports have been surging following a slump in consumption caused by the 2001 discovery of mad cow disease in the country.

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