MALAYSIA URGES RETHINKING OF EU PREFERENCE RULES

MALAYSIA URGES RETHINKING OF EU PREFERENCE RULES

Malaysia, fearful of losing duty-free export privileges to its main markets, is calling for them to revamp the criteria that decide what's in and what's out.

The European Union should "reconsider beneficiaries' representations and use a more objective criterion to 'graduate' industrial products from the system," said Kek Choo Ting, deputy minister for international trade and industry.The Generalized System of Preferences program was instituted 25 years ago as a way to promote the economies of developing nations and encourage them to move to industrial bases from traditional reliance on commodities.

Malaysia is the largest single beneficiary of U.S. GSP benefits and among the largest from the EU.

Despite the country's rapid economic growth, "a large number of manufacturers are still small and medium-sized and need GSP benefits," the official said when opening a seminar in Kuala Lumpur.

Under the latest European review of eligibility, Malaysia would lose GSP benefits from Jan. 1, 1998, on four categories - plastic and rubber, wood, clothing and consumer electronics.

Malaysia shipped $4.3 billion worth of goods to the EU under its GSP program last year. It was the largest outlet for such exports, representing 48 percent of all GSP-qualified shipments, government figures show.

Global GSP exports were $8.9 billion, or 15 percent of the country's total.

The United States is also reviewing Malaysia's entitlement, and cuts are expected.

It was the second-largest GSP market for Malaysia last year at more than $4 billion, or 29 percent of its total such shipments. The dollar figure was up more than 40 percent over the 1993 level.

Under the EU's revamp, blanket entitlement would be replaced by different preferential rates depending on the "sensitivity" of the products to the domestic industry in member countries.

In the case of the EU, South Korea and Thailand would also lose entitlement on plastic and rubber, Indonesia on wood, Korea, Thailand, Hong Kong, Macao and China on clothing and Korea, Singapore and Hong Kong on consumer electronics.

Malaysian officials have appealed to the United States to make any loss of GSP privileges gradual. The EU has adopted that mode, with entitlement on excluded items falling to 50 percent in 1997 and going altogether in 1998.

As reported, the Philippines is appealing to the United States to reinstate GSP privileges on nine items "graduated out" of entitlement because shipments exceeded ceilings. Of particular concern in Manila is electronics, a rapidly growing sector on which the government is pinning high hopes.