VZCZCXRO2751
PP RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHPB
DE RUEHBD #0050/01 0400816
ZNY CCCCC ZZH
P 090816Z FEB 07
FM AMEMBASSY BANDAR SERI BEGAWAN
TO RUEHC/SECSTATE WASHDC PRIORITY 3711
INFO RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 BANDAR SERI BEGAWAN 000050 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR EAP/MTS AND APEC AMBASSADOR MICHALAK 
 
E.O. 12958: DECL: 02/09/2017 
TAGS: ETRD PREL APECO XB BX
SUBJECT: BRUNEI SEES P4 FREE TRADE AGREEMENT AS POSSIBLE 
WAY FORWARD ON FTAAP 
 
REF: A. 06 BANDAR SERI BEGAWAN 573 
     ¶B. SINGAPORE 206 
 
Classified By: DCM Justin Friedman, reasons 1.4 (b) & (d) 
 
------------------- 
SUMMARY AND COMMENT 
------------------- 
 
¶1. (C) Brunei likes the flexibility of the P4 Free Trade 
Agreement and sees it as a potential framework for a broader 
Free Trade Area of the Asia Pacific.  However, GoB officials 
believe that some ASEAN nations may continue to prefer 
ASEAN-style, positive, sector-by sector opt-in trade 
agreements as opposed to the negative, opt-out format of the 
P4.  The GoB is eager to learn more about U.S. ideas for the 
FTAAP and how it would relate to APEC work on model FTA 
measures.  As a small, oil & gas-export driven economy with 
no national champion industries to protect, good free trade 
credentials and reputation for seeking consensus in 
multilateral fora, bringing Brunei on board early could help 
the USG advance our FTAAP agenda.  END SUMMARY and COMMENT. 
 
----------------------------- 
P4: A Good Start for FTAAP... 
----------------------------- 
 
¶2. (C) DCM met February 7 with Mazlizah Mahalee, Assistant 
Director for Trade Development, Ministry of Foreign Affairs 
and Trade (MOFAT) to solicit GoB views on Brunei's experience 
joining the Trans Pacific Strategic Economic Partnership 
Agreement (the Pacific-4 or P4) with Singapore, Chile, and 
New Zealand.  Ms. Mahalee is a youngish, but veteran trade 
negotiator, who served for five years (1999-2004) in Geneva 
on Brunei's WTO negotiating team and is now an important 
player on Brunei's P4 implementation/negotiation team.  Ms. 
Mahalee is an avowed free-trader who personally favors 
WTO-level trade liberalization in principle over FTAs. 
 
¶3. (C) Ms. Mahalee said that the GoB liked the P4 and saw it 
as a potential framework for a FTAAP (see also ref A).  The 
P4 is Brunei's first multilateral free trade agreement. 
Noting that joining the P4 was first and foremost a political 
decision, Ms. Mahalee said that the P4 had forced Brunei to 
expand the scope of its trade agenda.  This was the first 
time Brunei had accepted brining environment, labor, and 
government procurement issues under international agreements. 
 
¶4. (C) Ms. Mahalee praised the P4 agreement structure as 
better suited to countries like Brunei which need flexibility 
and some time (two years in this case) to work through 
bringing national legislation in line with FTA commitments. 
She said that implementing the P4 has injected vigor into 
internal, interagency reviews of economic regulations and 
forced her counterparts in other ministries to quickly climb 
a steep learning curve to understand the impact of conforming 
to P4 chapters.  This was the first time Brunei had worked 
with a "negative" list structured FTA -- where all sectors 
are assumed to be fully under the FTA unless a country 
specifically opts out.  This forced the GoB to do its 
homework in implementing its P4 commitments. 
 
¶5. (C) Another positive for the P4 from the Brunei 
perspective is that the chapters require different levels of 
commitment from the signatories.  For example, the 
environment and labor chapters are in the form of memoranda 
of understanding ) a form with which Brunei is more 
comfortable as there are no penalties for failure to quickly 
and fully comply.  DCM cautioned that as the U.S. considered 
options for an FTAAP, meaningful labor and environmental 
protections would be essential to ensure broad political 
support in the U.S. for any trade agreement.  Ms. Mahalee 
also singled out the P4 chapter on Strategic Economic 
Cooperation as being well suited to Brunei's desire to build 
up stronger networks of economic relationships. 
 
----------------------------------- 
... But Still a Work in Progress... 
----------------------------------- 
 
¶6. (C) The main drawback of the P4 was that it is still a 
work in progress.  Ms. Mahalee admitted that the chapters on 
financial services and investment were still under 
development.  While she expected negotiations to start this 
quarter on these chapters, Brunei would have strong 
incentives to seek concessions or a limited time exemption to 
protect its fledgling banking sector from being overwhelmed 
by foreign competition.  Accepting government procurement 
rules would also be a challenge to Brunei which sees local 
procurement preferences as a way to build up local SME 
 
BANDAR SER 00000050  002 OF 002 
 
 
capacities. 
 
--------------------------------------------- --- 
... Which may give other ASEAN members heartburn 
--------------------------------------------- --- 
 
¶7. (C) While Ms. Mahalee praised the "negative" structure of 
the P4 agreement, she said that other ASEAN nations would be 
reluctant to move away from the "positive" structure of 
opting in on specific industry sectors which is the basis of 
ASEAN agreements.  She said that counterparts from Malaysia 
and Thailand in particular, but also Indonesia, had told her 
directly that they did not like this aspect of the P4. 
 
-------------------- 
Crowded Trade Agenda 
-------------------- 
 
¶8. (SBU) Brunei has a crowded agenda of FTA negotiations. 
Under the ASEAN umbrella, Brunei is now negotiating FTAs with 
India, China, Japan, Australia ) New Zealand, and the EU. 
On top of that, Brunei is also negotiating a bilateral FTA 
with Japan, having come to agreement in principle in 
December.  On top of that, Brunei would like to see the 
suspended Doha Round WTO talks restarted.  Ms. Mahalee said 
that she was disappointed that the U.S. and EU had not yet 
reached agreement on agriculture. 
 
------------------------ 
Where is the U.S. Going? 
------------------------ 
 
¶9. (C) Brunei is looking for the U.S. to drive the global and 
regional trade agenda.  Ms. Mahalee said that there were so 
many regional groupings with trade on their agendas that it 
was sometimes a challenge to engage in so many dialogues. 
She said that a U.S.-led effort to clarify and direct the 
FTAAP process at the September leaders' meeting was needed 
and Brunei trade officials were eager to learn more of what 
the U.S. had in mind.  She cautioned that Brunei would be 
reluctant to endorse any effort that abandoned work APEC has 
done thus far to develop model measures for FTAs. 
 
¶10. (C) Brunei's main concern on trade right now was the 
impending expiration of U.S. trade promotion authority (TPA). 
 She said that the MOFAT trade team had discussed that 
morning what would be the consequences of Congress failing to 
reauthorize TPA.  DCM responded that renewing TPA was a high 
priority for the President but the debate in Congress would 
be sharp. 
 
------- 
COMMENT 
------- 
 
¶11. (C) Although an important regional energy exporter, 
Brunei is a small economy even in the ASEAN context.  In 
international fora, Brunei has a well deserved reputation for 
seeking consensus.  Since it does not have other major, 
national-champion industries, Brunei is in a unique position 
to play the role of an "honest broker" in any trade talks. 
We believe that as the U.S.G. develops ideas on where to take 
regional trade negotiations and the FTAAP concept, Brunei 
could serve the role as both a useful sounding board and a 
quiet but effective advocate to advance our positions. 
SKODON