TWN Info Service on Free Trade Agreements

18 January 2007


Malaysia-US FTA Talks May Go Beyond July 2007

We wish to bring to your attention two reports that provide some insights into the current talks between Malaysia and the US on a free trade agreement.

International Trade and Industry Minister Datuk Seri Rafidah Aziz said she is doubtful that the FTA talks between Malaysia and the US can be completed by July this year. (Item 1)

The US is hoping to conclude negotiations by then as its authority to negotiate FTAs expired by July.

She said the talks are facing some challenges that need to be ironed out, namely in investment and services where differences in positions have emerged.

Meanwhile, the US’ lead negotiator Barbara Weisel has also admitted that there remain a number of obstacles that need to be resolved such as on government procurement, labor and environment, adding that talks is not likely to conclude by the next and fifth round of talks to be held in February. (Item 2)

Both countries have this month concluded their fourth round of talks in the US.



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Item 1

M'sia-US FTA Talks Unlikely To Be Completed By July 2007

KUALA LUMPUR, Jan 17 (Bernama) -- International Trade and Industry Minister Datuk Seri Rafidah Aziz is doubtful that the free trade agreement (FTA) negotiations between Malaysia and the United States can be completed by July this year.

"I doubt it very much because July is only a few months away and we are not negotiating every week. This is a serious broad-based discussion. I am not very optimistic," Rafidah said.

"If they (the US) want to finish by July, I do not see it happening because of so many issues to cover. So they have to get an extension (to their trade policy authority) to negotiate if they can. We have no problem," she said.

Rafidah said the negotiations were comprehensive, covering trade in goods, investment and services.

She said this at a press conference after receiving a RM200,000 donation from Persatuan Pengimpot dan Peniaga Kenderaan Melayu Malaysia for flood victims in Johor.

The fourth round of the FTA negotiations was held in San Francisco last week.

The US is eager to conclude negotiations by July as its authority to negotiate FTAs expired by then.

Rafidah said Malaysia would be happy to continue if negotiations could not be concluded by July.

Asked about the position, the minister said both sides "merely have different positions and no obvious differences as differences mean you quarrelling whereas both are now negotiating".

She said negotiations of trade in goods were progressing smoothly and in some areas, discussions have reached the issue about tariff cuts.

However, Rafidah agreed there are still challenges, such as in investment and services, as both have different positions on the approach to negotiations.

"One example, on investment negotiation, they (the US) want a negative list approach but we want a positive list approach," she said.

Positive list mean that only those listed would be discussed for the FTA, whereas negative list meant that all are covered under free trade except for those listed.

"The US has always negotiated based on negative list. We have always negotiated on positive list with everybody. So it is a different stance," she added.

However, Rafidah expressed Malaysia's willingness to be flexible by having some areas negotiated under the positive list approach and others under the negative list approach.

"So I told my officers to look at the options. This is negotiating and not cast in stone," she said.

However, on issues such as government's procurement, Malaysia is standing firm, according to Rafidah.

She said Malaysia has to be firm on those areas where it could not compromise and this is known by the US side.

As for the outcome of negotiations in San Francisco, Rafidah said Malaysia was quite happy with the outcome because it was professionally done.

"The representatives of other ministries are also careful about negotiations and taking it seriously," she said, adding that the responsibility was not her ministry alone, but also other ministries responsible for the areas being negotiated.

"We cannot do their work for them. We only coordinate their positions," Rafidah said.

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Item 2

US negotiator says more talks needed to reach FTA with Malaysia
By EILEEN NG
The Associated Press
January 12, 2007

KUALA LUMPUR, Malaysia

The U.S. and Malaysia need at least two more rounds of negotiations to overcome obstacles and reach a free trade agreement, a top American trade negotiator said Friday.

Progress has been made in talks this week in San Francisco, with constructive discussions on sticky issues such as greater access to Malaysia’s protected financial services and auto sector, Barbara Weisel, who is leading the U.S. team, told reporters here via videoconference.

But both governments must find creative ways to resolve differences, she said.
Malaysia has still not decided if it will agree to loosen up its policy of awarding government tenders to ethnic Malay-owned companies under an affirmative action program, Weisel said. Labor and environmental issues are also holding up a deal, she said.

"We believe the progress we have made this week has put us within striking distance of concluding this agreement within the next few months," she said.
"But there are significant challenges ahead. We will work intercessionally and hopefully make progress in February. I think we will not conclude at the next round," she said. "I think we would need more than one more round."

The San Francisco talks, the fourth round of negotiations since they began last June, wind up Friday. Officials are to meet again in Malaysia next month.

Negotiators are under time pressure because the the U.S. side wants to bring a proposed pact to Washington by the end of March so that American lawmakers can review and vote on it before President George W. Bush’s authority to negotiate trade deals that require simple yea-or-nay Congressional approval expires end of June.

The U.S. is also aiming to wrap up a trade deal with South Korea by the end of March.

Malaysia is the United States’ 10th-largest trading partner, with $44 billion (euro35 billion) in two-way trade in 2005. Officials say that figure will double by 2010 if the pact is signed.

Malaysia has stressed it would not compromise in allocating government tenders to Malay businesses, which has shut out not only domestic non-Malay companies but also U.S. and other foreign firms from bidding for any government contracts.

The policy is mandated by a 1970 preferential program that gives special privileges in contracts, jobs and housing to Malays to help them close the gap with wealthier minority Chinese. Malays make up about 60 percent of the country’s 26 million people, Chinese account for a quarter and Indians about 10 percent.
Some Malaysians have opposed a free trade agreement with the U.S., fearing it would lead to job losses, erode workers’ rights and mark the end of cheap, generic drugs now available to those with HIV/AIDS and other diseases.

Rice farmers are also worried the import of duty-free U.S. rice under a deal will hurt their livelihood.
Malaysia’s Trade Minister Rafidah Aziz has allayed fears, saying that rice and tobacco two of the country’s key agricultural products were excluded from the pact to protect local farmers.

"We have never included rice and tobacco (in any FTAs). We only discussed products that we exported," she was quoted as saying by Friday’s Malay-language Utusan Malaysia.

Weisel said agricultural products from both countries are complementary, and not competing with each other.

She stressed an FTA would boost bilateral trade and investment, create higher paying jobs in both countries and enhance each other’s competitiveness globally.
Weisel dismissed concerns that the new Democratic-controlled U.S. Congress will be more hostile than the previous Republican one, saying a "strong agreement" will win approval.