TWN Info Service on Free Trade Agreements

15 January 2008


Malaysia-US FTA Talks Resumed

The US and Malaysia resumed formal negotiations yesterday in Kuala Lumpur for a free trade agreement, nearly a year after talks came to a deadlock over differences in a number of contentious issues which include the opening up of government contracts.
According to the US ambassador to Malaysia, the US is to seek market access to government procurement, failing which negotiations may come to an end. The US is also seeking “substantial market access” in a number of areas including financial services.

``We have to have that (government procurement). If we don't have that, then it would become a deal stopper. We've got some absolute requirements,'' the US envoy was quoted to have said, adding that the US hopes to conclude by the middle of this year before the new administration comes into the office.

The negotiations were greeted with protests by members of the People’s Coalition Against the US-Malaysia FTA who once again criticized the non-transparent nature of the talks as well as highlighted the possible negative impacts that such an agreement may have on medicine prices, the agricultural sector and the economy.


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Item 1

U.S. Says Malaysia Trade Pact at Risk Without Advance Next Week

By Stephanie Phang and Angus Whitley
Jan. 11 (Bloomberg) -- U.S. and Malaysian negotiators meeting next week for the first formal round of free trade talks in almost a year need to make ``substantial progress'' or risk delaying the pact indefinitely, a U.S. ambassador said.

``Clearly there is a time limit on how much energy both governments can put into this,'' James R. Keith, the U.S. envoy to Malaysia, said in an interview in Kuala Lumpur today. ``There is only a certain amount of time left before this administration in the U.S. runs out of time.''

Failure to conclude talks by the end of summer this year would make it harder to achieve further progress, as U.S. leaders prepare for presidential elections in November that will bring in a new administration, Keith said.

Officials from the two countries seeking to bolster $52 billion of two-way trade will meet in Kuala Lumpur to begin the sixth round of trade talks on Jan. 14, after missing a U.S. deadline to conclude discussions last year. The last round of negotiations was held in February last year.

``I am very hopeful that we can make it happen by next summer,'' Keith, who has been in Malaysia since September, said. ``If we don't, we'll continue to look for another partner in the region. We'll find someone else to negotiate with.''

Malaysia's reluctance to open up its rice market, change policies that benefit ethnic Malays and meet requests to increase access to government contracts are among the issues that have delayed the signing of a pact.

`Bottom Line'

``A bottom line for us on government procurement is transparent and reciprocal market access,'' Keith said. ``We have to have that. If we don't have that, then it would become a deal stopper. We've got some absolute requirements.''

Keith said he doesn't expect to conclude talks on government contracts next week, although U.S. negotiators will be seeking ``substantial market access'' in areas including financial services.
The U.S., which started the free trade talks in June 2006, is Malaysia's No. 1 overseas market, buying almost a fifth of the Southeast Asian nation's exports.
Malaysia's Trade Minister Rafidah Aziz is out of the office and not immediately available for comment, her press secretary said in an e-mail.

U.S. negotiators had sought to reach agreement before April last year in order to push a deal through Congress before President George W. Bush's trade promotion authority expired at the end of June 2007. A trade promotion authority allows the president to present Congress with trade agreements that it can accept or reject, not change.

`Roll of the Dice'

U.S. Assistant Trade Representative Barbara Weisel said in July the U.S. plans to conclude a free-trade agreement with Malaysia in the first half of this year.
``We still have time left to conclude the agreement by the summer,'' Keith said today. ``If we don't, it's a roll of the dice. You want to be careful about what you pass on to a new administration.''

The U.S., which hasn't signed a free-trade agreement with a Southeast Asian country since a 2003 accord with Singapore, signed one with South Korea on June 30. The Korean agreement is likely to be the last such deal reached before Bush leaves office. It joins three other accords, with Peru, Colombia and Panama, that need to be approved by a Democratic Congress.

Malaysia's total trade with the U.S. grew 6.1 percent to 170.8 billion ringgit ($52 billion) in 2006. Trade with the U.S. accounted for 16 percent of Malaysia's global trade.

An agreement would offer U.S. companies such as Microsoft Corp. and General Electric Co. greater access to Malaysia's $149 billion economy, Southeast Asia's third-largest. The country is the 10th-largest U.S. trading partner.

Sixty percent of Malaysia's 26 million citizens are ethnic Malay. An affirmative action policy introduced in 1971 gives Malays preference in government contracts, housing, education and jobs.

To contact the reporter on this story: Stephanie Phang in Kuala Lumpur at at sphang@bloomberg.net ; Angus Whitley in Kuala Lumpur at at awhitley1@bloomberg.net .

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Item 2

Washington Trade Daily
Volume 17, Number 11 Tuesday, January 15, 2008
Trade Reports International Group

* The United States and Malaysia resumed formal talks Monday for a free trade agreement, nearly a year after discussions stalled amid differences over Malaysia's government procurement policy, the Associated Press news service reported from Kuala Lumpur (WTD, 10/3/07). The United States - Malaysia's biggest trading partner - is seeking "real, demonstrable progress" in its sixth round of free trade negotiations with the Southeast Asian country, said US Embassy spokeswoman Kathryn Taylor.

"There is no deadline, but there is no indefinite timeline either. We need to be making progress. So that's what we'll be looking for," Taylor said. "Political calendars can affect the way trade negotiations continue." Taylor said the US wants to seal a deal by summer before a new administration takes over - a target that Washington believes is "achievable." Formal talks, last held in February 2007, stalled when the Malaysian government said it needed more time to consider its domestic interests.

However, informal discussions aimed at ironing out differences have been held since then, leading to the latest talks in Malaysia, which are expected to end Thursday, Taylor said. "'We're at the point now where both sides are ready to come back to the formal negotiating table,'" she said. "They are ready to come down and formalize what they've been discussing." Malaysian trade officials were not immediately available to comment.

One of the most sensitive issues is Malaysia's affirmative action policy, which awards government tenders to ethnic Malay-owned firms. The program is meant to give the traditionally underprivileged Malay majority an advantage in competing with the wealthier Chinese minority. The US wants more clarity and transparency in the bidding process for state contracts. Other sticking points have been differences over liberalizing Malaysia's services sector and highly protected auto industry, its ban on majority foreign ownership of banks, protection of intellectual property rights and labor and environmental issues.

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Item 3

'Death' at Miti gates
By Fauwaz Abdul Aziz & Azreen Madzlan | Jan 14, 08 7:16pm
(Malaysiakini.com)

Staff and visitors at the ministry of international trade and industry (Miti) were left with a morbid sight when a coalition against the proposed US-Malaysia free trade agreement (FTA) dumped a coffin outside its gates today.

It was one of two items - the other was a memorandum submitted to the ministry - to protest against the latest round of negotiations, which began today between US and Malaysian trade officials.

The 40 groups making up the People’s Coalition Against the US-Malaysia FTA also objected to the shroud of secrecy that has enveloped the past five rounds.

The last round went into a deadlock last March when the Malaysian delegation said it needed to refer 58 contentious issues to the cabinet.

Positive Malaysian Treatment Access and Advocacy Group for persons living with HIV/Aids - one of those behind the coffin idea - said this was to remind the ministry of the deadly impact of the US-Malaysia FTA.

According to its director Edward Low, an untold number of deaths can be anticipated as a consequence of the agreement. This will be due to higher cost of medical treatment due to US demands for more stringent patenting regulations and other intellectual property rights laws.

“(Higher) drug (and treatment) costs will affect all people, not just HIV/Aids patients, but those with cancer, diabetes and other conditions,” Low told reporters outside the ministry premises in Kuala Lumpur.

He also decried the lack of transparency with which the negotiations have been conducted between the US Trade Representative and Miti.

“Many memoranda have been sent to the ministry, but the government has not responded. They’re only listening to the US side. This is unfair trade,” he said.

Coalition coordinator Y Kohila of grassroots organsation Jerit echoed the point he made.

“What are the 58 issues? We want transparent negotiations, not secret (discussions). We can’t even be told (beforehand) where the negotiations will be held,” she told reporters.

‘Talk to us’

About 20 social and political activists participated in the 20-minute protest which began at 2.40pm, as some 50 police personnel - including about 20 of the anti-riot Light Strike Force - stood by.

A ministry representative met them outside the gates to accept their memorandum. Police officers refused, however, to allow the coalition to carry the coffin into the compound and it was left on the roadside.

The main thrust of the memorandum was the need for Miti, which is leading the negotiation team, to be forthcoming on the issues.

“People’s hopes (for answers) have not been entertained (by the government), and there has been no clarification on the issues raised by the coalition,” reads the memorandum which was in Bahasa Malaysia.

“All of a sudden, the formal negotiations are starting. Our question is: why the rush to sign an FTA with the US when many of the people’s questions have yet to be answered?”

Parti Sosialis Malaysia pro-tem treasurer A Sivarajan threw a dare to International Trade and Industry Minister Rafidah Aziz: “We have the facts, so we challenge Rafidah to have a debate with us.”

The coalition also expressed the worry that Malaysia’s agricultural sector - especially rice and tobacco - would be flooded by US-government-subsidised farm products.

In addition to the shutdown of local companies generally and resultant job losses, there is a possibility that the FTA would stipulate equal, if not special, treatment for US companies.