TWN Info Service on Free Trade Agreements

24 March 2008


Malaysia’s Stance on FTA with US Unchanged

The departure of long-time Minister of International Trade and Industry

Rafidah Aziz will have no material affect on Malaysia’s position in its FTA talks with the US, a source in the ministry was quoted to have said. (Item 1).

The US is seeking market openings in Malaysia’s financial services as well as in the government procurement sectors, two areas which are considered
sensitive to Malaysia, and are the final barriers to a deal (Item 2).

Despite the deadlock in a number of issues, the US hope to reach a deal by this year ahead of the US presidential elections in November. The next and
seventh round of talks, is scheduled to be held in April.


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Item 1

http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_cf62424d-cb73c03a-158f1fa0-43eb8c0e
21-03-2008: No change in Miti’s policies, says source
by Kevin Tan
Email us your feedback at fd@bizedge.com

KUALA LUMPUR: The Ministry of International Trade and Industry (Miti) is unlikely to change its policies, including those relating to the proposed US-Malaysia free trade agreement (FTA), even though Datuk Seri Rafidah Aziz is no longer helming the ministry, a highly placed source said.

Commenting on whether Rafidah’s departure could affect the FTA talks, the source said officials involved in the negotiations had been taking cues from the Cabinet all this while, and the departure of one minister would not change the current dynamics.
“It’s crazy (to suggest that Malaysia’s current policy on the FTA will change). It’s our national policy, and it does not give us much credit as officials (by suggesting that),” she told The Edge on Wednesday.

There is speculation that the US may find it easier to achieve an FTA if the assertive Rafidah was not leading Malaysia’s negotiation team.

The new minister, Tan Sri Muhyiddin Yassin, is said to lack the background for international trade negotiations. It is also believed that he is more willing to compromise, judging from his previous handling of a land deal with Singapore.

However, the source was quick to stress that the national goals would not be neglected in pursuit of the FTA, no matter who helms the ministry.

The source also said US negotiators were also facing their own set of constraints as they may require a fresh mandate as the country would hold its presidential elections by year-end. “That doesn’t we should stop negotiating,” she added.

Other than the requirement for Miti officials to adapt to the style of a new minister, the source reckoned that it would be status quo for the ministry. “Some things will stay the same. Policy directions will still come from the Cabinet,” she said.

The source pointed out that the ministry would continue to consult the private sector before implementing any policy that could affect them, and it would fall back to the Cabinet for decision-making.

“The minister can change. The system will stay the same,” she said.

On the other hand, the source also reckoned that the parliament would have more say on the FTA now as there was a significant increase in the number opposition members of parliament (MP) following the recent general election.

“This will also shape the direction of the (FTA) talks,” she said.

The opposition parties — comprising PKR, DAP and PAS — have a total of 82 seats in the 222-seat Dewan Rakyat. In general, they are critical of the FTA, claiming that it will further marginalise the poor.
For example, socialist MP for Sungai Siput Dr Jeyakumar Devaraj, who contested under the PKR’s banner, and DAP MP for Klang Charles Santiago are among those who have been campaigning against the FTA.

On how Miti officials were taking Rafidah’s departure from the ministry, the source said they had a “very emotional” farewell for her.

“We are sad that we are losing her after 20 years. You are losing someone you have gotten used to, and it’s only human nature (to feel sad).”

Meanwhile, the American Malaysian Chamber of Commerce (Amcham Malaysia) was still optimistic of an FTA between the US and Malaysia as it would benefit both countries, its president Vincent Leusner said.
“The US is Malaysia’s biggest trading partner and foreign investor. An FTA will bring more of these (trade and investment) to Malaysia,” he added.
Leusner also believed that both the US and Malaysia would remain committed to reaching an FTA despite the change in minister.

He said the talks would not be stalled for long although there could a “handover period” for the new minister to adapt to his new role.

“The underlying people are there. These are very senior civil servants involved in the talks, and they should pick up from where they left,” he added.
The businessman was also hoping that environment for doing business in Malaysia would become better with the new minister.

“Who knows? Maybe a new person will bring new perspective,” Leusner said.

Malaysia’s trade with the US amounted to RM149.19 billion last year or 13.4% of its total trade, with exports accounting for RM94.51 billion.

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Item 2

BRIDGES Weekly Trade News Digest - Vol. 12, Number 10 19 March 2008

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In Brief

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US TO RESUME TRADE TALKS WITH THAILAND, MALAYSIA

The US has resumed stagnant free trade agreement negotiations with Malaysia and is looking to do the same with Thailand, according to reports from the US trade representative's office this week.

Talks with Bangkok were put on hold in 2006, after a military coup in the Southeast Asian country. Negotiations with Malaysia have started to move forward after running aground over differences last summer, and then being held up by Malaysian general elections earlier this month.

Representatives from the US and Thailand met in Bangkok this week, with hopes of resuming negotiations in coming months. Assistant US Trade Representative Barbara Weisel met Thai Commerce Minister Mingkwan Sangsuwan to discuss overall trade relations. The US is Thailand's largest trade partner, absorbing 12.5 percent of all Thai exports.

Left out of their discussion was talk of pharmaceuticals, a main point of contention even before the FTA talks were suspended. Since then, the Thai government has raised the ire of Western pharmaceutical companies - and won the praise of public health activists - by issuing compulsory licenses effectively suspending patent protection for certain drugs used to treat HIV/AIDS and heart disease. The decree authorises the import and domestic production of cheap generic versions for public health programmes.

While the compulsory licenses do not go against WTO rules, the US has complained that Bangkok's decision process was not sufficiently transparent. The US trade representative's office currently places Thailand third on its Priority Watch List, which monitors other countries' protections of US intellectual property rights. Further elevation on the list could mean possible trade sanctions against Thailand.

As for Malaysia, US Ambassador to Malaysia James Keith last week expressed hope that a comprehensive bilateral FTA would be finalised by the middle of this year.

Talks have largely stalled since the two parties failed to complete a deal in time for it to be submitted to the US Congress under the Bush administration's 'fast-track' authority, which expired in mid-2007.

The sixth round of negotiations took place in late January. The next round, scheduled for April, will be the first under the new government, which will notably see longtime trade minister Rafidah Aziz replaced by Muhyiddin Yassin, the former farm minister. The final barriers to the deal are US access to Malaysian financial services markets and public procurement. In Malaysia, government contracts are subject to a government affirmative action programme benefiting the ethnic-Malay 'bumiputra' majority. Keith is confident the two sides will resolve their disagreements in the coming months.

ICTSD reporting; "US, Thai officials talk trade for first time since coup," AGENCE PRESS FRANCE, 16 March 2008. "A first step to better Thai-US Trade Relations", THE NATION 15 March 2008. "U.S. Trade Representative Places Thailand On Priority Watch List In Annual Report," MEDICAL NEWS TODAY, 3 May 2007. "U.S. eyes free trade pact with Malaysia", XINHUA, 13 March 2008. "US seeks to conclude FTA," THE STAR, 14 March 2008. "Malaysia PM shakes up cabinet after poll setback" REUTERS, 18 March 2008.