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Special Presentation - Dec. 17, 2007


Dr. Pek Koon Heng discusses the Malaysia-U.S. Free Trade Agreement at the East-West Center in Washington on Dec. 17, 2007.

NEGOTIATING THE MALAYSIA-U.S. FREE TRADE AGREEMENT: A MID-COURSE ANALYSIS

(WASHINGTON, DC) Dec. 17 – Malaysia and the United States began negotiations on a Free Trade Agreement (FTA) in March 2006, but after six rounds of talks, the two parties were unable to reach agreement before the expiration of the Trade Promotion Act on July 1, 2007, though negotiations continue.  Dr. Pek Koon Heng, Assistant Professor at American University’s School of International Service, provided an analysis of the proposed FTA in a seminar at the East-West Center in Washington, addressing an audience of scholars and policymakers about the current state of the FTA negotiations and what to expect in coming months.

Dr. Heng began by explaining that the U.S. and Malaysia have very different agendas for pursuing the FTA.  The U.S. hopes to (1) provide new opportunities for U.S. manufacturers, farmers and service sector workers to increase the value of U.S. exports; (2) strengthen U.S. competitiveness in the region, particularly in the manufacturing sector; and (3) advance broader U.S. strategic goals with Malaysia—such as counterterrorism and maritime security cooperation. Malaysia’s main concern is to strengthen Malaysia’s competitiveness, as the country seems to be losing its edge as a low-cost, labor-intensive manufacturing hub in the region. It also hopes to leverage greater access to U.S. markets to develop local talent and innovation so it does not lose out to neighbors Vietnam and Thailand.

Dr. Heng then argued that four main factors led to the impasse in the last round of negotiations: (1) time constraints; (2) differences in U.S. and Malaysian economic philosophies; (3) a belief that the agreement would undercut the United Malays National Organization (UMNO), the dominant political party in Malaysia; and (4) different approaches to economic and trade policies.  Malaysia’s inability to reconcile its national development policies and to accommodate the neoliberal principles that underlie U.S.-initiated FTAs proved to be a major constraint in the negotiation process.

In spite of these stumbling blocks, however, Dr. Heng suggested that prospects for a successful conclusion remain bright in the view of negotiators on both sides. Thus far, civil society opposition to the FTA has been facilitated by disagreement within UMNO. If Prime Minister Abdullah Ahmad Badawi were to take an unambiguous stand in favor of the FTA, it is likely that the room for dissent would shrink. Moreover, of the eighteen items under negotiation, the two parties have agreed to first tackle thirteen less-contentious issues, with the hope of building momentum to arrive at compromises on the remaining five. While approval of the FTA is not certain, the scheduled seventh round in January 2008 will be an important opportunity for progress.

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