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08 March 2006

U.S., Malaysia Launch Negotiations for Free-Trade Agreement

Trade pact viewed as strategic in supporting Muslim country known for tolerance

By Bruce Odessey
Washington File Staff Writer

Washington -- The United States and Malaysia have launched negotiations for a free-trade agreement (FTA) as U.S. Trade Representative Rob Portman cited the potential not only for expanding U.S. exports but also bolstering a moderate Muslim ally.

At a March 8 news conference, Portman said he hoped to conclude negotiations with Malaysia by the end of 2006 in order to submit an agreement to Congress before the president's trade negotiating authority, called trade promotion authority (TPA) or fast track, expires in July 2007.

Deputy U.S. Trade Representative Karan Bhatia is scheduled to visit Malaysia the week of March 12 to start the negotiations, he said.

Portman called Malaysia "a country that has been at the forefront of the economic dynamism that has transformed Asia in recent years."

Malaysia is already the United States' 10th largest trading partner with $44 billion in two-way trade, taking more U.S. imports than much bigger economies such as India and Indonesia, Malaysian Minister of Trade Rafidah Aziz said at the news conference.

Portman said an FTA would lead to gains in U.S. exports to Malaysia of agricultural goods, manufactured goods and, most of all, services, including telecommunications, energy services, health care, audio-visual services and financial services.

The launch of FTA negotiations follows months of bilateral preparation after the May 2004 signing of a bilateral trade and investment framework agreement.  Malaysia's decision on March 7 to open its market to U.S. boneless beef also helped create the right conditions, Portman said. (See related article.)

Expected to be among the most politically sensitive issues for negotiation are textiles for the United States and autos and financial services for Malaysia.  Rafidah said Malaysia  already has begun relaxing restrictions in its financial capital markets.

Members of Congress, both Democrats and Republicans, attended the news conference to demonstrate support for an FTA.  Most of them called attention to how Malaysians already have demonstrated their dependability as allies in the fight against terrorism. Portman did the same.

"They're an ally for peace and stability in the region," Portman said. "They're a large Muslim country and a leader giving voice to a vision of tolerance and multiculturalism."

Representative Gregory Meeks, a New York Democrat and one of the leaders in Congress promoting an FTA with Malaysia, said a trade agreement would be good for both the business and stability of both countries.

"They are fitting to be a partner in a region of the world that the United States needs to make sure that we have friends," Meeks said.

The announcement on Malaysia followed by just a few weeks the launching of U.S.-South Korea FTA negotiations. (See related article.)

FTAs already reached with Oman, Peru and Colombia are expected to receive congressional consideration in the months ahead. Already under way are FTA negotiations with Panama, Ecuador, the United Arab Emirates, the five countries of the Southern African Customs Union, and Thailand.

Thailand's government has suspended FTA negotiations with both the United States and Japan after calling an election for April.  Portman said he expected to resume negotiations with Thailand after the election.

Portman left open the possibility of launching more FTA negotiations but acknowledged that time is growing short as the TPA deadline approaches.  Under TPA, Congress restricts itself only to approve or reject a negotiated trade agreement, within strict time limits and without amendments.  Congress has become bitterly divided over trade agreements, approving them by the narrowest of margins.

Not expected to be among the politically sensitive issues in Malaysia FTA negotiations is sugar.  Domestic U.S. sugar growers bitterly oppose any trade agreement that increases U.S. import quotas for sugar.

Representative Clay Shaw, a Republican from the sugar-growing state Florida, drew laughter when he spoke in support of an FTA with Malaysia.

"Thank God you're not an exporter of sugar," Shaw said.

Accessible from the Office of the U.S. Trade Representative (USTR) Web site are a press release and a fact sheet.

For more information on U.S. policy, see Trade and Economics.

(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)