TWN Info Service on Free Trade Agreements

11 February 2007


Cabinet to decide on ‘deal breakers’ in US-Malaysia FTA talks

The fifth round of the Malaysia-US FTA talks in Sabah concluded on Friday with limited progress made in key areas, which led the US to declare that the March deadline it sets for the conclusion of the talks will unlikely to be met.

According to news report, the Cabinet is expected to grapple with a list of possible "deal breakers" and decide whether to move forward with more flexibility or drop them altogether.

Among the deal breakers are said to include government procurement and financial services which the US hope to see more opening in the Malaysian market.



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Item 1


Fifth round with KL ends, seventh opens with Seoul
Feb 10, 07 3:21am,
Malaysiakini.com
(http://www.malaysiakini.com/news/63240)

The United States and South Korea launch their seventh and crucial round of talks this weekend to forge a free trade pact, complicated by Seoul's unrelenting ban of American beef imports.

Racing to conclude an agreement by the end of March to give the US Congress its requisite three months to consider the deal, the two allies have to overcome differences on three sensitive issues - US anti-dumping rules, and non-tariff barriers in South Korea's auto and drug markets.

As negotiators begin their new round of talks on Sunday, US lawmakers have threatened to withhold support for any free trade deal amid South Korea's persistent refusal to accept US beef imports.

Seoul last year lifted a three-year ban on US beef imposed to keep out mad-cow disease and agreed to accept shipments of boneless beef. But it has since blocked all three shipments sent after finding tiny bone fragments in them.

The US side claims South Korea is using the fragments as a pretext to exclude its beef and to protect local farmers.

Still, experts say there is political will by both governments and widespread support among US lawmakers and key US industries to conclude an agreement.

A doable challenge

Brian Peck, a former senior director at the US Trade Representative (USTR) office, said there is a door open still, "as long as it (the beef issue) is resolved by the time Congress has to consider the FTA."

"It is a challenge but it is doable," said Peck, now counsel for international trade with US legal firm Crowell and Moring LLP.

The beef ban is the only issue that both the US Congress and the administration have definitely said could wreck the deal.

"They haven't said that on autos, they haven't said that on pharmaceuticals," noted Amy Jackson, a former deputy assistant USTR for South Korea and currently director with C and M International, a trade and investment consulting firm affiliated with Crowell and Moring.

"On autos and pharmaceuticals, they said we need to get adequate concessions from Korea in order to make this agreement meaningful enough to be passed. But they have been much more definite on beef," Jackson said.

South Korea was once the third-largest market for US beef, with annual exports close to one billion dollars. Many senior American legislators represent beef-producing regions.

If an FTA agreement is clinched, it would be the biggest for Washington since the North American Free Trade Agreement of 1993, marrying two economies whose combined bilateral trade is more than US$70 billion.

"We are hopeful about making progress in the upcoming round of negotiations," said Stephen Norton, the USTR spokesman. "The KORUS FTA (South Korea-US FTA) represents a great opportunity for both the United States and the Republic of Korea."
Aside from South Korea, Washington is anxious to wrap up a free trade deal with Malaysia no later than early April so that Congress could clear the agreements before President George W Bush's powers to fast-track trade pacts expire in June.

Possible 'deal breakers'

The fifth round of FTA talks with Malaysia ended Friday with only limited progress made in key areas, and assistant USTR Barbara Weisel felt "it would be very difficult to conclude an FTA with the deadline we have set."

Among possible deal breakers is Washington's push for greater transparency in the bidding process of and access to Malaysian government contracts, and for the opening of its financial services sector.

Under Malaysia's affirmative action program, government tenders are awarded to ethnic Malay-owned companies with little transparency and accountability, opposition politicians and non-governmental groups complain.

"The US business community is pleased with the progress made in many sectors, but it is disappointed that the negotiators were not able to reach a breakthrough in the key areas of services, financial services and government procurement," said Murray Hiebert, the US Chamber of Commerce's senior director for Southeast Asia.

The Malaysian cabinet on Wednesday is expected to grapple with a list of possible "deal breakers" and decide whether to move forward with more flexibility or drop them altogether, sources close to negotiators said.

"A trade agreement has much to benefit both economies, but time is running out for the negotiators to hammer out the outstanding issues," Hiebert said.

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Item 2

(http://thestar.com.my/news/story.asp?file=/2007/2/10/nation/16840449&sec=nation:)
‘Saturday February 10, 2007
Malaysia and US unlikely to meet deadline over FTA
By SUSAN TAM

KOTA KINABALU: The March deadline is likely to pass without Malaysia and the United States striking a deal for a Free Trade Agreement (FTA).

US Assistant Trade Representative Barbara Weisel said it would be “very difficult” to conclude the talks within the deadline that the United States had set.

“We are looking at the end of March, that is the operative deadline for us under the congressional authority that we have now,” she told a press briefing yesterday.

Weisel said while progress had been made in a number of areas, there were few key areas where “unfortunately, only limited progress was made.”

“There has been some sensitive issues in the negotiations and we continue to try and close the gap on those issues; we will continue to talk and try to do that over the next few weeks,” she added.

Weisel said the United States anticipated further dialogue with the Malaysian authorities over the next few weeks, but no sessions have been scheduled for now.

The two teams concluded the fifth round of FTA talks yesterday, which ran over five days held at a resort in Karambunai, some 30km from here.

The negotiations started last June and the parties have met four times – in Penang, Washington, Kuala Lumpur and San Francisco.

Asked if the two teams reached a deadlock over issues such as government procurement, Weisel said there were some difficult issues and strong sensitivities on both sides.

“We think we can close the gap between the two positions but it is going to take some work on both sides,” she added.

She also said the United States believed that an FTA was achievable, which would mutually benefit the two countries.

The United States is pressured to conclude the talks, as the March 31 deadline looms close for the US Congress to be notified of its outcome.

The parties were expecting to submit the conclusions before this deadline, which is 90 days before the expiry of US President George W. Bush’s Trade Promotion Authority (TPA) in July.

The TPA is a fast-track authority that allows the president to negotiate trade agreements that the US Congress can only approve or reject.

In KUALA LUMPUR yesterday, International Trade and Industry Minister Datuk Seri Rafidah Aziz said she would not change government policies that benefit ethnic Malays, an issue where the two negotiators had disagreed, Bloomberg reports.

“We are far from” a free-trade agreement, said Rafidah. “I don’t expect at this meeting everything will be solved.”’