TWN Info Service on Free Trade Agreements

19 March 2007


US Fast-track Deadline Unlikely to be Met, Talks to Continue

Though the US-Malaysia FTA is not likely to be concluded by the end of March, both sides are to continue discussions in the coming weeks, according to press reports.

The Malaysian Cabinet is locked in debate over the 58 contentious issues which have held back negotiations on the FTA and according to the Deputy Prime Minister Najib Tun Razak, Malaysia will not be bound by any timeframe to conclude the talks. (Items 1, 2)

"That process is continuing in the Malaysian Cabinet. But I think it’s clear at this point that getting the free trade agreement done under the current TPA (Trade Promotion Authority) is improbable," Steve Norton, a spokesman for the US Trade Representative was reported to have said, adding that talks will continue in the next few weeks. (Item 3)

Though the FTA might not be able to make it for the deadline for the current round of the TPA, the FTA nonetheless can still be achieved without the fast track authority. Furthermore, the US Congress can renew fast track authority at any time, even after it has lapsed.


Some sources have told Inside US Trade (see issue dated March 16, 2007) that if an FTA is not possible before the deadline, ‘intensified negotiations’ under the Trade and Investment Framework Agreement (TIFA) signed between the two countries in 2004 could be a good alternative. Malaysia was said to have indicated that it might follow in the footsteps of the United Arab Emirates which last month opted for intensified TIFA negotiations after its FTA negotiations with the US were suspended.



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Item 1

KL Not Bound By Timeframe To Decide On M'sia-US FTA - Najib
Bernama, March 18, 2007 16:33 PM http://www.bernama.com.my/bernama/v3/news.php?id=251917

KUALA LUMPUR, March 18 (Bernama) -- Malaysia is not bound by any timeframe to give a decision on the issues at stake in the ongoing Free Trade Agreement (FTA) talks with the United States, Datuk Seri Najib Tun Razak said Sunday.

The Deputy Prime Minister said Malaysia's stand on the issue was clear in that Kuala Lumpur would continue the FTA negotiations until both sides
reached a consensus on the contentious issues.

"Malaysia is not tied down to any fixed timeframe. We will study thoroughly every issue being negotiated (before deciding on the FTA)," he told reporters when responding to yesterday's statement by Steve Norton,
spokesman for the US Trade Representative Susan Schwab, who ruled out the possibility of the talks concluding in two weeks as Kuala Lumpur had not
decided on several issues.

A total of 18 issues are being negotiated including on industrial products, textile, customs procedures, intellectual property rights, financial services, investments and the environment.

Malaysia and the US had held a series of negotiations in the past one year, with the latest round in Kota Kinabalu last month.

Najib said International Trade and Industry Minister Datuk Seri Rafidah Aziz had conveyed Malaysia's stand to the US Government.

He refuted assumptions of Malaysia being pressured by the US to wrap up the FTA talks soon.

"No, the US is not pressuring us. Of course, the US would like early resolution but they also understand there are some issues that require a bit of time," he said.

The US had hoped to ink the FTA with Malaysia by July.


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Item 2

‘Malaysia says it will not bow to U.S. pressure to conclude trade talks
The Associated Press
Published: March 18, 2007

KUALA LUMPUR, Malaysia: Malaysia will not bow to pressure from Washington to meet the White House's fast-closing window to push a free trade pact through Congress without amendments, Malaysia's deputy leader said Sunday.

At least five rounds of talks between Malaysia and the United States have so far ended in a deadlock, mainly because of a disagreement over the way the Southeast Asian nation awards government contracts.

Reports in Malaysia's media Sunday said Washington has all but ruled out a successful conclusion by July — when U.S. President George W. Bush's fast-track authority expires.

The authority allows Bush to submit a trade deal to Congress for a straight up-or-down vote without amendments. Negotiators must conclude a deal by the end of March to allow U.S. lawmakers three months to review it and then vote.

"We will not be tied down to any timeframe and we want to look into all details thoroughly before making a decision," Malaysian Deputy Prime Minister Najib Razak said. "The U.S. will not pressure us. Of course, we know the U.S. wants an early resolution but they also understand some issues take time to be finalized."

The two countries are looking at 18 areas in the talks, including industrial goods, customs procedures, intellectual property rights, agriculture, financial services and telecommunications.

Two-way trade between Malaysia and the United States totaled US$44 billion (€33.6 billion) in 2005, which officials say will double by 2010 if a free trade pact is signed.

The key obstacle to the talks is Malaysia's affirmative action program that awards government tenders to Malay-owned companies to give them an advantage in competing with the wealthier Chinese minority. While some government contracts are open to bids from foreign companies, Washington wants more clarity and transparency in the bidding process.

Recently, U.S. Ambassador to Malaysia Christopher LaFleur and U.S. lobby groups have urged Malaysian officials to finish the agreement before Bush's fast-track authority expires.

Malaysian Trade Minister Rafidah Aziz has said the government will not alter the affirmative-action policy.

"Our stand has also been made known to the U.S. government by Minister Rafidah Aziz," Najib told reporters. "Malaysia's stand is that discussions will be ongoing until a time when an understanding or agreement is reached."

Other sticking points in the negotiations are differences over liberalizing Malaysia's services sector and highly protected car industry, its ban on majority foreign ownership of banks, its poor protection of intellectual property rights, and labor and environmental issues.

Malaysian rights activists and political analysts say the trade agreement would put local farmers out of work, lead to job losses, erode workers' rights and end the availability of cheap generic drugs for those with AIDS and other diseases.'

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Item 3

Free trade deal cannot make deadline, says US
18 Mar 2007

WASHINGTON, SUN: The United States government on Friday all but ruled out the chances of a free trade deal with Malaysia before a crucial deadline expires in two weeks.

Steve Norton, a spokesman for US Trade Representative Susan Schwab, said the Malaysian Cabinet remained locked in debate about crucial provisions of the deal, including government procurement rules.

After the last round of talks last month, Malaysia had informed the US that it needed more time to develop a political consensus in favour of the ambitious pact, he said.

"That process is continuing in the Malaysian Cabinet. But I think it’s clear at this point that getting the free trade agreement done under the current TPA (Trade Promotion Authority) is improbable."

The timetable is tightening because President George W. Bush will lose his TPA, which allows deals to be fast- tracked through Congress, on July 1.

The FTA negotiations need to be wrapped up by the end of this month to give Congress the requisite time of three months to consider the deal.
With that deadline just two weeks away, time has virtually run out, Norton conceded.

"Having said that, we’re going to continue meeting and will probably have further discussions in the next few weeks

"You don’t want to let negotiations that have been going on for the best part of a year to just disappear."

The two countries have held five rounds of talks but negotiations have bogged down over 58 unresolved issues, and no further rounds have been scheduled between the US and its 10th largest trading partner.

"The government fully understands the thinking and concerns of the people on the matter," Prime Minister Datuk Seri Abdullah Ahmad Badawi had said following an inconclusive Cabinet meeting on March 7.

"I would like to assure that the nation’s interest will always be safeguarded and would not be sacrificed in any way."

Minister of International Trade and Industry Datuk Seri Rafidah Aziz insisted after last month’s round that the talks would continue, and has said both parties were trying to resolve outstanding obstacles informally. -

AFP