News Straits Times Press, 31 October 2006

Malaysia, US in key round of FTA talks

A CRUCIAL third round of Malaysia and US Free Trade Agreement (FTA) negotiations kicked off yesterday as both countries ploughed into the contentious trade and market access and government procurement issues.
Negotiators were unavailable for comment.

American Malaysian Chamber of Commerce president Vince Leusner, however, said he expects discussions to become more "robust" this time around as the negotiators have developed familiarity and identified sensitive issues.

"For both governments, skilled in trade, they would not have entered into negotiations unless they are reasonably sure they can consummate an agreement," he told Business Times.

The first round of negotiation were held in Penang in June and the second in Washington DC in July. The third round was originally scheduled for September but was postponed to yesterday.

The Malaysian delegation to the talks was led by International Trade and Industry Ministry's newly-appointed secretary-general Datuk Abdul Rahmat Mamat.

Assistant US Trade Representative for Asia Pacific, Barbara Weisel, who heads the US team, had projected negotiations would likely be concluded by early next year, ahead of a July 1 2007 deadline to sign the FTA.

Bilateral trade between the two countries surpassed US$44 billion (RM161.48 billion) last year. The US is Malaysia's single largest trading partner, while Malaysia is the 10th largest trading partner for the US.

The FTA initiative is expected to make Americans more aware of Malaysia as an ideal place to do business and see an increase in foreign direct investments, Leusner said.

Malaysia is well-known among the US semiconductor and oil and gas trade, but is relatively unknown to the financial services and communications industry such as advertising or media, he noted.

"In the areas of research and development (R&D) where American pharmaceutical and biotechnology companies spend billions of dollars, Malaysia could be in for a windfall if it was able to attract a fraction of that spending.

"But to do so, the second-tier Intellectual Property laws in Malaysia have to be improved in order to make these companies feel secure enough to divert their R&D from the US or Europe," he said.

On growing concerns that local generic drug makers might lose out to US drug companies, Leusner said this was not the case based on previous FTAs negotiated with the US.

"In fact, our analysis of the pharmaceutical market in countries that have recently signed FTAs with the US showed that the generics industry has done exceptionally well," Leusner said.

A bilateral FTA will benefit some large semiconductor manufacturers based in Malaysia as they can look to a level-playing field in the Government procurement area in the US, he added.

Government procurement is one of the top five issues being negotiated under the FTA talks apart from intellectual property rights, trade in services (including financial services), transparency in awarding contracts and tariffs and duties for the automotive sector.

Leusner suggested that Malaysian companies, through the FTA, can also explore opportunities in the US Government procurement market by taking advantage of US laws which also favour minority groups through preferences given to businesses run by women or Americans of African or Latin American descent.

"For Malaysian companies to participate in a big way in the US Government procurement market, there will have to be some agreement on what suits them, where there is some sort of volume transactions with a preference group like bumiputera or low income group," he said.

For example, the US-Singapore FTA has opened the US Government procurement, worth US$200 billion (RM728 billion), to Singapore companies, ranging from Singapore Airlines to traditional Chinese medicine firm Eu Yan Sang, he noted.