The Proposed U.S.-Malaysia Free Trade Agreement (CRS Report for Congress)
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| Release Date |
Revised Jan. 26, 2009 |
| Report Number |
RL33445 |
| Report Type |
Report |
| Authors |
Michael F. Martin, Analyst in Asian Trade and Finance |
| Source Agency |
Congressional Research Service |
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Summary:
This report addresses the proposed U.S.-Malaysia free trade agreement (FTA). It provides an overview of the current status of the negotiations, a review of the 2008 talks, an examination of leading issues that have arisen during the negotiations, a review of U.S. interests in the proposed agreement, a summary of the potential effects of a FTA on bilateral trade, and an overview of the legislative procedures to be followed if the proposed FTA is presented to Congress for approval.
The proposed U.S.-Malaysia FTA is of interest to Congress because (1) it requires congressional approval; (2) it would continue the past trend toward greater trade liberalization and globalization; (3) it may include controversial provisions; and (4) it could affect trade flows for certain sensitive goods and industries in the United States.
Since the U.S. Trade Representative announced on March 8, 2006, the Bush Administration's intent to negotiate a free trade agreement with Malaysia, eight rounds of negotiations have been held. A proposed ninth round of talks scheduled for November 2008 were postponed until after President Barack Obama's inauguration once it became apparent that several outstanding issues remained unresolved. Since the postponement, Malaysia has suspended the bilateral negotiations, possibly in response to U.S. support for Israel's military operations in Gaza.
Efforts in 2008 to complete the FTA negotiations by the end of the Bush Administation were unsuccessful. There is general agreement that one major "sticking point" is Malaysia's government procurement policies, which give preferential treatment for certain types of Malaysian-owned companies. Other key outstanding provisions of the possible FTA as of the end of 2008 were intellectual property rights protection, protection of Malaysia's agricultural and automotive industry, and trade in services.
Areas of particular interest to U.S. exporters include a reduction of Malaysian trade barriers to automobiles and certain agricultural products, provisions for the enforcement of intellectual property rights, and broader access to Malaysia's service sectors such as financial services, telecommunications, and professional services.
Both nations could potentially see economic benefits from the proposed FTA, but there will be both winners and losers in both nations, as well as in other nations not part of the bilateral agreement. Overall bilateral trade flows would probably rise, possibly at the expense of some domestic and foreign manufacturers and their workers. In 2007, the United States was Malaysia's largest trading partner, while Malaysia was the United States' tenth largest trading partner. The United States was Malaysia's top export market and its second largest supplier of imports in 2007.
In addition, the United States may also accrue some political benefits from the proposed FTA. An FTA with Malaysia would strengthen U.S. ties with a moderate, democratic Muslim nation. It would also support U.S. efforts to be viewed as more engaged in Southeast Asia.
This report will be updated as circumstances warrant.
