’Win-win situation’ expected from FTA
The Star, Malaysia
’Win-win situation’ expected from FTA
By Keith Hiew
14 March 2006
PETALING JAYA: While US ambassador to Malaysia Christopher LaFleur last week mentioned about the advantages for Malaysia should its free-trade agreement (FTA) with the US materialise, Malaysian economists prefer to look at both sides of the coin.
The issue will be who stands to gain more from the pact should the FTA go ahead, and local sectors that will be affected.
Dr Yeah Kim Leng, chief economist of RAM Consultancy Services Sdn Bhd, said the FTA would not be a “zero-sum game”, especially in the long term, as it could create a “win-win situation”.
“Despite concerns that we might need to lower our tariff rates to accommodate US companies setting up shop here, the flipside would be a larger volume of US direct investments entering Malaysia,” Yeah told StarBiz.
Trade losses, he said, should not be a concern, as Malaysian importers would then have a wider choice of US products to choose from, besides goods from other foreign countries.
While an FTA would most definitely mean a levelling of the playing field in the services industries such as finance and telecommunications, Yeah said it was another step Malaysia was taking towards liberalisation.
A slight increase in imports from the US might also not be a bad thing, he said. “There is an uptrend among major Asian currencies, which would increase domestic demand. If technology product demand rises in line, we could see an indirect technological upgrading here,” Yeah added.
Having said that, Yeah does not foresee any significant impact on the trade balance between the two countries even if an FTA goes through, as the tariff rates in the US are already at a low 3.7%.
“US firms coming into the country as joint ventures with Malaysian parties are also beneficial for Malaysians with the pooling of US expertise,” he said. He added that local intellectual property rules might have to be revamped to further enhance transparency.
Meanwhile, another economist from OSK Securities told StarBiz that US companies interested in Malaysia would no doubt benefit from the lowering of tariffs.
“The relatively protected industries such as the financial and automotive sectors would have to open up and be more willing to negotiate with foreign companies,” the economist said.
He said the FTA would in turn encourage more US firms to take Malaysia seriously as an investment destination and signal Malaysia’s commitment as a trade partner. Malaysian firms could also be seeing more diversified exports to the US and that may increase Malaysia-US trade surplus instead of reducing it.
The economist foresees challenges in the FTA talks, due to conclude early-2007, but “working under a dateline may mean both parties are more willing to give concessions.”
