Malaysia recommended for FTA talks with US
The Star, Malaysia
17 March 2005
Malaysia recommended for FTA talks with US
BY JOHAN FERNANDEZ IN NEW YORK
MALAYSIA is among five countries that the National Association of Manufacturers (NAM) has recommended that the US administration explore the possibility of negotiating free trade agreements (FTA) with.
The other four countries are Egypt, India, New Zealand and South Korea.
In a report, NAM placed another five - Brazil, China, European Union, Japan and Taiwan - on the “FTA Watch List”, believing that it was not time yet to recommend them for active consideration.
The association, headquartered in Washington DC, is the nation’s largest industrial trade association representing small and large manufacturers in every industrial sector in all 50 states.
It undertook a quantitative analysis of all countries to which US exported at least US$1bil in manufactured goods annually, and after eliminating countries that already had FTAs, found there were only 18 trading partners in this category.
The top 10 countries in this group were Brazil, China, Egypt, The European Union, India, Japan, Malaysia, New Zealand, South Korea and Taiwan.
After extensive discussions within NAM’s International Economic Policy Committee, a consensus was reached to recommend to the administration to begin FTA discussions with Egypt, India, Malaysia, New Zealand and South Korea and to place the other five on the watch list. Except for Egypt, the other countries are from the Asia-Pacific region.
Malaysia is 10th on the list of US trading partners and in 2003; US exports to Malaysia totalled US$9.58bil.
NAM said Malaysia’s strong economic growth and large bilateral tariff disparity made it an interesting FTA candidate from a manufacturer’s viewpoint.
Malaysian tariffs on US manufactured goods average 6.6% - seven times as high as the 0.9% average US tariff on imports from Malaysia.
“The imbalance of market opportunity is further shown in that 85% of Malaysia’s exports to the US already enter duty-free,” it said.
In addition, Malaysia had bound tariffs that were more than twice as high as its applied rated, and could legally snap back to these higher tariffs at any time.
It said that Malaysia’s expected rapid economic growth meant that the US$10bil of US manufactured goods exports in 2003 could double by 2010 to about US$22bil.
By NAM’s methodology, an FTA could increase that growth by one-fourth and the reduction of non-tariff barriers in Malaysia could further add to US exports.
The report said last year’s formation of the bilateral Trade and Investment Framework Agreement (TIFA), between Malaysia and the US provided a basis on which to enter into discussions of trade issues and on detailed discussions of what a bilateral trade agreement might look like.
It also said FTAs were the quickest and most practical way to eliminate the imbalance in market access between the US and other countries.
The average US import duty on imported manufactured goods was 1.8%, and excluding textiles and apparel, was only 0.9%
“Our goal is to level the global playing field for American manufacturers, both by pressing for market-determined currencies and by lowering or eliminating foreign trade barriers,” it said.
