As the world's leading economic power, the United States has sought to use various instruments to enhance its trading position with other countries. In recent decades, the US has increasingly looked to bilateral free-trade agreements (FTAs) to this end.
On March 8, 2006, the then US president George W. Bush announced that negotiations had begun with Malaysia for a free-trade agreement. He noted that Malaysia was the US' 10th largest trading partner, and the US was Malaysia's largest export market.
That same day, the US and Malaysia launched talks on the FTA. The US specifically hoped to expand American exports and bolster a "moderate" Muslim ally — "a country that has been at the forefront of the economic dynamism that has transformed Asia in recent years".
Bilateral trade stood at US$44 billion, and Malaysia's imports from the US were more than Indonesia's and India's. The US expected increased trade in agricultural products, manufactured goods, and, most of all, services, including telecommunications, energy, healthcare and finance.
The two nations hoped to conclude the agreement in 2006 to take advantage of the president's trade promotion authority (TPA) or "fast track", which was set to expire on July 1, 2007.
The announcement of the
FTA negotiations came after months of preparation following a May 2004 bilateral trade and investment framework agreement.
Malaysia's announcement on March 7, 2006, that it would re-open its markets to US boneless beef paved the way for the FTA talks.
The most politically sensitive issues were expected to be, from the American side, the export of textiles, and automobiles and financial services to Malaysia.
Meanwhile, Malaysia had already begun relaxing financial market restrictions. The use of FTAs reflects political and economic wants. Many countries believe that freer trade brings economic benefits.
The US, in particular, stresses free trade as an effort to shape
the world into a rational, western image. Globalisation of trade and commerce is seen as key to countering Islamic extremism.
After the initial announcement that the two countries would negotiate an FTA, talks followed, with a total of five rounds beginning in March 2006 and ending in May 2007.
The two sides sought to open the Malaysian market to US financial services and automakers, and open the American market to rubber, timber, garments, plastics, chemical and agricultural products, optical and scientific instruments, and electrical and electronic goods, by dropping duties.
Malaysia also sought technical support to give it an advantage over other Asian countries, making it attractive for biotechnology and for high-end technical research and development.
The breakdown in talks was mainly due to Malaysian concerns about access to generic medications and opposition from the Malaysian agricultural sector, as well as US concerns about intellectual property, patent protection, labour laws, environmental standards, and government procurement procedures.
The talks stalled, leaving no chance of an agreement before the TPA expired.
Each side had "no-go" areas. Market access issues, such as the entry of US companies into Malaysia's protected financial, automobile and services sectors were discussed, but Malaysia refused to talk about affirmative action policies favouring Bumiputeras.
Since the TPA has long expired, any enabling legislation would have to go through open-ended congressional consideration. In the current scenario, economic nationalists who are influential in President Joe Biden's administration are bringing many changes to American trade policy.
For example, the Biden administration has focused on "a worker-centred trade policy that fosters inclusive prosperity", and not on restarting pending talks or new FTAs.
Nevertheless, little has changed, and nothing has happened that negates the value of an FTA.
Contentious issues, such as generic medications or government procurement procedures, should not stand in the way. They should instead be put on the back burner.
A longer timetable ought to be set to resolve outstanding issues prior to arriving at optimal solutions. Both sides should press forward with the negotiations based on foresight and commitment.
* The writer is a widely quoted independent analyst, previously attached to a leading local think tank. He completed his graduate studies at Macquarie University, Australia