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US official: Free trade pact with Malaysia may flop if no firm progress in talks next week

US official: Free trade pact with Malaysia may flop if no firm progress in talks next week

A proposed Malaysia-U.S. free trade pact may falter if negotiators fail to make firm progress in bridging differences at a fifth round of talks next week, a U.S. official warned on Wednesday.
Negotiators will meet again for a week starting Monday in Malaysia's Sabah state on Borneo island, where they will seek a compromise over opening up of Malaysia's services and government contracts _ two key hurdles to a deal _ said Deputy U.S. Trade Representative Karan Bhatia.
Labor and environmental issues are also holding up talks, he said.
"This is a major window of opportunity we have here in the fifth round," Bhatia, who arrived Monday for a three-day visit, told reporters.
"If we were not to see significant progress, if we were not to see the two sides moving together toward a closure, I think it will be very difficult to see how then it can happen in the time remaining," he said.
Negotiators are under time pressure because the U.S. wants to get a Congressional vote on the pact before President George W. Bush's special "fast-track" trade authority expires on July 1. That allows him to submit a deal to Congress for a straight up-or-down vote without amendments.
But the proposed trade agreement must wrap up by end of March so U.S. lawmakers have time to review it before a vote.
Malaysia is the United States' 10th-largest trading partner, with US$44 billion (euro35 billion) in two-way trade in 2005. Officials say that figure will double by 2010 if the pact is signed.
Bhatia said he is "more optimistic" that a deal can be reached after meeting several Malaysian government ministers this week.
He said that the U.S. is not seeking to "undo or undermine" Malaysia's policy of awarding government tenders to ethnic Malay-owned companies, but that Washington wants more clarity and transparency in bidding for government contracts that are open to foreign firms.
Malaysia has said it will not budge on the policy, mandated by a 1970 preferential program that gives housing, contracts and job privileges to help Malays economically, and has shut out local non-Malay companies and foreign firms from bidding for a large chunk of government tenders.
Malays make up about 60 percent of Malaysia's 26 million people. Ethnic Chinese account for a quarter, and ethnic Indians about 10 percent.
"We've heard the Malaysian government clearly, but there are some concerns that need to be addressed in the broader tendering areas," Bhatia said. "I think the two are reconcilable."
He dismissed concerns that Malaysian companies would be gobbled up by bigger U.S. rivals if the country's services sector is liberalized. He said U.S. firms often partner with local companies in ventures abroad and help them grow and become more competitive.
Malaysian Trade Minister Rafidah Aziz said earlier this month that the pact is unlikely to be concluded in time to meet the July 1 deadline, due to the two sides' differences.
Bhatia said that Rafidah met with U.S. Trade Representative Susan Schwab on the sidelines of the World Economic Forum in Davos last week, and that both of them had recommitted to conclude talks by end of March.
"We have done enough work to bring this (deal) to a closure, but it's going to require political determination," he said. "If there is no substantive progress in the fifth round, both sides need to do stocktaking on how best to proceed."
If talks founder, he warned it could drive investors away and "breed frustration" in their bilateral economic ties.


Updated : 2021-10-26 14:43 GMT+08:00