Malaysia and the United States have terminated the negotiation of a bilateral free trade deal. While many Malaysians felt that Malaysia has finally gotten rid of this unequal Malaysia-US Free Trade Agreement (MUSFTA), there is a need for Malaysia to ponder on why MUSFTA could fail after going through eight rounds of negotiation since 2006. This failed trade negotiation has reflected the reality that in Malaysia's economic construction process, Malaysia has ignored or tried to outsmart the free trade negotiation pattern that is generally accepted by the international community as standard. Malaysia is afraid that other countries might have already noticed Malaysia's failed trade agreement with the United States. It is likely that other nations would not agree with the way Malaysia handles bilateral Free Trade Agreement (FTA). As such, when other countries want to engage the FTA with Malaysia in the coming days, they will give Malaysia very specific requirement as a base to negotiate for trade deal.
Maintaining National Dignity
Through this failed experience, the Malaysian Government should realize that in terms of logical global economic trend, it is difficult for Malaysia to insist on using traditional economic policy to negotiate with another country at trade negotiation table.
Another lesson the Malaysians can learn from this failed MUSFTA experience is that the maintenance of the national dignity should involve the full cooperation of all citizens.
Protection of Intellectual Property Right
In retrospect, the trade issues involved at MUSFTA were quite basic issues that the international community has considered norm. In principle, Malaysia should understand that when Malaysia talked to the US trade negotiation team, those trade issues and items that both parties put on the negotiation table, including issues such as lowering tariffs, opening trade market, management of workers' rights plus issues relating to the protection of Intellectual Property Right (IPR) and environment have already been considered as global consensus. As such, the US requests for the US companies like Microsoft or GE's products to enter the Malaysian market as well as issues on strengthening environmental conservation were but normal request. This is also the global trend when booming developing countries begin to seek FTA with other countries.
Since those MUSFTA negotiation items and issues were also what many countries engaging in trade deals would pursue vigorously, negotiations based on those suggestions have become rule of the game in the international community. As such, there is a need for Malaysia to follow such rule of the trade game when engaging FTA with other countries.
It would be useful for Malaysia to, based on the eight rounds of MUSFTA negotiation, to review FTA negotiation stand from both sides of the view and understand why MUSFTA could finally fail to go through.
It seems that at the seventh round of trade negotiation, trade negotiation representatives from both countries have already narrowed down trade differences substantially leaving about 20 items for further discussion. Areas that were close to reach mutual agreement have included trade in services, pharmaceuticals, and intellectual property. However, unexpectedly, at the eighth round of MUSFTA negotiation table, the US trade negotiation team suddenly requested the binding tariff ceiling condition of few hundred products, such as the tariff rate of not more than 10 percent on agricultural products, and not more than 20 percent tariffs on industrial products, In additional, the US trade negotiation team also quoted the General Agreement on Trade in Services and required Malaysia to have a substantial opening up of Malaysia's financial services, telecommunications, tourism, transportation; and other ideas for the creation of new market. To Malaysia, the sudden expansion of items for the negotiation of trade deal at the eighth round of trade negotiation was quite massive and the impact of it was far-reaching. Apparently, at the eighth round of MUSFTA negotiation, the United States has taken advantage of Malaysia's weakness in wanting to seal MUSFTA deal quickly. As such, the United States has asked for additional items for tariff reduction. However, it was also a fact that some of the tariffs on goods and products in the Malaysian market were indeed quite high. In addition, the doors of some of the market and services in Malaysia were also very tightly guarded without opening them up for fairer negotiation. Malaysia should learn from this experience that during critical period of trade negotiation, good communicate with negotiation partner would be beneficial for the removal of trade barriers.
On the negotiation on environmental protection, the United States did not have thorough understanding of the implementation of environment protection in Malaysia. It could also because information received by the United States on Malaysia's effort to do conservation work was different from the actual situation in Malaysia. If Malaysia and the United States could strengthen communication in environmental protection work, it would be beneficial to help Malaysia's work on conservation of nature at the same time to reduce the misunderstanding of the United States over Malaysia's effort in conservation of nature.
Trademark and Patent Violations
However, on IPR negotiations, the United States insisted that patent law under negotiation should also include the importation of genuine goods that universally consider without "prohibition." The United States also repeatedly pressed the issue that Malaysia's judicial authorities should severely punish trademark and patent violations. The stand taken by the United States over the IPR issue has given Malaysia a negative impression that the United States tried to intervene with Malaysia's legislative and judicial independence. Therefore, Malaysia deeply regret that, as a country that so proudly hails the operation of the separation of powers and checks and balances to take tough stand and total disregard of Malaysia's judiciary independence was indeed not acceptable during MUSFTA negotiation. Similarly, the country also regret the Malaysian representatives have failed to stand firm on what they aimed to achieve for MUSFTA. Instead, they have taken advantage of the intention of the US companies like Microsoft in wanting to open their market share in Malaysia to set a precondition for the United States to allow the bumiputera (the Malays) to enjoy preferential treatment in their share market. The use of the Malay special rights to exchange for open market are what Malaysia deeply disagrees.
Why MUSFTA Failed?
Although MUSFTA failed to go through during the final stage of negotiation, there is a need for the Malaysian Government to reflect on a trade deal that failed.
First, against the accusations coming from the United States, the Parliament should accelerate the enactment of labor rights and environmental protection legislation. The enactment of these laws should eventually help the Malaysian Government to reduce pressure coming from home and abroad. Second, Malaysia should continue to keep the US trade mission posted on information on Malaysia's enactment of trade laws such as the labor laws. There is also a need for the Malaysian Government to show to the world that Malaysia would take concrete action in the implementation and executive of these laws. This is because according to the US trade representatives who directly involved in MUSFTA negotiation, they have remarked that Malaysia was only good to file paperwork but could not produce concrete result of what they put on paper. As such, the United States has lost confidence and patience to continue the FTA negotiation with Malaysia. In other words, what the US trade team demanded was concrete results, but a nice packaged copies of "Program."
Finally, whether it is in the lowering tariffs, opening markets, strict enforcement of intellectual property protection provisions, as well as the implementation of the provisions of the conservation of wild animals, it is inevitably that the sealing of these deals with a foreign country will bring inconvenience to companies and individuals. However, if the Malaysian Government put the national interest as the top priority, all Malaysians, including NGOs should abandon their selfish needs or self-centered perspective, so that Malaysia can move toward trade liberalization, internationalization, and modernization in the new era.
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