U.S. relations with Malaysia have been generally positive over the last few years. In addition, Malaysia and the United States appear to have conflicting views of the future of regional economic integration in East Asia. However, an unexpectedly weak showing for Badawi's political party, the United Malays National Organization (UMNO), and its Barisan Nasional (BN) coalition partners in the March 8, 2008 parliamentary elections may have implications for U.S.-Malaysian relations. Malaysia's 2008 Elections

UMNO and its coalition partners have been in power since Malaysia's independence in 1957. Among the people removed from the cabinet was Datuk Seri Rafidah Aziz, who had held the position of Minister of International Trade and Industry for over 20 years. In addition, opposition control of five of Malaysia's 13 states may also curtail Badawi's power. This came to be known as the "Malayan Emergency." The Prime Minister is the head of the Federal Government, which has 25 ministries. Each state has a state legislature. Malaysia has also called for ASEAN states to discuss defense issues as well as foreign and economic policy. According to Malaysia's trade figures, both Malaysia's exports to the United States and its imports from the United States declined in 2007, by 14.6% and 9.1% respectively. The government sees the formation of the proposed ASEAN Free Trade Area (AFTA), the trade liberalization and facilitation efforts of the Asia-Pacific Economic Cooperation (APEC), and the current efforts by the World Trade Organization (WTO) for greater liberalization of trade in goods and services as being consistent with its overall trade policy. U.S.-Malaysia Bilateral Trade

In general, trade relations between the United States and Malaysia are dominated by the outsourcing of the production of machinery, and electronic and electrical products by multinational corporations with operations within the United States and Malaysia. In addition, the United States and Malaysia concluded a trade and investment framework agreement (TIFA) in May 2004, are currently negotiating a free trade agreement (FTA), and are parties to various regional trade associations that are considering multilateral trade and investment agreements. Among the outstanding issues in the negotiations are: (1) market access for U.S. exports to Malaysia of agricultural goods, automobiles, and automotive parts and components; (2) market access for Malaysian exports to the United States of agricultural goods; (3) market access for U.S. services, especially financial services, in Malaysia; (4) Malaysia's enforcement of intellectual property rights (IPR) protection; and (5) Malaysia's government procurement system and its preferential treatment for businesses owned and operated by ethic Malays, or bumiputera . Other Aspects of U.S.-Malaysia Relations

Bilateral relations between the United States and Malaysia are viewed as having improved since Badawi came to power. In the past, the relationship suffered from what a U.S. official called "blunt and intemperate public remarks" critical of the United States by former Prime Minister Mahathir, who generally subscribed to a view of the United States as a neo-colonial power strongly under the influence of a coterie of Zionist Jews. The increasingly perceived comity of interests after September 11, 2001, improved the bilateral relationship. Within this context Ambassador Black made special reference to Malaysia's contribution to the war against terror in Asia.
This report discusses key aspects of the U.S.-Malaysia relationship (including economics and trade, counterterrorism cooperation, and defense ties) and the possible impact of Malaysia's 2008 elections on the future of the relationship.
In parliamentary elections held on March 8, 2008, the Barisan Nasional (BN), which has ruled Malaysia since independence in 1957, was struck by a "political tsunami" that saw it lose its two-thirds "supermajority" for the first time since 1969. Malaysia's major opposition parties won 82 of the 222 parliamentary seats up for election. In addition, the opposition parties won control of five of Malaysia's 13 state governments. The election results are widely seen as a vote against the current policies of the Malaysian government, which could have implications for relations with the United States.
Prior to the elections, the bilateral relationship has been generally positive and constructive, particularly in the area of trade. Malaysia is a key trading partner of the United States and is regarded as an effective and cooperative regional player in the war against terror. The United States and Malaysia also have informal defense ties including commercial access to Malaysian ports and repair facilities. Despite these positive dynamics, the bilateral relationship has at times been strained. Past differences have stemmed from disagreements between Malaysia's former Prime Minister Mahathir Mohamad and the United States over such issues as the internal suppression of dissent in Malaysia, the Israeli-Palestinian conflict, Iraq, globalization, Western values, and world trade policy. Relations are perceived as having improved since Abdullah Badawi became prime minister in 2003.
After years of strong economic growth, Malaysia has become a middle income country. Much of its gain in economic prosperity has come from the export of electronics and electrical products, with the United States as its top export market. According to U.S. trade figures, Malaysia exports over $30 billion of goods each year to the United States and imports over $11 billion from the United States.
The United States and Malaysia have enjoyed a positive trade relationship over the last few years, in part because both nations favor trade and investment liberalization in Asia. Malaysia is the United States' 10th largest trading partner. Building on their common perspective of international trade, Malaysia and the United States concluded a trade and investment framework agreement in 2004 and are currently negotiating a bilateral free trade agreement. Key issues still to be resolved in the negotiations principally revolve around market access for key goods and services in both the United States and Malaysia, and intellectual property rights protection in Malaysia. In addition, the dismissal of Malaysia's chief negotiator, Trade Minister Datuk Seri Rafidah Aziz, may complicate future talks.
This report will be updated as circumstances warrant.