	Overview of the Current Status of Negotiations

On March 8, 2006, then U.S. Trade Representative (USTR) Rob Portman announced and notified Congress of the Administration's intent to negotiate a free trade agreement (FTA) with Malaysia.. At the time, then USTR Portman indicated that he thought the negotiations could be completed "within a year." A proposed ninth round of talks were postponed until after President Barack Obama's inauguration. Conserted efforts to complete the negotiations of the free trade agreement (FTA) before the end of the Bush Administration were unsuccessful as talks foundered on a number of key issues. These include Malaysia's government procurement policies (which give preferential treatment to bumiputera -owned companies), market access for U.S. companies into Malaysia's services sectors (in particular, financial services), provisions for intellectual property rights (IPR) protection, and market access for U.S. exports of automobiles and agricultural crops. After Israel launched "Operation Cast Lead" on December 27, 2008, various political figures and interest groups in Malaysia called for a boycott of U.S. products and the suspension of the FTA talks to protest U.S. support for Israel's military operations in Gaza. Review of 2008 Negotiations

At one time, there were to be three rounds of talks in 2008, to be held in January, July and November, respectively. There will be no hard feelings." Ambassador Keith, stated that the United States was interested in concluding the FTA negotiations "as early as possible in the new administration." Malaysia has recently tightened its laws on and stepped up enforcement of protection of intellectual property, but problems still remain. Interests, Benefits and Potential Opposition

The proposed U.S.-Malaysia FTA is of interest to Congress because: (1) it requires congressional approval; (2) it would continue the past trend toward greater trade liberalization and globalization; (3) it may include controversial provisions; and (4) it would affect certain trade flows that would, in turn, affect U.S. businesses or farmers, particularly import-competing industries and those exporting to Malaysia. Several Malaysian industries have been generally supportive of the proposed FTA, principally because they believe that they will benefit from greater access to the U.S. market. As a moderate, democratic Muslim nation, Malaysia plays a strategic role in U.S. foreign policy. FTAs also create winners and losers. An FTA with Malaysia would be the third FTA negotiation by the United States with a Southeast Asian nation, following the U.S.-Singapore FTA that came into effect on January 1, 2004, and a proposed U.S.-Thailand FTA whose negotiations are currently stalled. For more information on the relative tariff rates of the two nations, see Appendix C .
The potential impact of an FTA depends on various other factors, including the relative size of the two nations, the amount and nature of their bilateral trade flows, the size of bilateral FDI in each nation, as well as existing trade relations with other nations. The Malaysian Economy

 Table 1 provides a summary of Malaysia's key economic indicators. According to U.S. trade figures, Malaysia was the tenth largest trading partner of the United States in 2007. Trade in Services

According to current U.S. data, Malaysia is not and has not been a major services trading partner for the United States (see Table 5. The United States already is Malaysia's top export market for merchandise goods.
This report addresses the proposed U.S.-Malaysia free trade agreement (FTA). It provides an overview of the current status of the negotiations, a review of the 2008 talks, an examination of leading issues that have arisen during the negotiations, a review of U.S. interests in the proposed agreement, a summary of the potential effects of a FTA on bilateral trade, and an overview of the legislative procedures to be followed if the proposed FTA is presented to Congress for approval.
The proposed U.S.-Malaysia FTA is of interest to Congress because (1) it requires congressional approval; (2) it would continue the past trend toward greater trade liberalization and globalization; (3) it may include controversial provisions; and (4) it could affect trade flows for certain sensitive goods and industries in the United States.
Since the U.S. Trade Representative announced on March 8, 2006, the Bush Administration's intent to negotiate a free trade agreement with Malaysia, eight rounds of negotiations have been held. A proposed ninth round of talks scheduled for November 2008 were postponed until after President Barack Obama's inauguration once it became apparent that several outstanding issues remained unresolved. Since the postponement, Malaysia has suspended the bilateral negotiations, possibly in response to U.S. support for Israel's military operations in Gaza.
Efforts in 2008 to complete the FTA negotiations by the end of the Bush Administation were unsuccessful. There is general agreement that one major "sticking point" is Malaysia's government procurement policies, which give preferential treatment for certain types of Malaysian-owned companies. Other key outstanding provisions of the possible FTA as of the end of 2008 were intellectual property rights protection, protection of Malaysia's agricultural and automotive industry, and trade in services.
Areas of particular interest to U.S. exporters include a reduction of Malaysian trade barriers to automobiles and certain agricultural products, provisions for the enforcement of intellectual property rights, and broader access to Malaysia's service sectors such as financial services, telecommunications, and professional services.
Both nations could potentially see economic benefits from the proposed FTA, but there will be both winners and losers in both nations, as well as in other nations not part of the bilateral agreement. Overall bilateral trade flows would probably rise, possibly at the expense of some domestic and foreign manufacturers and their workers. In 2007, the United States was Malaysia's largest trading partner, while Malaysia was the United States' tenth largest trading partner. The United States was Malaysia's top export market and its second largest supplier of imports in 2007.
In addition, the United States may also accrue some political benefits from the proposed FTA. An FTA with Malaysia would strengthen U.S. ties with a moderate, democratic Muslim nation. It would also support U.S. efforts to be viewed as more engaged in Southeast Asia.
This report will be updated as circumstances warrant.