How The Partnership Flourished
Malaysia is a country found in the Southeast Asian region. It is the southernmost nation of the said area and is notable for its very sound economy. As a developing nation though, it had its own share of downfalls. One fact that supports this statement is the slowing down of economic growth in the 1980's due to decreasing prices and demand for its prime export commodities. Agriculture played a vital role in its development with rice as its major subsistence crop.
Around two-thirds of Malaysia's exports earnings relied upon rubber and tin until the 1960's. Back then, it supplied about one-fourth of the world's tin. Recently, the market had improved with petroleum from offshore reserves as well as palm oil comprising bulk of its exports. After the 1960's, the industrial sector boomed rapidly. Electronic components especially semiconductor chips led the manufacturing side. Other essential industries are electrical machinery and textiles and clothing.
Malaysia patterned its government with the British system though it had federal policies on its own. Despite following the pattern of the Britons, Malaysia did not hinder itself from negotiating with other vital nations in world trade. Since the country and its officials believe in independence, it welcomed free trade with a big hand. As part of this, it had strengthened an alliance through diversity and expansion with that of United States.
The US now ranks as Malaysia's largest trading partner and foreign investor. Foreign American firms on Malaysian ground focused on electronics, machinery, energy and manufacturing. The Asian country on the other hand, ranks tenth among all foreign trading partners of the US. With more than $40 billion amount of trade between the two nations, a friendship flourished. As of June 2006, the two governments had launched a negotiation for bilateral free trade between the two nations.
Major Exports and Imports Between Malaysia and US
The primary export commodities of Malaysia to other nations in international trade are electronic equipment, wood products, petroleum, liquefied natural gas, rubber, palm oil, chemicals and textiles. The major export partners are US, Singapore, Japan, China, Hong Kong and Thailand. Malaysian imports from other countries are comprised of electronics, petroleum products, vehicles, iron and steel, machinery, plastics and chemicals. Its primary suppliers are Japan, US, Singapore, China, Taiwan, Thailand, South Korea and Germany.
The US Census Bureau has recorded the trade of US with respect to other nations. Regarding the country's trade with Malaysia, the total amount of exports as of October 2008 was recorded at $11.31 billion while the imports from the said Asian nation made $26.69 billion on US grounds. For the year 2007, the following statistical data are available:
Launching of US-Malaysia Free Trade Agreement
- Malaysian Exports to US. The total amount of exports of Malaysia to US for 2007 was $32.79 billion. Of this grand total, computers topped the prime commodities entering the US boundaries with sales amounting to $8.27 billion or 25.22%. Other goods which topped this category were: computer accessories, peripherals and parts; telecommunications equipment; semiconductors and related devices; clocks, portable typewriters and other household goods; furniture, household items and baskets; other scientific, medical and hospital equipment; food oils and oilseeds; radios, phonographs, tape decks and other stereo; and apparel and household goods from cotton. The last product earned total sales of $509.77 million which is 1.55% of the year's total.
- Malaysian Imports from US. The imports from US to Malaysia made a remarkable stint in the market as well. The total recorded by the US Census Bureau under this category is at $11.68 billion. Semiconductors topped the list of these products by making an income of $5.03 billion which is around 43.07% of the year's total. Other commodities found on top of the charts were: computer accessories; other industrial machines; telecommunications equipment electric apparatus; steelmaking materials; measuring, testing and control instruments; civilian aircraft engines; civilian aircraft parts; and minimum value shipments. Minimum value shipments earned a spot on the top due to the sales it made amounting to $156.33 million or 1.33% of the year's total.
- Fastest-Growing US Exports to Malaysia. The goods traded between these two nations are earning cognizance in each other's markets. As evidence to this, US exports to Malaysia made excellent sales increases from 2006 to 2007. On top of the list were leather and furs with total earnings of $258 thousand which is commendable for a 4,300% increase. Other goods found under this group were: aircraft launching gear and parachutes; iron and steel mill products; metallurgical grade coal; and business machines and equipment. The last product made it to the top because of its $52.47 million earnings which is 298.36% higher than what it made in 2006.
- Fastest-Growing US Imports from Malaysia. For the goods coming from Malaysia sold in US markets, outstanding percentage sales increases were also noted. Topping the list was nickel which made an income for 2007 at $306 thousand or 5,100% higher than in 2006. Other noteworthy products on the chart were: pulp and paper machinery; engines for civilian aircraft; numismatic coins; and other military equipment. Other military equipment had total sales of $283 thousand in 2007 which made an increase of 589.58% from 2006.
Since their partnership, Malaysia and the United States have not yet made any trade agreement for their business. Currently on the works is the Free Trade Agreement (FTA) which was launched in June 2006. Among the vital portions of negotiating this pact included proposals on several issues such as:
Trade Disputes Brought About by the Lack of FTA
- Tariffs. The concerns along this line dwelled upon the higher imposition of tariffs on US imported goods compared to those of Malaysian imports. This has to be tackled in order to put the market on equal grounds and to avoid existing and future barriers in their trade relations.
- Motor vehicles. There were issues related to the restriction of importing US motor vehicles to Malaysian grounds. This is said to be hampering free trade especially that there is much contribution of motor vehicles to the prospering trade between the Americans and the Malays.
- New Economic Policy. This policy is said to be favoring more of the Malays. Since the US is the number one foreign investor on Malaysia's territorial jurisdiction, there is a need to at least revise the economic policy. Otherwise, American investors may be discouraged as vested interests of locals in the Asian nation are being favored in the policy.
- Investment Requirements. Under the New Economic Policy, there are several investment requirements that need to be addressed which are no longer necessary under free trade agreements in the future. There is a need to revise the section that handles this particular category.
The original Trade and Investment Framework Agreement between Malaysia and the United States started in 2004. Several years after the plans were made, there is still no concrete trade agreement governing the business relations of the two parties. With this, several conflicts were encountered and the barriers raised a lot of concerns. Export subsidies, intellectual property rights, pharmaceutical matters and other services were the main issues which also needed to be settled.
The reason for not coming up with a concrete Free Trade Agreement is intensified by several speculations on who will really benefit from the trade. Obviously, on the Malaysian side, critics have been intensifying issues saying that the US gains more if not most of the advantages of the FTA. Some of the issues presented were:
Trade Opportunities Between the Two Nations
- Competition. Since Malaysia is one of the expanding markets in Asia, there is that assumption that US is a bit threatened of its standing in world economy. This was even supported by facts of its rivalry with that of Europe, Japan and China. Some Malays felt that the Americans are doing trade with them to be able to maintain its leadership in the global economy scene.
- Negotiation. Again, Malays think that Americans are favored while the negotiation is being pushed through. They feel that there are more representatives from the US who were working for their own interests in the trading market. They also think that the US community are updated and consulted while the Malays know nothing about what is going on behind the negotiations.
While the US-Malaysia FTA and its objectives have not been realized yet, there is nothing that the two governments should be worried about. After all, their government officials are the ones dealing with each other hence they know very well what transpires during their discussions. Pushing through with the FTA is possible without thinking about what critics are saying.
More trade opportunities for US in Malaysian markets can be concentrated on. One good thing that Americans should take advantage of is Malaysia's hosting of the 2009 Global Outsourcing Conference. This is to be held to provide techniques on how to solve the global economic crisis which had affected a lot if not all of the nations in the world. This is a good way to start picking up the missing pieces of the puzzle.
The closure of large financial institutions in the US during the current year (2008) had made its way to hamper businesses in a lot of countries. With Malaysia's concern to the existing problem, the 2009 Global Outsourcing Conference will tackle issues that will lead to outsourcing opportunities. The conference opens chances for employment not only for the benefit of the Asian continent but for the entire world as well. Malaysia was chosen to handle the Asian leg because of the success of the Information Technology World Congress held last May 2008. This is something that the US should look forward to.
US-Malaysia Trade References