Infernal Ramblings
A Malaysian Perspective on Politics, Society and Economics

US-Malaysia FTA Helps Malaysia More?

Written by johnleemk on 11:06:55 pm Mar 12, 2007.

I read in the papers today that according to the Federation of Malaysian Manufacturers (FMM), the potential free trade agreement with the United States will help us more than it helps them.

Though I'm inclined to take their word with a grain of salt since they do have some vested interest in the outcome of the FTA negotiations, it would be foolish to simply brush aside what these industrialists have to say.

According to the FMM, several of our goods are subject to heavy tariffs in the US, some as high as 48% (for shoes). Furthermore, we are missing out on the lucrative market (reportedly as large as RM875 billion) created by the US government's procurement programme, since we are not signatories to the relevant World Trade Organisation agreement, nor are we currently part of an FTA with the US.

Were we to have an FTA, our manufacturers would be able to sell their goods to the US government and its subsidiaries, which would mean hefty profits for us. On the other hand, it's unlikely many US companies would sell much more to our government than they are already selling.

According to the FMM, the FTA, if it were inked, would allow our textile industry to double its exports, from RM3 billion currently to RM6 billion. The FMM also estimates that 20,000 jobs would be created in the textiles sector alone by the FTA.

I am rather dissatisfied, though, with how the FMM brusquely dismissed concerns about generic drugs. They stated that the drugs would remain available, but without explaining how or why. They also noted that apparently US drug companies are unhappy with the government using their clinical data as a basis for approving generic drugs based on those made by the US firms.

Their noting of it, however, failed to highlight how crucial this is. By forcing generic drug manufacturers to gather data all over again, when it is actually publicly available, the US drug firms will be exercising their monopoly power to create a less than optimal outcome.

Were the FTA to support this abuse of monopoly force, it would no longer be a true free trade agreement, since this would actually lead to less, not more, trade, and under unfree conditions.

Aside from that, though, and even assuming that part of what the FMM is saying is mere hyperbole, it's clear that the FTA carries tremendous benefits that should not be dismissed outright. The increased competitiveness it would bring to our industrial and service sectors would be a welcome relief from the protectionist policies we have suffered under in the past.

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