Washington Council on International Trade
US-Malaysia Free Trade Agreement: A Clear Winner for Washington State
Background: The United States and Malaysia share a diverse and expanding partnership. In March 2006, Malaysia and the United States announced intention to form FTA between the two countries. Despite missing the March 31, 2007 deadline in order for Congress to consider the proposed FTA before the Administration’s Trade Promotion Authority expired on July 1, 2007, both the United States and Malaysia remain committed to a successful completion of the negotiations.
U.S. - Malaysia Trade Facts:
- Economic ties are robust. The United States is Malaysia's largest trading partner and Malaysia is the sixteenth-largest trading partner of the U.S.
- The United States is the largest foreign investor in Malaysia on a cumulative basis. American companies are particularly active in the energy, electronics, and manufacturing sectors. The U.S. direct investment position in Malaysia for 2007 was $15.7 billion.
- There was $43.5B in two-way trade between the United States and Malaysia in 2008
- US exports to Malaysia have increased 38% since 2001, 742% since 1985
- Malaysia is the United States’ 5th largest trading partner in Asia
- Malaysia has the 3rd highest per capita income in ASEAN, and reflects a growing market for American exports.
- The United States is the 2nd largest exporter to Malaysia, behind Japan (which finalized a FTA with Malaysia in 2006)
- The United States is Malaysia’s biggest export market.
Washington State - Malaysia Trade Facts:
- Washington ranked 5th among U.S. States exporting to Malaysia 2006
- Washington accounted for 6% of all U.S. exports to Malaysia in 2006!
- WA was 3rd largest exporter to Asia from U.S. in 200
Why A US-Malaysia FTA is Good for the US:
- Bound tariff rates are 4 times higher in Malaysia compared to US (Bound tariffs are those tariffs at which a country has agreed to not increase the rate of duty beyond)
- Applied tariff rates are double that of US (These are the tariff rates applied by the country concerned)
- The National Association of Manufacturers estimates that US manufacturing exports to Malaysia could double by 2010 under an FTA.
- The US has a trade deficit with Malaysia. Leveling the playing field and reducing tariffs and non tariff barriers in Malaysia could remove this imbalance.
- Since it became independent, Malaysia's economic record has been one of Asia's best. Real gross domestic product (GDP) grew by an average of 6.5% per year from 1957 to 2005. It is important for US exporters to gain access to this market, so that they can benefit the most from the growing Malaysian economy.
- Nearly 85 percent of Malaysia's exports to the United States currently enter the U.S. market tariff-free, while U.S. exports are often faced with tariffs of six percent or more.
Why A US-Malaysia FTA is Good for Washington State:
- Malaysia was a $400 million market for U.S. agricultural exporters in 2005
- Washington State, is a major grower and exporter high value agriculture such as fruit, vegetables, nuts, and processed horticultural. Exports of these products are expected to increase under a Malaysia-U.S. FTA.
- Washington’s top export categories including electrical machinery, machinery, optic and medical instruments, aircraft, and plastic all stand to gain new market access.
The U.S. and Asia:
- The Malaysia – U.S. FTA Supports U.S. Engagement in Southeast Asia
- Southeast Asia among most vibrant, rapidly-growing regions of world and key U.S. market
- The 10 ASEAN economies:
- GDP of $2.7 trillion.
- Population of 570 million
- Represents the United States’ 4th largest export market ($50 billion)
- It is also collectively the United States’ 5th largest source of imports ($99 billion)
- The United States must quickly act if it wants to gain market share in Asia. Australia is aggressively forming FTA’s with Asian countries, and as a agricultural exporter, would be in direct competition with American agricultural exports.
Conclusion:
An FTA with Malaysia is a logical progression of U.S. trade policy. While there are important issues yet to be negotiated, we strongly support the initiative and believe it is in the best interests of the U.S. economy
Helpful Links
Description of benefits of FTAs
from the U.S. Government's Export Portal
from the U.S. Trade Representative
"The Pros and Cons of Pursuing Free-Trade Agreements"
from the Congressional Budget Office, July 31, 2003
U.S. - Korea Free Trade Agreement
Brief summary by the Office of the U.S. Trade Representative
Read. (pdf)