I’m happy that the Democrats have taken over the House. They’re likely to take over the Senate too. Despite that, I don’t share with many economic policies espoused by the Democrats. While I’m unsure where do they stand on the ongoing Malaysia-US FTA negotiation, it’s probably fair to say that the Democrats would take on a protectionist stance. If that’s the case, then the US negotiation team would’ve weaker influence to wield against the Malaysian negotiation team.
On top of that, the US team’s authority is fast expiring, making the scenario for the US team more depressing; the trade promotion authority will expire in July 2007. With a Democrats-dominated Congress, it’s possible that the Congress won’t renew the power the US trade authority currently enjoys. Earlier, I’ve suggested that time is on the Malaysian side. With the current development, that suggestion has become more compelling than before.
Talking about free trade, another FTA is on the horizon. It’s with Pakistan:
KUALA LUMPUR, Malaysia (AP) – Malaysia wants Pakistan to cut import duties on motor vehicles and palm oil under a proposed free trade agreement that both sides hope to conclude by the year-end and implement from January, a report said Tuesday.
We know what we want. But what does Malaysia offer to Pakistan? According to the Daily Express:
Malaysia’s offer to Pakistan covers 114 tariff lines which include yarn, textiles and clothing while Pakistan offers 125 products such as electrical appliances, machinery, plastic products, chemical, rubber and timber products.
On the Malaysia-Pakistan FTA negotiations, Rafidah said Malaysia has requested reduction in import duties on motor vehicles.
“We have identified products of interest to us and so are they. We are now finalising whether we can offer what they requested and whether they can accept our requests. Hopefully, there will be some movements,” she said.
On services, Rafidah said, Malaysia has made the same offer to Pakistan in the Doha Round.
They are accountancy, engineering, architecture, construction, higher education, distributive trade, franchising, health, oil and energy.
Cool, but does Pakistan really want in return? The article doesn’t say. I wish the information was more readily available to the public. Alas, transparency isn’t the Malaysian government’s forte.
Regardless, in all likelihoods, Malaysia should come out on top in this FTA. Why? Well:
“For the January-August 2006 period, Malaysia has exported RM24.3 million worth of products to Pakistan, mainly petrochemical products, oleic acid and rubber.
“Unfortunately, there were no exports from Pakistan and this showed that Pakistani businessmen are not taking advantage of the EHP which took effect from January 1 this year,” she said.
Hey, we could use some of your nuclear stuff. Export us some, will ya?
According to Slate (thanks John for the lead):
As a result of this year’s election, it now seems unlikely that the new Congress will extend George W. Bush’s ”fast-track” trade-negotiating authority, which expires this summer. The results are further bad news for the Doha round and bilateral trade agreements with South Korea and other countries. It is possible that congressional Democrats will revive efforts to saddle China with punitive tariffs as punishment for ”currency manipulation.” It would be going too far to say that the 2006 election ushers in a new protectionist consensus. But free trade has definitely left the building.
Needless to say, I agree.
4 replies on “[955] Of Democrats and Malaysian FTA galore”
[…] I hope we could get the FTA signed before it is too late. It is going to be tough to get an FTA after the expiry of Trade Promotion Authority because the Democrats are expressing economic nationalism stance. […]
[…] it becomes increasingly clear that both the Malaysian and the US negotiators are going to miss it. As stated earlier, with the Democrats in control of the Congress, it would be hard to carve out a free trade […]
Pakistanis were guaranteed over 0.7m Working Permits. They are exporting Pakistanis literally.
Bangladeshis and Indonesians however now are no longer issued new work permits. Those who are here have to leave once it expires. Can’t renew.
Slate has an excellent piece on this. It’s not good that the left-wing partisan hacks are trying to use this midterm election to claim support for their aggressive but insane policies. (And I’m referring to more than just the protectionists – I’m also talking about the ilk of Daily Kos, etc.) The Democrats won only because of the nation’s distaste for Bush and Republican corruption, and no more. It would be like PAS asserting support for its version of Islam just because many Malaysians vote for them.
As the Slate piece hinted, it’s best for the Democrats to support greater retraining programmes. Free trade tends to create greater (temporary) unemployment because jobs shift to places with greater comparative advantages for producers. The US needs to retrain its workers to take advantage of the new opportunities in specialisation that free trade opens up.
The “race to the bottom” is generally a myth, as Paul Krugman (often associated with the Democrats because of his anti-Bush stance, incidentally) has pointed out. Wages and living standards in China, Vietnam, India, etc. are rising, and South Korea, once notorious for stealing American industrial jobs, now boasts first-world standards of living on par with Japan, etc. Trade creates better lives for everyone, and the Democrats should recognise that it creates results beating whatever aid handout programmes the government can come up with, at home or abroad.