Thousands Of Jobs Probably Saved By Malaysia-US Agreement On Reciprocal Trade

By Mikhail Raj Abdullah

KUALA LUMPUR, Nov 16 (Bernama) -- Thousands of jobs in Malaysia will probably be saved by the Agreement on Reciprocal Trade (ART) signed between Malaysia and the United States.

This was among Malaysia’s priorities in its negotiations with the US to reduce tariffs since the Liberation Day tariffs were announced in April this year.

As an export-oriented country, Malaysia aims to keep business costs down and continue exporting, and the nation did well in reducing the tariffs from the steep 24-25 per cent to 19 per cent when the ART was inked with the US on Oct 26.

The agreement has put it on a more level playing field, if not in a stronger position, compared with neighbouring countries with similar export profiles.

Businesses here were hopeful that Malaysia’s negotiating team, led by Minister of Investment, Trade and Industry Datuk Seri Tengku Zafrul Abdul Aziz, would look at the whole scenario objectively and not emotionally.

The business sector wants certainty to be able to plan and strategise their costing, and the ART provides that stability

It must be remembered that Malaysia is one of the US’ largest trading partners and has been recording trade surpluses with Washington.

Last year, the trade surplus fell to about RM25 billion, compared with RM40 billion four years ago. It was narrowing, but we are still in the top 15 trading nations, and President Donald Trump had clearly stated that tariff negotiations were aimed at balancing its economic interests by reducing deficits with trading partners.

The US is Malaysia’s biggest export market at RM200 billion, led by semiconductors, a mainstay of our export economy.

Bilateral investments are also significant. Since the 80s, the US has invested RM225 billion into Malaysia, and they are the biggest investor here -- bigger than China.

Clearly, the American and Malaysian economies are intrinsically intertwined.

As such, in the ongoing polemics over ART, Malaysians need to look at the whole ecosystem painstakingly built around exporting to the US.

Thousands of jobs, either directly or indirectly, probably depend on trade and investments with the US, currently the world’s economic superpower. We cannot just depend on domestic demand, more so since our economy is an open one.

One question which detractors of the ART have to ask is what will happen to Malaysia if it does not engage in negotiations with the US while other countries do so.

Even China, an economic superpower, is engaging the US, as are major economies like the European Union, Japan, South Korea, and long-time ally Canada

As an export-oriented country, Malaysia must be consistently practical in its outlook and economic relations with trading partners.

As for some of the terms of the agreement, it is very clear in one of the clauses that Malaysia should not do something with any other party that is contrary to US interests.

For instance, Malaysia could be talking to Russia or China, exploring possibilities for a nuclear energy deal, and in this scenario, the US insists that it be given a fair chance, which is a fair request.

As far as Malaysia is concerned, it would deal with the country that gives it the best offer, and the agreement clearly does not preclude Malaysia from purchasing nuclear infrastructure or equipment from other countries.

Meanwhile, critics comparing Malaysia’s ART to Cambodia’s are not exactly comparing apples to apples.

Cambodia gets some preferential treatment even in the World Trade Organisation (WTO) as it is regarded as a least developed country (LDC). Understandably, Washington has given them a slightly different treatment and a bit more leeway.

By contrast, Malaysia is a strategic partner to the US, and the ART reflects its status as a trusted and secure supply chain partner.

What the US wants is equal opportunity.  For instance, in terms of digital tax, if the Ministry of Finance grants a waiver or exemption on any tax to others, American firms should also be able to get it.

That again is a fair request.

Signing the ART highlights the need for Malaysia to accelerate economic diversification. We cannot be too reliant on our traditional markets and partners, as global dynamics are constantly changing.

Ensuring Malaysia’s economic growth is sustainable is imperative to ensure the benefits reach as many segments of society and industries as possible.

Sometimes that means making tough, non-populist decisions, clinching trade agreements that draw much criticism.

But ultimately, the objective is that it benefits Malaysia’s economy and the people in the long term.

-- BERNAMA