US targets Malaysia in drive to sign Muslim countries to free trade agreement

Abdar Rahman Koya

Muharram 13, 1428 2007-02-01

South-East Asia

by Abdar Rahman Koya (South-East Asia, Crescent International Vol. 35, No. 12, Muharram, 1428)

After months of optimism, Malaysia finally admitted last month that its negotiations over the free trade agreement (FTA) with the USare going nowhere. The Malaysian government has been shunning an infant movement which is slowly gaining momentum to oppose any FTA with Washington. With other ‘developing' countries, the Americans have listed Malaysia as their next target for an FTA, salivating at the prospect of laying hands on this economically booming southeast-Asian region.

After almost a year of negotiations, the Malaysians finally announced that the FTA would not be signed as scheduled. As with all its other messes around the world, the Bush administration is losing patience: the July 1 deadline of Bush's trade authority is looming, and Bush has no achievement to his name. That authority enables George Bush to negotiate trade agreements which Congress, before being taken over by Democrats who swept to victory in the recent elections, can never change.

One major hurdle that the Americans had hoped to tackle is Malaysia's economic policy that aims to create more wealth among ethnic Malays. The policy, a long-term (and ‘never ending', as some critics claim) affirmative action plan, has been hailed by incoming governments as ‘positive discrimination' to help Malays. Most leaders believe that if administered properly, it could undo the economic disparities among the various races, not dissimilar to what South Africa's post-apartheid administration is doing by having a quota system to help the indigenous South Africans who were long suppressed under apartheid.

Malaysia is an important country for the US in its bid to enter other Muslim markets. Malaysia is arguably the most developed Muslim-majority country in terms of its manufacturing and infrastructure, so Washington hopes that an FTA, which it often parades to developing countries as the answer to all their economic woes, will ‘bolster' a moderate Muslim ally into a stronger ally. So far Malaysia in the post-Mahathir era has not shown serious interest in joining Bush's now-docile coalition of the willing, mainly because of domestic dislike of the prospect, but also partly because of its government's traditional suspicion of American and European governments.

Critics have repeatedly warned the government about the consequences of a trade agreement with the US. Many countries, especially in Latin America, embraced FTAs with the US as a shortcut to enjoying American products, as well as a guarantee of good ties with Uncle Sam, only to be helpless against adverse side-effects. That large US companies swallow up local companies and in the process destroy the livelihoods of millions is not an exaggeration.

Like the FTAs involving the EU, a US FTA penetrates deep into a country's social and economic policies, often resulting in these countries amending laws to accommodate US big corporations. On paper, an FTA signed with the US means a country commits to environmental protection, workers' rights and deregulation of its industries. But the most obvious effect is setting US-friendly standards for investors and a forced commitment to protect American intellectual property rights, especially in the field of medicine, effectively ‘banning' cheaper generic pharmaceuticals and thus making medicines more expensive.

The political motive of the Bush administration in concluding an FTA with Malaysia could not be less obvious, when US trade representative Rob Portman, in a pre-negotiation meeting last year, cited Malaysia "an ally for peace and stability in the region ... a large Muslim country and a leader giving voice to a vision of tolerance and multi-culturalism." Such descriptions make the US seem desperate to gain a foothold in non-petroleum-related Muslim markets; what better way to start with than in the south-east-Asian region?

Even without an FTA with the US, Malaysia is already among the top ten of the US's largest trading partners: their trade comes to US$44 billion, taking more US imports than much larger economies such as India and Indonesia. The political motive of the Bush administration in concluding an FTA with Malaysia could not be less obvious, when US trade representative Rob Portman, in a pre-negotiation meeting last year, cited Malaysia "an ally for peace and stability in the region ... a large Muslim country and a leader giving voice to a vision of tolerance and multi-culturalism." Such descriptions make the US seem desperate to gain a foothold in non-petroleum-related Muslim markets; what better way to start with than in the south-east-Asian region? As one Democrat, Gregory Meeks, who had lobbied for the FTA with Malaysia, said, "They are fitted to be a partner in a region of the world that the United States needs to make sure that we have friends."

However, Malaysia is not the first Muslim country to have entered into FTA negotiations with Washington. Regimes in Jordan andOman have already inked their signatures on the agreement, and recent studies in Jordan have already begun to show the notorious ill-effects of FTAs, as have happened in Latin American countries.

If the current FTA between Malaysia and US really fails to materialise, it is not surprising and just another instance of what happens when people in these countries read between the lines and draw conclusions from the economic and social messes they see elsewhere, despite the ‘luxury' of being in Bush's good books via an FTA. Taking their cue from these failures, FTAs are increasingly being regarded by many countries as Washington's economic analogue of a nuclear bomb.

In October last year, FTA talks between South Africa and the US broke down after US demands for complete access to South African markets were rejected. Even the South Korean government, which is a close ally of Washington, has warned that an FTA with theUS is expected to cost as much as US$1.05 billion in damage to the South Korean pharmaceutical industry if the US proposal for the deal is accepted. A group of South Korean lawmakers has filed a suit to declare that President Roh Moo-hyun's move to conclude an FTA with the US is unconstitutional.

By contrast, many Muslim governments are less interested in the ill-effects of FTAs, thanks to the eagerness of Muslim and Arab governments to get into the US's good books and stay there at almost any cost. Muslim countries that are reportedly in Washington's radar-screen for an FTA or are already negotiating one include the United Arab Emirates, Algeria, Egypt, Tunisia, Saudi Arabia and Qatar. Before the year 2000 the US had only three comprehensive FTAs on its books: with Canada, Israel and Mexico. Since then, the US has concluded FTAs with Australia, Bahrain, Chile, Jordan, Oman, Morocco, Singapore, Peru, Costa Rica, theDominican Republic, El Salvador, Guatemala, Honduras and Nicaragua.

The Americans' FTAs with Middle Eastern regimes are motivated also by a desire to achieve recognition for Israel. The US FTA's first signatory is after all, Israel, in 1985. It is not hard to see how these client regimes succumb under pressure to the US's wish to have an end to Israeli boycotts, especially when reminded of Saddam's fate and Washington's role in aiding Israel's bombardmentof Lebanon.

An agreement with Bahrain was signed in September 2004 and took effect in August 2006 after securing Bahrain's assurance not to boycott Israeli goods. In the case of Morocco, the political motive is particularly transparent. A report prepared by the Bangkok-based FTA Watch and several other non-governmental bodies said that the main objective of the US's FTA with Morocco was to "reward a moderate Muslim government for its support to the White House's ‘war on terror' and to pull a friendly North African kingdom deeper into its sphere of influence, creating a wedge vis-à-vis the Arab world". Recently, the UN Committee on Economic, Social and Cultural Rights has warned about the effect of the US-Morocco FTA on access to medicines and the right to health, and called on Rabat to undertake an impact assessment of these trade rules on economic, social and cultural rights.

In Malaysia, the US's hopes for an FTA were boosted by the departure of Dr Mahathir Mohamad from office in 2003, and since then American officials have been bombarding Kuala Lumpur with arguments about all the good an FTA allegedly achieves, now that they hope that Abdullah Badawi will be more willing to sign an agreement. What they do not realise is that Malaysia's inter-communal relations are fragile: incoming governments have to thread carefully between pleasing Uncle Sam and appeasing Malays that the economic policies which favour them will continue. Malaysia's procurement rules reserve a certain proportion of business and trade for ethnic Malays, and foreign companies are required to take on a local partner before they can be considered for government contracts. This defeats the whole idea of an FTA, which would give American companies an almost free hand in manipulating the country's markets.

Thus the news that the Malaysian government is showing pessimism about the FTA with Washington, for whatever reason, is a relief to activists opposed to the move. For months, adverse opinions on the negotiations have been blacked out from the mainstream media in classic Malaysian style, while government ministers emphasise all the good that they claim would follow from an agreement.

One main worry expressed by civil groups is the effect of the FTA on the country's farmers, just when the Abdullah government is trying hard to help agriculture overtake manufacturing as a key earner of national income. Unlike countries such as Thailand and the Philippines, a problem with Malaysia's opposition movement is the lack of information about the FTA. As such, many people are ignorant of what a US FTA means. The opposition lacks the skill to champion the fight against an FTA. The non-Muslim block of the opposition is adopting a wait-and-see attitude, under the illusion that the FTA would to some extent abolish the government's pro-Malay economic policies. Anwar Ibrahim, who is competing with other pro-US Malaysian government leaders to lead the ‘American-friendly Islamist' camp, has been giving vague and mixed signals on the FTA, with no clear public statement opposing the FTA specifically, though some loyalists and party supporters have taken part in anti-FTA protests. The voice of PAS, the Islamic party, is almost unheard in the debate. Only a small group of civil groups, comprising NGOs, workers' groups and individual members of the opposition have expressed fears of what might well happen should domestic markets be opened to giant US agricultural producers. Despite such limitations, a recent signature campaign in northern Kedah state, demanding that the government call off its FTA talks with the US, has won support from 20,000 fishermen and farmers.

While many Malaysian Muslims oppose the FTA, it remains to be seen whether or not the present government will succumb to American pressure. Some have said that Malaysia may well start off by having FTAs with Muslim countries to strengthen ties among OIC economies. (Malaysia's only Muslim FTA partner is Pakistan, with a programme that came into effect in January 2006.) But with most Muslim regimes being taken hostage politically and economically by Washington, such hopes remain an utopian ideal.

Meanwhile, the choice is not too difficult to understand: between being in the bad books of America and maintaining some semblance of a developed Muslim country that is not subservient to the US and its allies, or an FTA with the US whose terms favour not Malaysia and its people but the US and its business interests.