Malaysia and America as Free Trade Partners?

By Farish A. Noor, Muslim Media News Service (MMNS)
This week marks a significant date as far as Malaysian-American relations are concerned: During the two decades that Malaysia was under the governance of former Prime Minister Mahathir Mohamad, the country’s relations with the West was somewhat frosty. Despite the ongoing close relations between the security services of Malaysia and its western counterparts, Malaysia – along with Singapore – steadfastly stood against the imposition of what was termed then ‘Western values’. Malaysia’s Mahathir and Singapore’s Lee Kuan Yew insisted that Western notions of human rights and democracy had little relevance in a part of a world where Asians (to quote at least one prominent ASEAN leader) were somehow not ‘genetically’ suited to Western codes and standards of democracy…

Things were set to change with the onset of the so-called ‘war on terror’ in the wake of the attacks on the USA on 11 September 2001. Overnight, Malaysia – along with the rest of ASEAN – was suddenly on the map of American technocrats and securocrats again, and the region was designated the ‘second front’ in the ‘war on terror’. Since then the governments of ASEAN have been racing to be the first at the door of the White House, with leaders like Thaksin Shinawatra of Thailand and Gloria Aroyyo of the Philippines in particular coveting the title of America’s No.1 non-NATO ally.

Perhaps the most surprising outcome was the sudden elevation of Malaysia as a key strategic partner of the USA in the war against its enemies. Following the departure from office of Prime Minister Mahathir in 2003, the new establishment under Prime Minister Abdullah Ahmad Badawi has sought to improve ties with the USA at no inconsiderable cost. That the two countries would like to come closer is hardly a surprise considering that exports to the USA amount to around a quarter of Malaysia’s export earnings, while Malaysia happens to be the 10th trading partner of the United States. The scene was thus set for a marriage of convenience bringing the two economies together.

This week sees the warming of US-Malaysian ties even further. On the Malaysian island of Penang American and Malaysian representatives are meeting to work out the terms of a mutual free trade agreement (FTA) between the two countries. At present annual bilateral trade between the two countries amounts to around US $44 billion, and is set to rise even higher by 2010 should the FTA go through.

There are however some important snags that stand in the way of both governments: The American representatives are keen to focus on two areas in particular: access to the Malaysian auto market and a commitment on the part of the Malaysian government to curb the infringement of copyright laws in the country.

Here is where the Badawi government finds itself painted in the corner.

Prime Minister Badawi came to power on a wave of reform promises, chief of which was to ensure greater transparency and accountability to governance.

He promised to crack down on cases of corruption as well as to look into the alleged abuses and misconduct of the Malaysian police. Yet thus far none of the reform measures have taken root or shown evidence of having an effect.

The few cases where those accused of corruption have been taken to court were cited as marginal to the real problem of institutionalised corruption and linkages between political parties, the government and the private sector. In the area of reform of the police, the Badawi government has failed to secure the support of the chiefs of police to initiate even the mildest of reform measures.

Taking into account the current political stalemate in the country, analysts wonder if Prime Minister Badawi can actually deliver the terms demanded by the FTA, and whose interests it will eventually serve in the long run. Local economists and trade unionists in the country warn that any attempt by the US and its automobile industries to edge into the domestic automobile market in Malaysia will spell the doom of the national carmaker Proton, which is already facing pressure from Chinese and Japanese auto producers. At present the American representatives are demanding that American car makers also be given access to the Malaysian market and that import tariffs be lowered to make American (and other foreign cars) competitive in Malaysia. Just how the beleagured Proton company will survive under such circumstances is an open question.

The biggest political hurdle that Badawi will have to face, however, is the demand for transparency and competitiveness in the open tender of government projects. Long-term observers of Malaysian politics have long since recognised that Malaysia’s fragile ethnic consensus is based on a form of discriminatory economic preferential treatment that has always favoured the majority Malay community. Despite talk of reform and transparency, even the Badawi establishment has had to fall back on its traditional ethnic Malay vote base to secure power and remain in government.

But should the American representatives get their way, such ethnic preferential treatment would no longer be practicable in Malaysia, which in turn jeopardises the political base of the ruling UMNO party that Badawi himself is president of. Ironically, by bringing Malaysia into the free global economy as he has, Badawi may have introduced to Malaysia’s coccooned system a host of external variable factors that may well interrupt the cosy consensus upon which Malaysian politics has been based for half a century.

The American-backed FTA is certainly not designed to serve the interest of ordinary Malaysian or American workers (as it may well lead to the practice of dumping and out-sourcing instead), but it will invariably open up the Malaysian economy to the rigours and discipline of the global market. Badawi in turn may find himself captive to external variable factors hiterto unaccounted for: He may end up being the Prime Minister who opened up the Malaysian economy to the world, or alternatively as the Prime Minister who allowed the world to come in and plunder the country.

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