Global Policy Forum

Iran Deal Clouds Free Trade Plans With US


By Baradan Kuppusamy

Inter Press Service
February 7, 2007

A free trade agreement (FTA) between the United States and Malaysia, in its final round this week, has run into opposition from trade unions and also from U.S. lawmakers opposed to an energy deal struck between this country and Iran.

The make-or-break negotiations clouded up after influential U.S. congressman Tom Lantos urged Washington to put the talks on hold to put pressure on Malaysia to stop a 16 billion US dollar deal to develop energy and infrastructure in Iran -- a country the U.S. has been trying to isolate. Kuala Lumpur has also come under internal pressure to keep U.S. competition out of lucrative government tenders, which are mostly the preserve of native Malay entrepreneurs who benefit from a 'Malays-first' policy of affirmative action.

Malaysian farmers, mostly small scale, have also voiced concern that an FTA with the U.S. would open the fragile and heavily subsidised Malaysian rice and vegetable sector to cheap imports. Factory workers have added to the chorus by pointing to possible escalation in the already high cost of living with human rights activists organising protests warning that an FTA will result in 'big fish' U.S. swallowing up 'minnow' Malaysia.

"It is an invitation to disaster," said the Third World Network (TWN), a Penang-based non-government organisation (NGO) that is at the forefront of protests against the FTA. This week TWN led a coalition of farmers and workers to organise a noisy protest outside the U.S. embassy to demand an end to the negotiations. Placards and banners denounced leaders of both countries and accused them of a sell-out to the interests of big business.

Ongoing talks being held in Kota Kinabalu city, the capital of remote Sabah state on Borneo island, far away from the protests, have added to the overall secrecy in which the negotiations are being conducted. ''We are left guessing--the government must reveal to the public the U.S. position on the economic sectors that are affected,'' Ani Mat Zain, a leader of the anti-FTA coalition told IPS. "We deserve to know what is really going on because the livelihood of poor farmers and vulnerable factory workers are at stake.''

"Local farmers are already disadvantaged by low prices, high costs and shrinking farming land. They cannot compete with the heavily-subsidised and globally promoted U.S. farm produce," Zain added. "It is a recipe for disaster." U.S. trade officials have dismissed such fears as misplaced and unfounded. They say U.S. rice imports cannot overwhelm Malaysian rice farmers because the grain varieties grown in the two countries are different. ''Our FTA experience tells us these fears are misplaced and U.S. goods are unlikely to swamp Malaysia," deputy U.S. trade representative Karan Bhatia told a news conference here last month, refuting statements issued by the coalition.

Bhatia said the U.S. was also sensitive to Malaysia's affirmative action policies that help ethnic Malays, who make up about 60 percent of Malaysia's 26 million population, to advance socially and economically. Ethnic Chinese, who form 25 percent, and ethnic Indians, who make up another ten percent, often form joint ventures with native Malays to get around the policy.

But there are other issues. Annuar Mahmud, coordinator for Friends of Earth, Malaysia, told IPS: "We know from the experience of FTAs in other countries that rural people will be severely affected. The people have a right to know what areas are being signed off. Such deals will hamper Malaysia's efforts to reduce poverty and improve the incomes of smallholders, farmers and fishermen."

Differences have also cropped up on labour and environmental issues. The American Federation of Labour and Congress of Industrial Organisations and the Malaysian Trades Union Congress jointly said last week that they "strongly oppose" the talks unless the respective governments first address the deteriorating state of workers' rights and labour standards.

"We share concerns that violations of workers' human rights have reached crisis levels, while secure and well-paying jobs have been replaced with casual and irregular work in both countries," the joint statement said. While protests mount, trade officials on both sides are racing against time to strike a deal before the Bush administration's mandate to negotiate FTAs expires in June.

But the last ditch effort has been hit badly by rearguard action by Lantos over the Malaysia-Iran energy deal. Lantos, who heads the powerful House Foreign Affairs Committee, has described the deal between the Malaysian private company SKS Group and the state-owned National Iranian Oil Company as a security risk. Lantos has described the deal as "abhorrent" and wants the FTA negotiations suspended until Malaysia renounces the gas deal. The Malaysian government has reacted angrily and vowed not to bow to U.S. pressure.

"This is a question of business. Do not insert politically-related matters into the talks. For this agreement, no political matter is needed to be brought to the negotiating table," Malaysian Prime Minister Abdullah Badawi said in reaction. His trade and industry minister Rafidah Aziz was blunter. "Malaysia reiterates that the FTA negotiations cannot be held hostage to any political demand, and cannot be conducted under such threats," she told reporters last week. Bilateral trade between the two countries in 2005 was worth 44 billion dollars. The U.S. is Malaysia's biggest trading partner and foreign investor, while Malaysia is the tenth largest trading partner of the U.S.

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