Malaysia: Political, Security, Economic, and Trade Issues Considered

Publication Date: February 2007

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Government

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Abstract:

This report discusses key aspects of the U.S.-Malaysia relationship, including economics and trade, counterterrorism cooperation, defense ties, and Malaysia's external posture as it affects American interests. The bilateral relationship is generally positive and constructive, particularly in the area of trade. Malaysia is a key trading partner of the United States and is regarded as an effective and cooperative regional player in the war against terror. The United States and Malaysia also have informal defense ties including commercial access to Malaysian ports and repair facilities. Despite these positive dynamics, the bilateral relationship has at times been strained. Past differences have stemmed from disagreements between Malaysia's former Prime Minister Mahathir Mohamad and the United States over such issues as the internal suppression of dissent in Malaysia, the Israeli-Palestinian conflict, Iraq, globalization, Western values, and world trade policy. Relations are perceived as having improved since Abdullah Badawi became prime minister in 2003.

After years of strong economic growth, Malaysia has become a middle income country. Much of its gain in economic prosperity has come from the export of electronics and electrical products, with the United States as its top export market. According to U.S. trade figures, Malaysia exports nearly $35 billion of goods each year to the United States and imports over $11 billion from the United States.

The United States and Malaysia have enjoyed a positive trade relationship over the last few years, in part because both nations favor trade and investment liberalization in Asia. Malaysia is the United States' 10th largest trading partner. Building on their common perspective of international trade, Malaysia and the United States concluded a trade and investment framework agreement in 2004 and are currently negotiating a bilateral free trade agreement. Key issues still to be resolved in the negotiations principally revolve around market access for key goods and services in both the United States and Malaysia, and intellectual property rights protection in Malaysia.

The free trade agreement negotiations have been complicated by Malaysia's $16 billion energy deal with Iran to develop Iranian natural gas fields and related infrastructure. The January 2007 Malaysia-Iranian deal has led to opposition by some members of Congress. Chairman Lantos of the House Committee on Foreign Affairs sent a letter to U.S. Trade Representative Susan Schwab calling for the MalaysianIranian deal to be nullified before the U.S. proceeds with free trade negotiations. This report will be updated as circumstances warrant.