logo logo

FTA with US may be delayed due to financial crisis

New Straits Times, Malaysia

FTA with US may be delayed due to financial crisis

By Nor Baizura Basri, BERNAMA

18 October 2008

The proposed free trade agreement (FTA) being negotiated between Malaysia and the US may face a delay following the impact of the global financial crisis especially on the American economy, a former US diplomat said. “On global trade agreements with our partners, there’s going to be some serious rethinking on financial services,” John Wolf, a 34-year career diplomat who was the ambassador to Malaysia from 1992-1995, told Bernama in an interview today.

“With the financial turmoil playing havoc on markets, there are going to be some questions on what an open market looks like,” said Wolf, who was here to attend a regional conference organised by the Eisenhower Fellowships of which he is president.

He said: “How do you reach agreement when you don’t quite know the international financial architecture, that is going to be difficult.” He pointed out that among issues that need to be addressed under the new financial architecture include hot money and money laundering.

Wolf, who has been involved in several trade negotiations before and at one time was US Ambassador to Apec, said against such a backdrop, “there could be a delay in reaching a pact with Malaysia.”

“Washington’s new administration would first have to think out what the global approaches would be particularly as regards to financial services and related regulations.

“With the worsening US financial crisis, there is a need for a new financial architecture, not only in the US but also in other countries which are experiencing the same financial turbulence,” he said.

The US financial woes, which started off with sub-prime mortgage crisis, severely affected the broader American economy over the past few months, forcing large corporations like Lehman Brothers into bankruptcy.

Wolf said: “They have to think through on whether or not we are talking about a global architecture where one needs international cooperation in order to monitor and effectively regulate. Some serious works need to be done.”

“Between no regulation and total regulation, what you need is effective regulation. We will think through what are the regulatory and monitoring mechanisms necessary to insure safety and stability in the market,” he said.

He said the US was not as effective in implementing laws and regulations that were already in place.

“Nevertheless, both countries would have more time to negotiate without sacrificing their national interests prior to signing the proposed FTA,” said Wolf.

Malaysia and the US, which began FTA talks in June 2006, concluded their eighth round of negotiations in Washington in July this year with both sides showing willingness to resolve outstanding issues.

The eighth round of the negotiations held from July 14 to 18 focused on six working groups addressing issues on services, investment, intellectual property rights, agriculture, sanitary and phytosanitary measures as well as legal and final provisions.