The Malaysian government is undertaking a series of bilateral negotiations with the United States to conclude what would be a Free Trade Agreement (FTA) with the world's only superpower - politically, militarily, culturally and economically.

No empire has dominated the world as thoroughly as the United States. From the US perspective, the FTA is yet another excellent instrument of control.

From the Malaysian government's perspective, the FTA is key in ensuring continued foreign direct investment (FDI), especially from the US. The only problem being, this time around, if the FDI do come in, it would be determined strictly by market sentiments.

International Trade and Industry Minister Rafidah Aziz was quoted as saying, "The government will not entertain any requests that will impede on the New Economic Policy or Malay interests by any country". Famous last words from the minister?

A FTA between a developed and developing country exacerbates existing inequalities between and within the two countries. The developing country would often suffer disproportionately. This is because an FTA 'levels the playing field' between unequal players.

The US economy dwarfs the Malaysian economy. The Fortune 500 is filled with US multinational corporations while Petronas is the only Malaysian multinational that has been consistently placed in the Fortune 500. These inequalities are worsened as FTAs do not include protection for the losers.

Possible impacts

Although, the FTA is badly needed by Malaysia, the Malaysian government must be cognizant of the possible impact of the trade pact on Malaysia. A review of previous US FTAs indicates that the US has emerged clear winners in all the FTAs that they have signed and often to devastating effects to the partner country.

In Mexico, two million farmers have lost their jobs due to the North American Free Trade Agreement (Nafta) as subsidised agriculture products from the US flooded the Mexican markets wiping out Mexican agriculture producers.

Similarly, the US-Peru FTA has allowed subsidised US agricultural products to flood the Andean Common Market through Peru causing further hardship in a country where over half of its 27 million citizens live below US$1 a day.

The USJordan FTA and the Central American Free Trade Agreement (Cafta) have turned Jordan and the Central American economies into sweatshops producing goods for the US market.

Singapore, a close ally of the US, saw its trade deficit with the US increase by 200%, a rise of US$2.9 billion in the first year upon signing the FTA. The same effect occurred to another ally of the US. Australia's trade deficit increased by US$1.7 billion in the first year of its FTA with the US.

US benefits

However, for the US, the FTAs have worked well. US trade surplus with Singapore tripled after the first year of the FTA reaching US$4.3 billion. The US experienced phenomenal export growth in certain sectors.

Exports in IT equipment grew by 62%, exports in machinery and parts by 24%, 86% in minerals and fuels, 99% in furniture and 84% in vehicle and parts. US exports to Chile grew by 33.5% from US$1 billion to US$3.6 billion. US trade surplus with Australia grew by 31.7% and exports to Australia increased by 11.7% in the first quarter of 2005.

The US will also benefit in its latest FTA with the Central American region. The Cafta is expected to reduce the US trade deficit with the region by US$756 million. US farm exports to the region are expected to expand by US$1.5 billion a year while US manufacture exports to the region are expected to increase by US$1 billion.

In Thailand, South Korea and Latin America, thousands of citizens are demonstrating against the FTAs with the US The citizens are against FTAs as they see the FTAs as nothing more than meeting the corporate interests of the US.

Furthermore, US corporate demands such as intellectual property (IP) rights would literarily mean death to thousands who cannot afford IP protected medicine. IP protected medicine will also increase the costs of governments to provide healthcare to its citizens. In addition, the Free Trade Area of the America (FTAA) modeled after the Nafta and involving 34 countries spanning the American hemisphere has been rejected by South American governments fearing domination by US corporate interests.

For Malaysia, the workers will probably suffer the most as US-Malaysia FTA does not include specific reference to implementing International Labour Organisation (ILO) Core Labour Standards. The Malaysian government's refusal to discuss the impending FTA with the Malaysian Trade Union Congress (MTUC), the legitimate representative of the worker movement in Malaysia, reaffirms the workers fears that the trade pact is focused solely on protecting investor rights.

Malay rights

It is unclear who in Malaysia will actually benefit from the FTA. Rafidah has yet to "show the numbers" on how Malaysia will benefit from the trade pact. While the Federation of Malaysian Manufactures has come out in support of the FTA, the actual gains noted by FMM are negligible. Further, it is unclear if FMM has a strategy on how it intends to position itself to benefit from the FTA, let alone survive it. It is also unclear if Rafidah has a strategy when it comes to the "spaghetti" of FTAs that she is getting Malaysia involved in.

What is clear is the lack of public support for the US-Malaysia FTA even from the Malaysian government. On the contrary, it may be pertinent to note that the US is very supportive of Rafidah and the FTA. The US, represented by the United States Trade Representative (USTR) office, the US Chamber of Commerce and its partner, the AmericanMalaysian Chamber of Commerce (Amcham) has continually heaped praises on Rafidah and the need for the US-Malaysia FTA, an ironic situation indeed.

Make no mistake; Amcham knows exactly what it wants. It has made a 98-page public submission on the US-Malaysia FTA to the US government. It influences the USTR to pursue certain key issues the very ones that Rafidah declares that she will not trade away. How ironic will it be, should the minister that promised to protect Malay rights the most, be the very person to give it all away at the end with a simple signature.

GREG LOPEZ is an amateur economist.