The United States is aiming to seal a free trade agreement with Malaysia by June next year, a top official said Monday after both sides missed a crucial deadline to fast-track the agreement.

United States assistant trade resentative Barbara Weisel said both parties will now "move on" and return to negotiate on the deal which was bogged down partly over Malaysia's affirmative action policies for its ethnic Malays.

"We would like to finish this as quickly as possible and there's an ideal window to do that ... we'd prefer it not to go on past next year, in the second quarter," Weisel told reporters.

"Given that there are some sensitive issues here, it would take time," she said.

Washington had been racing to conclude the agreement before President George W Bush loses his Trade Promotion Authority (TPA) to "fast-track" trade deals at the end of June.

The expiry date gave US negotiators up to March 31 to present a deal for a mandatory 90-day review by the US Congress.

Any agreement reached after that will have to go through a complex process in the US Congress in order to be passed.

"The bottom line is, we would've preferred to have passed it when the last TPA was still enforced but that is not going to impede our efforts to try and conclude the agreement as quickly as possible" Weisel said.

Issue of government procurement

Malaysian Trade Minister Rafidah Aziz on Monday said both sides were still actively discussing the agreement in smaller delegations to iron out outstanding details.

"We have agreed on some areas and there are also areas that need further discussions, which are mostly at the technical level," Rafidah said in Seoul, where she is heading a trade mission, state Bernama news agency reported.

Malaysia is seeking access for 600 of its products into the US.

Weisel said the parties were currently discussing 23 chapters of the proposed agreement, 17 to 18 of which have yet to be concluded.

On the difficult issue of government procurement, she said the US's sole requirement from Malaysia was reciprocal market access.

"Beyond that, we are prepared to discuss whatever proposals would work for Malaysia to reach agreement on that chapter. We are truly open to any proposal ... that would address the sensitivities of government procurement," she said.

Weisel said a seventh round of talks could resume by the end of the year.

Officials had met in Washington in April, after a fifth round of talks were bogged down in February over a series of issues, including Malaysia's affirmative action policies for its majority ethnic Malays.

The decades-old policies provide special privileges to indigenous and ethnic Malay-owned firms, a sticking point for US negotiators.

Malaysia has said it will not sacrifice its national interests in order to forge a deal with the US.