Malaysian suppliers stand to gain substantially from the Free Trade Agreement (FTA) with the US as they will be able to bid for US government tenders, claimed the deputy assistant to the US Trade Representative (USTR) Elena Bryan yesterday.

The US government is generally prohibited from purchasing foreign goods or services such as from Malaysia. This would change in the event of an FTA with the US and open up US$250 billion in government procurement to Malaysian companies, said Bryan.

She was speaking at a seminar in Kuala Lumpur for Malaysian small and medium industries (SME) on 'Expanding Malaysia-US Trade Relations with the FTA' jointly-organised by the Federation of Malaysian Manufacturers (FMM) and the US Embassy.

In 2004, said Bryan, Malaysia exported US$20 billion of electronics and information technology products to the US.

"That same year, the US government purchased over US$20 billion in electronics and information technology products. Given the extent of Malaysia's exports of these products to the US, and the US's needs, Malaysian firms would find a ready market with the US in this sector," she added.

While approximately half of Malaysian exports to the US were automated data-processing (ADP) machines, telecommunications and telecommunications-related products, Malaysia also exported US$2.4 billion worth of radio, recording and television equipment, US$457 million of rubber gloves, and US$439 million of wood furniture, said Bryan.

Seeking the best product

At the same time, the US had purchased more than US$6 billion in telecommunications products, ADP services, machines and telecommunications software, US2.6 billion in radio, recording and television equipment, US$5 million in rubber gloves, and US$1.2 billion in wood furniture.

"This comparison of Malaysian exports to the US and US government purchases demonstrates that Malaysian suppliers stand to gain substantially from an FTA," he said.

At a press conference later, Bryan reiterated that she doesn't "see why Malaysian companies could not successfully bid for US government contracts."

"The US$250 billion that the US government spends is composed of many thousands of goods and services contracts of various sizes, and agencies look for the best product," said Bryan.

When approached for comments, however, a Malaysian trade official dismissed the possibility of Malaysian firms making any significant inroads to US government procurement.

Of the US$250 billion in tenders, 94% go to US-based firms, said the official, who declined to be identified, citing a Jan 15 report by financial publication The Edge.

"The balance of the tenders is distributed to among around 170 World Trade Organisation (WTO) member-countries that have agreed on government procurement provisions. Malaysia is not one of those countries," he added.

FMM president Yong Poh Kon echoed Bryan's stance and said although Malaysian companies are currently dwarfed by the financial and technological advantages of US construction companies, for example, it does not mean this would remain static over time.

"That's a growing expertise which Malaysia possesses, and in time they will have a chance," he told the press conference, citing the headway reached by Malaysian construction companies in Asia and the Middle East.

'Economy works in many ways'

He also said Malaysian garments, textiles, and shoes manufacturers stood to gain the most from the reduction of tariffs - currently at 20% - on their imports in the US.

Yong also said other companies that seek to import their goods into the US would find the three to four percent reduction in tariffs after the FTA also attractive despite not being as high as the differential enjoyed by garments, textiles, and shoes manufacturers.

He did not comment, however, on the slim likelihood of Malaysian companies obtaining the tariffs lowered by more than about ten percent.

The USTR, noted The Edge report, 'only has executive powers to offer a reduction in tariffs that exceed five percent by no more than half.'

On suggestions that Malaysia may suffer from higher trade deficit on account of the FTA as occurred in Singapore and Australia following their FTAs with the US, Bryan said: "I don't think that you can blame the change in the our surplus on the trade agreement. The economy works in many ways."

"I know that Singaporean and Australian companies have benefitted from the FTAs," she added.

US and Malaysian negotiators enter into the fifth round of negotiations in the week of Feb 2-9 in Sabah.