Prime Minister Datuk Seri Anwar Ibrahim (right) and United States President Donald Trump during an expanded bilateral meeting on the sidelines of the 47th Asean Summit and Related Summits at the Kuala Lumpur Convention Centre.
PETALING JAYA: The newly signed Agreement on Reciprocal Trade (ART) between Malaysia and the US has sparked a range of reactions.
Some have questioned how much of the local economy and wealth has been handed over to US President Donald Trump on a silver platter.
High on the list of concerns if about Malaysia’s tariff and non-tariff barriers that the US has placed demands on for greater market access.
Under ART, Malaysia has agreed to eliminate or gradually reduce tariffs on US exports and in return the US will impose a reciprocal tariff of 19% on Malaysian imports.
The agreement saw the removal of tariffs on 11,000 US-made products.
Tradeview Capital founder and chief executive officer Ng Zhu Hann said the United States is asking for various goods, such as US-made vehicles, to be granted market access to Malaysia without duty in order to help US exports.
According to the agreement, all internal combustion engine (ICE) motor vehicles (excluding motorcycles) from the United States that are subject to an excise duty will see the lowest rate being applied.
“This is actually good for Malaysia’s end-consumer provided the items are able to drive down costs and help with inflationary pressure. This could result in better choices and higher savings,” Ng told StarBiz.
Another topic being debated is Malaysia’s acceptance of clearance by the US Drug and Administration (FDA) for medical devices.
The healthcare sector in Malaysia has been plagued for years by concerns such as the lack of manpower, rising costs, long-queues and high doctor-to-patient ratios.
With US medicine and medical equipment making their way into the country, could the healthcare sector be heading towards a long-awaited transformation?
Ng said the FDA’s approval is a standard that is globally recognised, enabling it to cut through red tape and domestic bureaucracy.
Economist Anthony Dass agrees but cautions that budget gates would still remain.
“There will be faster access to advanced therapies, but we can expect gains first in private hospitals and higher-income segments while public uptake follows procurement cycles,” he explained.
The halal industry has also been impacted. Under ART, American industrial goods, including cosmetics, pharmaceuticals and medical devices will not be required to have a halal certification while Malaysia allows the usage of a halal logo issued by any US Halal certifier designated by Jakim or Jabatan Kemajuan Islam Malaysia.
Ng however reckons Malaysian Muslims would not be comfortable with the removal of the halal stamp on industrial goods.
Dass said for food and ingestible products, this would not be a problem, but for the rest, the brands are in for some hurdles.
“This could implicate the marketing of these products too. We can expect dual tracks where there will be mass Muslim-focused lines remaining halal while other niche lines may rely on global certifications,” he said.
With Parliament in session, there has been a slew of debates, with many politicians calling for explanations.
However, some are quite clearly in favour of the deal.
Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz defended the deal, saying some of the commitments made to the United States are not new.
These included the purchasing of 30 Boeing aircraft plus a purchase option for 30 additional aircraft which he said was announced in March this year.
“In August, it was announced that Malaysia had committed to purchase US$150bil of US equipment over the next five years. These are all not new,” he said.
While it does seem that Trump has gained some clear wins, particularly with the removal of many local tariff and non-tariff barriers on US exports as well as pledges to spend billions on American goods, ART is also an opportunity for Malaysia to see where it can shine.
Dass sees good strategic openings, especially in high-value manufacturing and faster regulatory pathways.
“The win shows up only if Malaysia pushes hard for execution on matters such as neutral, rules-based regulation, investment facilitation beyond memorandums of understanding, and incentives tied to productivity, tech transfer and local supplier development.”
Ng said the deal is being touted as enhancing ties and relationships between both nations, but it remains to be seen whether other bilateral relationships will be affected.
“The argument about sovereignty stems from the discussion on some clauses requiring our country’s compliance with the US policies and decisions but I believe Malaysia will always have the final say when it comes to matters of national importance.”
Malaysians must realise the deal has been signed and perhaps looking at the example of other nations that practice free-market principles might help.
Countries like Poland and Ireland rank highly for their free-market economy and both have low corporate taxes and business-friendly regulations.
Does having a free-market economy jeopardise them? No.
For Malaysia, ART could help local industries improve efficiency, innovation and quality when competing with US businesses. Reducing excessive government control and bureaucracy could also make the market more dynamic and attractive to investors.
