KUALA LUMPUR: Malaysia has defended its manufacturing and labour practices amid ongoing trade negotiations with the United States, as Washington scrutinises whether goods from third countries are being routed through Malaysia before entering the US market.
Investment, Trade and Industry Minister Datuk Seri Johari Abdul Ghani said US concerns centred on allegations of excess production capacity and forced labour, particularly as to whether or not products from countries with surplus capacity were being incorporated into Malaysian exports to the United States.
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"We have maintained that Malaysia does not have excess production capacity.
"The concern may be that products from other countries with excess capacity are sold to Malaysia, used as inputs to manufacture other goods and then exported to the United States," he told reporters after officiating the American Malaysian Chamber of Commerce (Amcham) 49th annual general meeting luncheon here on Thursday (June 4).
Johari said Malaysia continued to engage with the United States following a series of tariff measures introduced under various US trade laws.
He explained that under the International Emergency Economic Powers Act (IEEPA), the United States initially imposed a 19% tariff on Malaysian exports, scheduled to take effect on Aug 1 last year.
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However, after the US Supreme Court ruled in February that IEEPA could not be used for such purposes, Washington invoked Section 122 of the Trade Act of 1974 to impose a temporary 10% tariff on Malaysia.
"The tariff is only valid for 150 days and will expire on July 24. After that date, they cannot continue using the same provision to maintain the tariff," Johari said.
He added that the United States subsequently launched investigations under Section 301 involving several trading partners, with Malaysia informed that the review covered excess capacity, forced labour, environmental considerations and government subsidies.
"For Malaysia, the focus is currently on excess capacity and forced labour," he said.
A delegation led by his ministry travelled to Washington in May to discuss issues raised under the investigation.
During the engagement, Malaysia stressed that its manufacturing sector operates on market-based principles and responds to genuine global demand, while its exports complement industries in both countries and strengthen competitiveness.
On forced labour, Johari said Malaysia had provided a detailed explanation of its labour laws and enforcement framework, stressing that the country adheres to standards set by the International Labour Organisation (ILO).
"Malaysia has a strong commitment to internationally recognised standards and rejects all forms of forced labour," he said.
He added that the government has established an Inter-Agency Task Force on Forced Labour to strengthen prevention, monitoring and enforcement efforts in line with international best practices.
However, Johari acknowledged challenges in monitoring imported products that may have been produced using forced labour in their countries of origin.
"One of the issues raised is that we do not have legislation specifically preventing the entry of products made using forced labour overseas. That is a gap we are now examining and refining," he said.
He said Malaysia was studying targeted measures to ensure only companies that comply with international labour standards are allowed to participate in local supply chains.
As an example, Johari said Malaysia could choose to trade only with companies that fully comply with forced labour regulations, even if other firms in the same country fail to meet those standards.
His remarks came after the Trump administration on Tuesday (June 2) proposed additional duties of 10% or 12.5% on imports from 60 economies following a Section 301 investigation into the use of forced labour in supply chains.
The Office of the US Trade Representative (USTR) proposed imposing a 10% duty on imports from several economies, including Malaysia, while a higher 12.5% duty would apply to the remaining countries covered by the investigation.
