The US and Malaysia began a fresh round of free trade talks yesterday, bogged down by differences over opening of two tightly protected sectors and a controversy over a major gas deal with Iran.
The fifth round of meeting in Malaysia's Sabah state on Borneo island was crucial to determine if negotiators could bridge differences and conclude the pact before a July 1 deadline, officials said.
Details of the talks were not disclosed immediately. However, a telephone news conference was being planned for Friday when the talks are scheduled to end.
Deputy US Trade Representative Karan Bhatia warned last week that the proposed pact could falter if negotiators failed to make firm progress this week over opening up Malaysia's services and government contracts -- two key hurdles to a deal.
Labor and environmental issues were also holding up talks, he said.
In Malaysia, government tenders are awarded to ethnic Malay-owned companies as part of an affirmative action program. Washington wants more clarity and transparency in bidding for government contracts that are open to foreign firms.
Negotiators were under time pressure because US President George W. Bush wants to get a Congressional vote on the pact before his special ``fast-track'' trade authority expires on July 1. That allows him to submit a deal to Congress for a straight up-or-down vote without amendments.
But the proposed trade agreement must wrap up by end of next month to give US lawmakers enough time to review it before a vote.
This week's talks also came amid new tensions over Malaysia's US$16 billion deal to develop gas fields in southern Iran.
US House of Representatives' Foreign Affairs Committee chairman Tom Lantos last week urged the suspension of FTA negotiations until Malaysia halts the deal, citing its nuclear weapons program.
But Malaysian Trade Minister Rafidah Aziz warned Washington she would drop the FTA talks if asked to scrap the Iran deal.
The FTA negotiations began with the "full understanding that there would be no political agenda and no interference [in] domestic policies," Rafidah said in a statement
"Malaysia reiterates that the FTA negotiations cannot be held hostage to any political demand and cannot be conducted under such threats," she said.
"It is now up to the US administration to make its official position known," Rafidah added.
The 25-year project to develop two gas fields in Iran, which has the world's second-largest gas reserves, was signed last month between the state-owned National Iranian Oil Co and Malaysia's SKS Ventures.
Iran insists its nuclear program is designed to produce energy, not weapons. Malaysia, which chairs the 57-member Organization of the Islamic Conference, has said it has no objections to Iran using nuclear power for peaceful means.
Malaysia is the US' 10th-largest trading partner, with US$44 billion in two-way trade in 2005. Officials said that figure will double by 2010 if the pact is signed.
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