The government is set to hold special parliamentary sitting to discuss the United States reciprocal tariffs on May 5th, Aira Azhari shares her insights.
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00:00Welcome back. Now, the government is set to hold a special parliamentary seating to discuss the United States reciprocal tariffs on May 5th.
00:10As a prelude to this, we have Aira Azhari from Ideas with us to share her insights. Thank you so much for joining us.
00:18Now, Aira, what can you expect during this seating and what would be the hotly debated topics and discussions put forth, you think?
00:25I think we can expect an update from Tenggu Zafrul, who just returned from the US, fresh from discussions with the US Secretary of Commerce and the US Trade Representative,
00:40and perhaps from the Prime Minister as well, who will most likely share about the steps the government is taking to address this tariff issue.
00:48I think MPs will be most interested to know what steps are being taken to ensure the impact on specific industries.
00:57Will tariffs mean increased costs for goods and services for Malaysians?
01:02What are the cost pressures on SMEs, especially those in affected export sectors?
01:09This is really important because small businesses usually operate on thin profit margins.
01:13So, any uptake in costs will have a significant impact on them.
01:19Investors will probably want to know about the unpredictability and the uncertainty,
01:26which will make it harder, actually, for foreign investors to take risks and to invest in the country.
01:32So, they would like to know how will this affect our FDI attractiveness and our competitiveness as well.
01:38And also, maybe, our stance as the Chairman of ASEAN.
01:44So, our initial response was quite a commendable collective stance.
01:49But what's next?
01:51There's about half a year to go for our ASEAN Chairmanship.
01:55So, I think all of these issues will be brought up by the MPs and the Ministers on Monday.
02:03Yeah.
02:04Right.
02:04A lot to look forward to.
02:06You know, from Tenggu Zafrul's trip to Washington just a couple of days ago,
02:13MITI has actually outlined its strategy to deal with US tariffs.
02:17But what does it entail, especially when it comes to reviewing certain industrial policies?
02:22Is there a specific sector or area that we need to look into?
02:26So, I think MITI's strategy in response to the US tariffs have been to focus on the broader goal,
02:39which is to manage the systemic uncertainty,
02:41while at the same time safeguarding our export competitiveness and also our investment climate.
02:47The National Geoeconomic Command Centre, the NGCC, which is MITI's stakeholder task force,
02:54has already been activated.
02:56I believe that the NGCC has already met.
02:59So, this is a good early step in a longer-term recalibration of Malaysia's trade and industrial strategies.
03:05But we must remember that this is not simply about negotiating tariff relief,
03:10but also about adapting the broader trade architecture and signalling openness to reform.
03:16So, MITI hasn't actually spelled out targeted sectors for reform,
03:21but they have mentioned several areas that have emerged as focal points.
03:26One of them is to reduce the bilateral trade deficit and then addressing non-tariff barriers,
03:32strengthening technological safeguards and security,
03:35and also exploring the possibility of a bilateral trade agreement.
03:40I think Tunku Zafro also brought up the issue of economic security as well.
03:45So, yeah, I think in the field of agriculture, especially non-tariff barriers,
03:50has remained a concern.
03:52There are many procedures and measures that are quite complicated still in the agricultural sector,
04:00which maybe this is a good time for Malaysia to think about improving this.
04:07And also, diversification versus dependency.
04:12So, one of the issues is the trade surplus with the US,
04:16which has reduced to $25 billion over the years.
04:20But this trade surplus still makes us vulnerable to political pressure from the US.
04:27So, of course, there is an impulse to preserve market access, which is understandable.
04:32But we need to think about real resilience,
04:35which will come from export, market diversification,
04:38enhanced free trade agreement, utilisation and stronger regional integration.
04:43So, I think here MITI is already taking the right steps.
04:46So, they are actively pursuing new trade agreements.
04:48So, the European Free Trade Agreement, the EFTA, will be signed early June, if I'm not mistaken.
04:56And also, you know, the opportunity to strengthen ASEAN cooperation is also really important.
05:03And lastly, I think while Malaysia has stated that we will not retaliate in terms of tariffs,
05:09the substance of these engagements are the one that matters.
05:12So, the devil is in the detail, right?
05:14So, negotiating exemptions or a technology safeguard agreement may offer tactical relief,
05:19but there are still deeper systemic issues such as restrictive ownership policies,
05:24sectoral protectionism, which will need addressing.
05:28And real concessions may require review of the longstanding industrial practices,
05:32particularly in services, agriculture, as I already mentioned, and also state-link procurement.
05:37So, strengthening domestic regulatory coherence is really important.
05:41And investing in sectors are likely to face scrutiny.
05:46Yeah.
05:47I mean, given the current situation, I think it's definitely timely for Malaysia to sort of
05:52assess and review back some of its policies and also its, you know, trade relations.
05:58But with regards to this, you know, Malaysia has remained very steadfast in its commitment to engage with the US
06:04and ensure continuous dialogue.
06:07So, focusing on, like you said, improving trade imbalance, surplus deficit, and also strengthening ties.
06:15But, you know, a lot is still in the air.
06:17So, do we expect any changes in our strategy and approach, especially after the seating on May 5th?
06:23Or can we anticipate anything that could affect Malaysia's future plans?
06:31To some extent, it will depend on what the responses are from the other MPs on Monday.
06:37The Goos Raffro has already kick-started the process of discussions, of engagements with the USTR.
06:44And he has mentioned that negotiations will start soon.
06:47I think there probably will not be a complete overhaul or a complete pivot away from our national priorities in terms of trade and investments.
06:56We already have some core frameworks in place, such as the National Industrial Master Plan,
07:02the National Semiconductor Strategy, and the NETR, which do provide a clear forward direction.
07:09But, who knows, there may be adjustments in how Malaysia approaches sector-specific reforms,
07:15especially in sensitive areas such as agriculture and technology.
07:18The NIMP already focuses on addressing many of the right issues, such as supply chain gaps,
07:25industrial upgrading, and export diversification.
07:28The changes will likely be about how we implement these priorities more effectively.
07:33So, I think after Monday, we will need to firstly pay attention to what the other MPs are going to bring up in Parliament.
07:44My sense is they will be concerned about how it will impact their constituents in the long run.
07:51But, I also don't feel that the government is going to sort of move away or come up with a completely new strategy.
08:03They're still going to stay on track to what they want to say.
08:07Right. Thank you so much, Aira.
08:10And May 5th is something we have to look forward to.