Did Malaysia concede too much? US-Malaysia trade agreement requires parliamentary scrutiny

Aliran is gravely concerned by the US-Malaysia trade agreement, signed on 26 October, which the White House has labelled “reciprocal”.

In our assessment, the terms appear lopsided and raise serious concerns about their impact on Malaysia’s national interests, economic sovereignty and strategic autonomy.

We outline five critical issues that need to be addressed:

1. Concerns over asymmetric market access: Under the agreement, Malaysia provides tariff-free access for a range of goods, including automotive parts and machinery. The US has agreed to eliminate tariffs for about 12% of Malaysian exports, such as palm oil and rubber. But it maintains an average 19% tariff rate on other Malaysian exports. Developing economies require policy space to protect emerging sectors – a concern that remains valid despite these new exemptions.

2. Potential impact on resource sovereignty: The agreement includes a commitment by Malaysia not to impose quotas or bans on rare-earth or critical mineral exports to the US. This could reinforce a pattern where Malaysia acts primarily as a raw materials supplier to the US. There appears to be no clear reciprocal guarantees on technology transfer or domestic value-addition for those resources. The US would thereby retain high-value processing and technology development. We believe finite strategic resources require sunset clauses and domestic industry development guarantees. Rare earths extraction also requires strong environmental safeguards. These specific safeguards are not detailed in the publicly released summaries of the agreement.

3. Digital economy commitments: Malaysia commits to refrain from imposing digital-services taxes on US firms and to ensure data flows. We are not aware of any equivalent US commitments regarding Malaysia’s digital firms or regulatory goals. We are therefore concerned that this could undermine Malaysia’s ability to regulate its digital economy and to generate tax revenue from foreign platforms operating in the Malaysian market.

4. Geopolitical implications: The agreement commits Malaysia to “strengthening economic and national security cooperation” with the US. This raises key questions. How will this affect Malaysia’s relationship with China, which remains our largest trading partner? How does this square with Malaysia’s – and Asean’s – traditional neutrality?

5. Apparent one-sided regulatory concessions: The agreement contains extensive Malaysian commitments to remove non-tariff barriers, including accepting US motor vehicle standards and ‘streamlining’ import licences and halal requirements. US commitments to facilitate acceptance of Malaysian standards or remove its own barriers are less explicitly detailed. This regulatory asymmetry, based on available information, appears to favour American exporters.

We fear the nature of this agreement could resemble historical colonial patterns: developing nations surrender sovereignty, natural resources and policy flexibility to major powers in exchange for limited market access. Indeed, the office of the US trade representative states of the agreement with Malaysia: “Today’s announcement shows that America can defend its domestic production while obtaining expansive market access with our trading partners.”

Parliamentary scrutiny

As this agreement will fundamentally affect Malaysia’s economic sovereignty and geopolitical positioning for generations, Aliran calls for parliamentary oversight and approval before ratification.

We support the call by the parliamentary Select Committee on International Trade for it to examine this trade deal thoroughly.

The government should provide the complete agreement text and impact assessments. The select committee should hold hearings with all stakeholders, including independent economists, labour union representatives and civil society groups, to discern the impact on Malaysia.

The agreement requires safeguards such as sunset clauses on rare earth commitments and provisions to safeguard Malaysia’s interests in case of economic and environmental harm. It should also have clauses for renegotiation if global circumstances change, as well as periodic parliamentary reviews.

Parliament also has to debate several critical questions:

• Do such major trade concessions exceed executive authority?
• What are the safeguards for affected industries?
• How will our trade relationship with China and Asean be affected?
• Are the Malaysian commitments to buy Boeing commercial aircraft new or pre-existing? Isn’t Boeing profiting from its arms sales to Israel, which is responsible for the Gaza genocide?
• Why is Malaysia committing to buy up to $3.4bn annually in US liquefied natural gas through multi-year agreements with Petronas?
• Why do the terms appear to surrender resource sovereignty while the US maintains its tariff protections on many goods? What about tariffs on US services?

We disagree that this agreement does not require a parliamentary vote. This is no ordinary trade agreement, as it will have an impact for generations. It requires MPs, the people’s representatives, to ensure safeguards are in place to protect the public interest.

Crucially, no prime minister or cabinet should commit Malaysia’s sovereignty, natural resources and strategic positioning indefinitely without explicit parliamentary oversight, mandate and public consent.

If the agreement genuinely serves the long-term interests of the people of Malaysia, then it should be able to withstand transparent and rigorous parliamentary examination and debate.

Aliran executive committee
28 October 2025