Malaysia’s is looking for better trade relations with the U.S.

Malaysia is looking to boost international trade relations with the U.S. hanse data show that Malaysia has fallen behind in U.S. imports since the global economic and financial crisis. However, it expanded its share in a small but growing segment of U.S. imports while maintaining a unique pattern of high trade concentration.

The share of Malaysia in U.S. imports stagnated from 1.7 percent or US$33.7 billion in 2007 to 1.6 percent or US$38.1 billion in 2017. The small decline can be attributed in part to Malaysia’s declining share in the U.S. fastest growing sectors from 2.9 percent in 2007 to 2.3 percent in 2017 (based on the harmonised trade classification HS 2002 AG2 of 99 chapters). In 85 electrical machinery and equipment and parts thereof, one of the most dynamic U.S. imports, Malaysia has continued to expand its share from 4.5 percent in 2007 to 7.1 percent in 2017. It holds the third largest share in 2017 after China with 41.4 percent and Mexico with 17.7 percent and expanded the third fastest between 2007 and 2017 after China and Vietnam and ahead of significantly smaller Ireland and Austria.

Malaysia maintains a strong and increasingly specialised presence in a narrow set of sectors. It expanded its share fastest in U.S. import between 2007 and 2017 in chapters 80 tin, 85 electrical machinery, 23 food industries, residues and waste thereof, 40 rubber, 92 musical instruments, 70 glass and glassware, 90 optical, photographic, cinematographic and other instruments, 49 printed books, 34 soap, 91 clocks and watches (Figure 1). The chapters expanded in U.S. imports from 17.0 percent in 2007 to 20.5 percent in 2017.

Figure 1. U.S. imports from Malaysia

Malaysia’s pattern of concentration, measuring the contribution to overall U.S. imports from a given set of sectors in overall U.S. imports from Malaysia, differs significantly from its geographic neighbours Cambodia, China, Indonesia, Philippines, Thailand and Vietnam. The 10 sectors in which Malaysia’s expanded its share fastest in U.S. imports represent in 2017 75.7 percent of total U.S. imports from Malaysia of which 85 electrical machinery represents 64.8 percentage points. For Cambodia, the 10 sectors where it expanded its share fastest in U.S. imports make in 2017 24.9 percent of total U.S. imports from Cambodia, for China 31.3 percent, for Indonesia 27.7 percent, for the Philippines 32.4 percent, for Thailand 14.9 percent and for Vietnam 54.3 percent, respectively. 85 electrical machinery is also important for China representing in 2017 27.6 percent of U.S. imports from China; for Thailand 26.7 percent; for Vietnam 22.8 percent, for the Philippines 35.0 percent, respectively.

Malaysia exhibits several sectors of high competitiveness in U.S. imports. However, the high level of concentration in its trade with the U.S. may make it unduly vulnerable to developments in the underlying sectors in particular in 85 electrical machinery. The success of any trade relations talks will be highly dependent on that.