Malaysia showing flexibility in trade talks - US

WASHINGTON, Apr 21 (Reuters) The United States and Malaysia agreed on a plan for continuing free trade talks in their first meeting this week after missing a March deadline to finish the pact, a U.S.

trade official said.

''The Malaysian government has shown flexibility on a number of U.S. priorities and that will help us to advance,'' said Steve Norton, a spokesman for the U.S. Trade Representative's office on Friday. ''However, we still have a lot of work to do.'' The United States launched talks on a free trade agreement with its tenth largest trading partner more than a year ago.

Although both sides were optimistic of reaching a deal by early 2007, the talks were delayed by a change in Malaysia's lead negotiator and that country's hesitation to open its government procurement market to more U.S. companies.

After the last round of talks in February, Malaysian officials said they needed to reach a new political consensus within their government on how to proceed.

That appears to have been accomplished, and Malaysian negotiators came to Washington this week with more flexibility on how to proceed in difficult areas like government procurement, investment and financial services, Norton said.

''The U.S. and Malaysia came up with a specific work plan for each chapter'' and are continuing to work toward the completion of a high-quality pact, Norton said.

However, the negotiations face an additional challenge after the two countries failed to reach a deal in March -- a key deadline under the Bush administration's trade promotion authority which expires at the end of June.

That legislation allows the White House to negotiate trade deals that Congress must approve or reject without making changes. It also requires President George W. Bush to give 90 days notice before signing any pact, which is why the United States and Malaysia needed to finish by March 30.

A senior Democratic lawmaker said earlier this week he believed Congress would approve a limited extension of trade promotion authority for Congress to conclude the Doha round of world trade talks. The Bush administration would like a broader extension to cover Malaysia and other trade pacts.

U.S. trade negotiators could still conclude a trade deal with Malaysia without trade promotion authority, but there's no guarantee Congress wouldn't change parts of the pact.

Reuters SBA VP0515