Malaysia is among the 16 countries under investigation by America for excess industrial capacity and forced labour

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The Office of the United States Trade Representative (USTR) has initiated an investigation under Section 301(b) of the Trade Act of 1974 into Malaysia and 15 other countries for alleged excess production capacity in sectors including electronics, machinery, and steel. So, what should you know about it?

 

A huge sum of money is at stake here

In addition to Malaysia, China, the European Union, Singapore, South Korea, Vietnam, Japan, and India are also being investigated. Malaysia has a USD16 billion (~RM62.9 billion) trade surplus with the United States, driven by exports of electronics and machinery.

According to the United States, Malaysia's steel production capacity is expected to increase by 22% between 2018 and 2022, even as demand falls by 25%. According to the United States, this indicates potential overcapacity that will drive steel prices down, putting strain on its domestic steel production capacity.

The investigation will last for several months, with public hearings and comment submissions open until April 15. USTR will issue a final decision before determining whether retaliation will be imposed. At the same time, the United States also initiated investigations into 60 countries, including Malaysia, for alleged failure to address the issue of forced labour, also under section 301(b) of the Trade Act of 1974.

 

This probe aims to see whether goods produced using forced labour were detrimental to American trade

Moreover, the investigation was conducted to see whether goods produced using forced labour were detrimental to American trade. The use of forced labour was seen as an unfair way of reducing production costs because American companies could not compete.

Apart from Malaysia, other countries under investigation are Saudi Arabia, Brazil, China, the Philippines, India, Indonesia, Cambodia, the European Union, Singapore, Thailand, and Vietnam. The US has requested consultations with the governments of the countries involved, and a hearing is scheduled for April 28.

If found guilty, the US will impose trade sanctions, new tariffs and import quotas. The investigation announced yesterday is seen as a pretext for the US to reimpose higher tariffs on a par with Trump's Tariffs. At present, the global tariff is only 15%, which is much lower than the 19% imposed on Malaysia through Trump's Tariffs.

 

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