KUALA LUMPUR, Malaysia (AP):

A top U.S. trade negotiator said Friday resolving disagreements on Malaysia's sensitive areas in free trade talks was not an "insurmountable task" and voiced confidence of con-cluding the pact early next year.

Barbara Weisel, who led a third round of negotiations with Malaysian officials this week, said the discussions have "provided the momentum" to achieve "significant progress" at the next round of talks in Washington in December.

Sixteen working groups thrashed out issues ranging from market access for goods, agriculture, textile and services to intellectual property, labour, environment, technical barrier and customs, she said at the end of week-long talks.

"It is clear from this week's discussions that there are very substantial areas of common understanding," Weisel told reporters. "It also is clear that finding a path forward on the areas of sensitivities, while a challenge, will not be an insurmountable task."

The main area of contention is Malaysia government's policy of awarding tenders for projects, goods and services mostly to ethnic Malay companies under an affirmative action programme. This has shut out not only domestic non-Malay companies, but also U.S. and other foreign businesses from bidding for any government contracts.

Other sticking points in the negotiations are Malaysia's highly protected state car industry, its ban on majority foreign ownership of banks and poor intellectual property rights.

Weisel said this week's talks have given the United States optimism about "the ability of our governments to work together to find creative solutions to address our challenges" and "hopefully to conclude this agreement early next year."

goods and services

Both sides have exchanged market access offers and will delve into specific sectors in the next round of negotiations, she said.

Malaysia is the United States' 10th-largest trading partner, with US$44 billion (€35 billion) in two-way trade in 2005. Officials say that figure will double by 2010 if the pact is signed.

The preferential government procurement policy is mandated by a 1970 affirmative action programme that gives special privileges in contracts, jobs and housing to Malays to help them close the gap with wealthier minority Chinese.

Malays make up about 60 per cent of the country's 26 million people, Chinese account for a quarter and Indians about 10 per cent.

U.S. officials, including Weisel, have pointed out that the lack of an FTA has forced the United States as a matter of reciprocity - to bar Malaysian companies from US$250 billion (€196 billion) worth of U.S. government procurement contracts.

In 2004, Malaysia exported nearly US$60 billion (euro47 billion) worth of electronics and information technology products worldwide, of which US$20 billion (euro15.7 billion) went to the U.S. Ñ but none of it to the U.S. government, she has said.

Officials hope to wrap up FTA negotiations by end of March and conclude it by July 2007, the expiry of U.S. president George W. Bush's authority to negotiate trade deals that require simple yea-or-nay Congressional approval. Once that runs out, Congress could hold up a deal debating over various points within the proposal.

"We are on track ... but there's still a lot of work to it," Weisel said. "It's in the interest of both countries to conclude it before that."

In 2004, Malaysia exported nearly US$60 billion (euro47 billion) worth of electronics and information technology products worldwide, of which US$20 billion (euro15.7 billion) went to the U.S. Ñ but none of it to the U.S. government, she has said.

Officials hope to wrap up FTA negotiations by end of March and conclude it by July 2007, the expiry of U.S. president George W. Bush's authority to negotiate trade deals that require simple yea-or-nay Congressional approval. Once that runs out, Congress could hold up a deal debating over various points within the proposal.

"We are on track ... but there's still a lot of work to it," Weisel said. "It's in the interest of both countries to conclude it before that."

"We are on track ... but there's still a lot of work to it," Weisel said. "It's in the interest of both countries to conclude it before that."