A free trade agreement between Malaysia and the United States means that there are no barriers to trade between them and that goods and services can flow freely between the countries. However, this free trade agreement has advantages and disadvantages which will be discussed further. In 2005, Malaysia had an annual trade surplus of $23 billion with the United States. Using the FTA, Malaysia could gain additional market access to the United States, but the US Trade Representative's structural and legal rules could limit access. For example, under “rules of origin” such as the “yarn forward rule” makes it difficult for Malaysia to export its textile products to the United States even if tariffs are lowered. Interestingly, the US National Association of Manufacturers predicts that it will be able to double its exports to Malaysia by 2010. This may seem rather one-sided or biased. Furthermore, it is a well-known fact that Malaysia has relatively high tariffs. By establishing a free trade agreement with the United States, the tariff cuts which could be as drastic as 0% since it is a free trade agreement will affect Malaysia more, requiring a greater sacrifice from Malaysia. This can have many impacts. For example, a huge reduction in tariffs on tobacco and alcohol could bring many negative externalities to the country that is trying to campaign against smoking since cigarettes will now be cheaper. Furthermore, by eliminating or reducing tariffs, Malaysia will not be able to protect itself from artificially cheap products from the United States. The United States could sell its surplus agricultural products to Malaysia, thus affecting our local producers. This is mostly because the United States provides agricultural subsidies, so its agricultural products can be exported below the cost of production. Services are the most important sector of the Malaysian economy for employment, local participation and social policy. Over the past 50 years the Malaysian government has succeeded in ensuring greater local ownership and participation through careful government policies. Malaysia gradually liberalizes its service sector, little by little, to make it proportional to the growth of the local service sector so that they can cope with foreign competition. At the WTO there is a positive list and only the sectors listed in it will be open to foreign competition. This means that Malaysia has no obligation to liberalize first and can do so at its own pace and on its own terms. However, after establishing a free trade agreement with the United States, there is a negative list and only the listed sectors can be exempted from US competition.