The first round of negotiations is expected to run for four days, with the US delegation led by assistant trade representative for the Asia-Pacific Barbara Weisel who is also handling stalled talks with neighbouring Thailand.

Washington has said it is "very optimistic" about clinching a free trade agreement (FTA) with Malaysia, as well as another mooted deal with South Korea, but admits there are some troublesome issues to thrash out.

The US government is rushing to complete the talks before July 1 next year when Congress will regain the right to amend any pact negotiated by the administration.

But among likely sticking points with Malaysia are its reluctance to throw open its automobile and banking sectors, and US queasiness over Malaysia's performance on protecting intellectual property rights.

"Trade and investment liberalisation will benefit both countries if it can be achieved... but there are obstacles to overcome," said RAM Consultancy Services chief economist Yeah Kim Leng.

"One of those is the difference in expectations of intellectual property standards. I think it is going to be a thorny issue," he said.

Malaysia has made efforts to shore up its anti-piracy efforts, announcing it will sign up to treaties protecting inventions and research, and set up a special court to handle complaints on infringement of copyright and trademark.

But despite government crackdowns, illegal movie and software discs are freely available in Malaysian street markets and even up-market shopping malls.

US ambassador to Malaysia, Christopher LaFleur, has praised Malaysia's efforts but said intellectual property protection would be a "big component" in the talks.

"Both sides want to benefit from an increasingly free and open exchange of intellectual property, and the basis for that has to be confidence that, for both of us, our intellectual property is going to be protected," he said.