The United States and Malaysia could finish talks on a free trade agreement in 2008, even though the Bush administration has lost key legislative authority, a top U.S. trade official said on Monday.

"It's our hope that we'll actually be in a position to conclude it next year," Deputy U.S. Trade Representative Karan Bhatia said in an interview. "We actually made a great deal of progress in the Malaysia FTA negotiations in the period right up to the expiration of (trade promotion authority)" in June.

Bhatia said he would discuss the proposed trade pact with Malaysian officials later this week, when he travels to Kuala Lumpur for the country's celebration of its 50th anniversary of independence from Britain.

The trip could be one of Bhatia's last as deputy USTR.  He is resigning in October to return to the private sector.

The loss of trade promotion authority has not reduced Malaysia's interest in negotiating a free trade agreement with the United States, Bhatia said

Although the two sides have not held a formal negotiating round for some time, "there continues to be some good exchanges through negotiating heads and groups," Bhatia said.

The Bush administration already faces strong opposition in Congress to free trade agreements with Colombia and South Korea, but could win approval of less controversial pacts with Peru and Panama.

A major stumbling block in the talks with Malaysia has been that country's reluctance to open its government procurement market to more U.S. companies.