The leaders of Malaysia and Australia have agreed to begin talks on a free trade agreement - despite lingering differences over regional security.

Malaysian Prime Minister Abdullah Ahmad Badawi, left, is handed a pen by Australian counterpart John Howard
Visiting Malaysian Prime Minister Abdullah Badawi and Australian leader John Howard Thursday announced their two nations would begin free trade talks at meetings in Canberra.

Mr. Abdullah is the first Malaysian leader in more than two decades to come to Australia in a visit that is being billed as a fresh start in often-strained relations.

Prime Minister John Howard says free trade negotiations will only improve bilateral ties.

"It is a mark of the determination of both of us to build on what is already a very strong relationship," he said.

Despite the positive trade tone, both men continued to deeply disagree on regional security.

At issue is Australia's refusal to sign a non-aggression treaty with the Association of Southeast Asian Nations - reserving the right to preemptively strike against terrorist threats in neighboring nations.

On the eve of his visit here, Mr. Abdullah criticized Mr. Howard for being too eager to ally with Washington on defense issues - such as Iraq.

"We are inclined to believe that Australia is not nearly centering on Asia - on East Asia - but has more concern with reflecting the views as expressed by the United States," he said.

Malaysia has long been an extremely vocal critic of U.S. foreign policy - alleging it is slanted against Muslim countries.

However, Australia's strong alliance with the United States has not been an obstacle to improving relations with Indonesia - home to the world's largest Muslim population.

Indonesian President Susilo Bambang Yudhoyono earlier this week backed Australia's bid to attend an inaugural East Asia summit in Kuala Lumpur later this year. Malaysian Prime Minister Abdullah declined to discuss Australia's possible inclusion.

Despite policy differences, trade between Malaysia and Australia amount to about $7.6 billion a year.

Australia has been negotiating free trade agreements with the United States, Singapore and Thailand.