Crunch time for TPPA talks

The Star, Malaysia

Crunch time for TPPA talks

11 May 2015

By Martin khor

Is the Trans Pacific Partnership Agreement about to be concluded, or will it be put into deep freeze instead?

The answer may be known in the next few days or weeks as the controversial TPPA negotiations face another crunch time.

Last week, US top negotiator Michael Froman was in Kuala Lumpur for a series of meetings.

He told the public that Malaysia’s concerns, especially on bumiputra policy, would be taken into account and that by joining the TPP, Malaysia’s economy and exports would grow significantly.

Froman also said there was no rush to conclude the TPPA.

In fact, there is an urgency for the talks to conclude within a few weeks because of the US political calendar.

Chief negotiators are scheduled to meet in Guam later this week to iron out outstanding issues so that a meeting of trade ministers of the 12 countries can conclude the deal in the Philippines at the end of this month, following the Apec Summit.

Why the hurry? The final TPPA has to be approved by the US Congress latest by December to avoid preoccupation with next year’s US presidential elections.

An agreement has to be reached by the ministers by May or June, or else the deadline may be missed and the TPPA may have to await a new president and Congress.

Other countries won’t negotiate their “bottom line” (or final positions) until the US obtains “fast track authority” from Congress, meaning Congress can only vote yes or no to the whole TPPA, but can’t amend the agreement.

The current sitting of Congress ends on May 18, and it has to fast-track the bills by then, or else the negotiators and ministers are unlikely to achieve a breakthrough in their meetings this month.

This is one of the many hurdles to cross if the TPPA talks are to succeed.

Firstly, Obama’s trade policy is unpopular both with the public and the Democrats. There are doubts whether the fast-track bills (known as Trade Promotion Authority) can be passed by both the Senate and the House of Representatives.

If even one of these does not accept the bill, then the TPPA talks will be in trouble, as partners of the United States will have no confidence that what their negotiators agree to will be approved by Congress, which has power over trade deals.

Second are the contentious issues in the negotiations which are difficult to resolve.

Most of the countries are opposed to the US demands on intellectual property. These will hike the price of medicine, causing them to be even more out of reach of the ordinary people; make it difficult for generic producers to operate; affect access to information and educational materials; and impact on farmers’ rights to save and exchange seeds.

Another issue is the TPPA’s investor-state dispute settlement system (ISDS), which gives power to foreign companies to challenge government policies in a foreign tribunal and to obtain compensation (up to billions of dollars) for loss of future profits.

In April, a group of renowned legal experts, including Obama’s old Harvard University law mentor Laurence Tribe, sent a letter to congressional leaders pronouncing that the ISDS is contrary to America’s legal traditions and principles and undermines its democratic norms.

Malaysia and some other countries find serious difficulty in the proposed TPPA rules to curb the operations of state-owned enterprises or even private companies in which the government has a stake.

This may affect big companies such as Petronas and the many enterprises under Khazanah and possibly PNB and EPF. Negotiations on whether companies can be exempted are under way. Future enterprises will certainly be affected.

Government procurement will be opened to foreign goods and companies, above a certain project threshold value.

The bumiputra preferences, a cornerstone of the Malaysian political economy, will be affected (though the extent and nature of the effects are still being negotiated).

This is within the larger issue of loss of preferences and advantages for local companies and goods (bumiputra and non-bumiputra) via the chapters on investment, procurement, competition and services.

Third is the question of benefits. Malaysia’s exports can be expected to increase due to better market access to the other TPPA countries. However, imports will also increase as Malaysia’s tariffs are eliminated.

Since our tariffs are generally higher than those of the United States, the most important partner, Malaysia would have to make more concessions and it can be expected that the trade balance would be negatively affected.

Fourth are the additional conditions that the United States may impose on other TPP countries, as it has done in previous FTAs with Peru, Guatemala and Australia.

Congress members also demand that TPPA countries that are “currency manipulators” (Malaysia has been mentioned as a candidate country) be punished, and that countries involved in human trafficking (Malaysia has been mentioned) be excluded from agreements that enjoy the fast-track treatment.

All these issues are already being hotly debated. If the TPPA negotiations conclude, the texts will at some stage be made public, and the debate can be expected to intensify.

But there are many hurdles to cross before that happens, and whether the political deadline can be met is still a big question. This will be answered in the next few weeks.

> Martin Khor is executive director of the South Centre, a research centre of 51 developing countries, based in Geneva. You can e-mail him at director@southcentre.org. The views expressed here are entirely his own.

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