Malaysians question US free-trade deal
Asia Times, Apr 21, 2006
Malaysians question US free-trade deal
By Chee Yoke Heung
KUALA LUMPUR - A popular movement opposing government plans to negotiate a free-trade agreement (FTA) with the United States is gaining momentum in Malaysia. This represents the latest hurdle to Washington’s plans to overhaul its terms of trade with Southeast Asia’s export-dependent economies.
When negotiations formally opened in Washington, DC, on March 8, Malaysian Minister of International Trade and Industry Rafidah Aziz declared that there was no domestic opposition to the bilateral trade proposal. The Consumers Association of Penang, Friends of the Earth Malaysia and the Third World Network, among others, beg to differ, and are raising public awareness of the deal’s implications, which they contend will cause more economic and social harm than good.
To take advantage of President George W Bush’s fast-track authority, which expires in mid-2007, the US aims to complete the negotiations by early next year, meaning negotiations with Malaysia are likely to be fast and furious when they get down to business this June.
For Malaysia, the economic stakes are particularly high. The US is currently Malaysia’s largest export market, absorbing nearly 20% of all exported goods and services. The US is also the largest foreign investor in Malaysia, with an emphasis on electronics-related manufacturing, one of the Southeast Asian country’s largest industries. The Malaysian government hopes that an FTA will further enhance trade and investment flows - but because of its small size and overdependence on the US market, Malaysian negotiators are at a substantial disadvantage, trade analysts say.
That’s exactly what has so many of Malaysia’s civil-society groups up in arms. In a recent petition addressed to the government, non-governmental organizations together with people living with the AIDS virus, human-rights groups, labor groups and other concerned individuals said the scope of the negotiations would have profound impacts on national sovereignty, including likely adverse impacts on jobs, food security and access to affordable medicines, as well as the viability of small farms, firms and service providers.
Minister of International Trade and Industry Rafidah Aziz said she has done the "arithmetic" and concluded that a deal would be in the broad national interest, but she failed to provide details of her calculations. While US trade groups have commissioned cost-benefit studies of a deal, so far there has been no independent assessment conducted in Malaysia of the likely economic impacts, according to a Ministry of Finance official.
The civil-society movement is particularly concerned that decisions on such important matters are being made in the absence of any consultations with the general public and without parliamentary oversight. Opposition leader Lim Kit Siang has likewise protested about the lack of transparency surrounding the FTA process. "To march into full negotiations with the US without such a [cost-benefit] assessment is akin to flying blind, and is an irresponsible step," warned Lim.
Such complaints are notably similar to those being lodged against the government of Thailand, where negotiations toward an FTA with the US have been shrouded in secrecy and undertaken without parliamentary oversight. The recent popular protest movement that dislodged Prime Minister Thaksin Shinawatra from power took particular hard aim at the US-Thailand FTA, which if completed, opponents contended, would undermine national sovereignty and disproportionately benefit politically connected big businesses.
Sticks and carrots
The US has dangled FTAs as a reward to governments that have cooperated closely with Washington’s post-September 11, 2001, counter-terrorism policies. That’s been particularly true in Southeast Asia.
Singapore and Australia, the United States’ closest strategic regional allies, were first to seal bilateral deals with the US. Thailand, which serves as the United States’ counter-terrorism hub in the region, was next in line for a deal. Malaysia and Indonesia, which at first resisted US pressure to crack down on alleged terror suspects but later stepped in line, have both belatedly been offered trade deals.
The political component of the deals has come under scrutiny, which many trade analysts believe undermines the greater potential economic benefits pursued under the World Trade Organization’s multilateral approach. Unlike previous US-brokered bilateral trade pacts, which targeted specific goods or projects, the present generation is more comprehensive, covering investment, services and tougher intellectual-property protections. They are also more restrictive: governments can be sued or face trade sanctions in cases where US companies feel they have been treated unfairly.
The US position at FTA negotiations surrounding intellectual-property issues is by law non-negotiable, and controversially includes the suspension of so-called compulsory licensing agreements, which under the WTO allow countries to produce generic drugs during times of national emergencies. Similar agreements have been signed with Australia, Chile, Morocco, Singapore, Bahrain and Central American countries, and all contain provisions that oblige these countries to tighten their legislation on intellectual-property rights well beyond internationally agreed standards.
One particular area of concern in Malaysia and Thailand regards future access to life-saving anti-retroviral treatments for people with the human immunodeficiency virus (HIV), which can cause AIDS. A group of Malaysians living with HIV under the banner "Positive Malaysian Treatment Access and Advocacy Group" has written to Prime Minister Abdullah Badawi expressing its concern that generic medicines will be banned and US-patented treatments rendered unaffordable under the tougher intellectual-property provisions in a US-Malaysia FTA.
The proposed pact is already making political waves. Former prime minister Mahathir Mohamad has warned that an FTA with the US could harm the economy by undermining the New Economic Policy, which was promulgated in the 1970s to give ethnic Malays and other indigenous groups special privileges to narrow the wealth gap with Chinese-Malaysians. Malay business associations have already called for excluding government procurement from the trade talks, which would go against the "national treatment" provisions other US bilateral trade deals have entailed.
US companies would likely leverage an FTA to get greater access to Malaysia’s financial sector, where ethnic Malays still have tight control over the industry. Similar domestic concerns surround the Proton national automotive project, which has survived over the years behind high protectionist walls that an FTA would aim to dismantle.
Narrowing the gap
According to US Trade Representative Rob Portman, the FTA will provide market-opening opportunities for US companies, particularly in telecommunications, financial services, energy distribution, health care, audiovisual, and other professional services. The US also hopes to expand its agricultural exports to Malaysia beyond the current US$400 million level, he said. Malaysia currently imposes a 40% tariff on imported rice, which aims to discourage imports and enhance food security.
Malaysia currently imports about $3 billion worth of food a year, and its rice farmers would be particularly vulnerable to cheaper US imports, analysts say. They point to the example of the North American Free Trade Agreement (NAFTA), where exports of cheap corn (maize) to Mexico rapidly tripled under market-liberalizing measures and forced nearly 2 million Mexican farmers to abandon their land.
A bilateral deal could seriously erode Kuala Lumpur’s current trade surplus. According to the trade representative’s office, Malaysia’s tariffs are on average twice as high as US tariffs, a situation that an FTA would aim to rectify. The US-based National Association of Manufacturers estimates that US manufacturing exports to Malaysia could more than double to $22 billion by 2010.
If the experience of other FTA countries is any indication, Malaysia can expect a narrowing trade surplus and possibly less trade altogether. In the case of the US-Australian FTA, it was found that in the first 12 months after the agreement came into effect, Australian trade with the United States had actually decreased, leading to a trade deficit with the US.
Historically, Malaysia has resisted many of the US-led initiatives at the WTO, including demands to open government procurement, investment and competition policy, which Kuala Lumpur feared would undermine its various national projects aimed at lifting the country to developed-nation status by 2020.
However, it was easier to fight back in unison with other developing countries at the WTO along developed- and developing-economy lines. In this era of US-led FTAs, export-dependent countries such as Malaysia are in danger of having to bend to US demands - even if it hurts the interests of its own people.
Chee Yoke Heong is a freelance writer based in Kuala Lumpur.
