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Re-think needed on free trade pact

The Sun (Malaysia) 10 Apr 2007

Re-think needed on free trade pact

Charles Santiago

The deadline that would have enabled President George W. Bush to fast-track any deal for a free trade agreement (FTA) through the US Congress has now passed. Talks are scheduled to resume in Washington in a couple of weeks. While politicians talk of fine-tuning various contentious issues and building consensus, the debate over the FTA’s future seems set to run and run.

The irony of the current Malaysia-US FTA is that it was born out of failure. Since the 1990s, trade liberalisation has promised much but delivered little in the way of genuine benefits for developing countries and poor people.

Given the intellectual and practical bankruptcy of free trade it is worth asking just how Malaysia has become embroiled in negotiations that will potentially exacerbate its worst features. Part of the reason lies in the character of US foreign economic policy. While multilateralism may be dead in the water Washington has not hesitated to pursue bilateral policies. As Robert McMahon of the US Council on Foreign Relations puts it: "The Bush administration has pressed ahead with smaller bilateral free trade agreements to secure preferential deals as well as cement ties with strategically important countries".

The US logic is based on its own interests. Competition for investment opportunities in an expanding Asian market is perceived as critical for maintaining US capital’s leading position in the global market place. At the same time, "partners" get locked in to the American geo-strategic nexus.

It is much more difficult to identify what benefits the proposed FTA holds for Malaysia. Supporters of the deal have trotted out the usual platitudes: accessing the US market for Malaysian firms, inducing foreign direct investment (FDI), stimulating local inventive activities and encouraging the transfer of new technologies into the country. Malaysian business lobbies have eagerly rehearsed a reassuring story about the potential gains in exports.

However, large numbers of people remain unconvinced of these arguments. Over the past year, a new and disparate constellation of forces has emerged—including economic nationalists, farmers and trade unionists, consumer groups, environmentalists, human rights campaigners and development experts—who are part of the expanding opposition to trade liberalisation around the world.

Unsurprisingly, much of the opposition is driven by anger and resentment of aggressive US tactics. These are seen as an affront to Malaysia’s economic sovereignty and a constraint on policy autonomy.

The politics of resentment is one thing but informed and effective resistance to the specifics of the FTA is another. Opponents of the FTA have been able to draw inferences from a careful evaluation of similar US-sponsored FTAs elsewhere and subject their provisions to detailed scrutiny.

Two examples serve to illustrate both the politics at play and the potential damage to Malaysia’s economic and human security if the FTA goes ahead: agriculture and intellectual property rights as they apply to medicines.

For many years the trade liberalisation agenda in agriculture has been set by and for the corporate agribusinesses of the US and the European Union. What this means is that the terms of trade in agricultural productionÑan area where developing countries should have their strongest comparative advantage, according to free trade theoryÑare firmly weighed against them. In fact, nowhere are the double standards of so-called free trade more apparent than in the agricultural sector.

Discussions are now taking place in the US on a new Farm Bill. The consensus is that US farmers may accept a modest reduction in their gargantuan subsidies but only in exchange for greater export opportunities and market access abroad of the kind guaranteed in the FTA. Meanwhile, it is clear that smallholder farmers in Malaysia would suffer untold hardship if tariffs are slashed and their subsidies are cut. Not only would this scenario devastate rural livelihoods but it would also call into question food sovereignty, a cornerstone of national development.

The second example concerns access to affordable medicines. Medicines (like other products) can be protected by intellectual property rights (IPRs). These are artificial monopoly rights to intangible goods and services. Major corporations have long pressed for such rights which, they say, encourage innovation and protect their R&D.

The adoption of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) at the WTO fundamentally transformed IPRs into internationally tradable commodities. In partial recognition of the struggle of many developing countries and NGOs against what they saw as "patent hegemony", the Doha Declaration on the TRIPS Agreement and Public HealthÑagreed in 2001 recognises countries’ rights "to protect public health and, in particular, to promote access to medicines for all".

However, the US government has consistently used its FTA negotiations to extract ever-higher levels of intellectual property protection than those mandated by the TRIPS Agreement. They include so-called TRIPS-plus standards which in some instances, even exceed US domestic law. They are likely to deepen Malaysia’s technological dependence on foreign interests, engender loss of trade balance in the pharmaceutical sector to the US, and hinder local R&D.

The lessons of both case studies—agriculture and the TRIPS-plus provisions as they apply to medicines—are wholly indicative of what a Malaysia-US FTA would look like. There are many more equally controversial issues on the table.

To suggest, as some Malaysian politicians have done, that they can simply be laid to one side during the negotiation process is disingenuous. Certainly the US government is not under any illusions. Its trade strategy is first and foremost about the pursuit of market-opening initiatives using models "that can be used throughout all negotiations".

For the US, then, there are core provisions that are not open to compromise. Rather there are vital business interests to protect, starting with agribusiness and pharmaceuticals. Bush himself understands this logic. As he made clear at the opening of negotiations, "a U.S.-Malaysia Free Trade Agreement will advance our commitment to opening markets around the world and expanding opportunities for America’s farmers, ranchers, workers, and businesses". Can the same be said for Malaysia’s farmers, workers and businesses?

The removal of the US-imposed time constraint should be now used as an opportunity for reflection and a much more frank debate than has hitherto been the case.

In this context, the fight over free trade today is symptomatic of critical new thinking about how best to control over the forces of globalisation that increasingly structure the country’s development choices. The FTA would leave these choices to the most powerful market actors. But the foundations of a durable national development project requires vision, values, leadership, purpose and accountability—the very antithesis of the market ethos which understands only competitiveness and profitability.

Hard choices must be made in the coming months. Those who make these choices must also listen to those voices who offer another vision of the future.

The writer is the Director of Monitoring Sustainability of Globalisation.

 source: Sun2Surf