TPPA is not in our national interest

Malay Mail. Kuala Lumpur

TPPA is not in our national interest

By Anwar Ibrahim

12 August 2013

The Trans-Pacific Partnership Agreement (TPPA), a proposed plurilateral free trade agreement (FTA) currently under negotiations among 12 nations surrounding the Asia-Pacific region, namely Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the Philippines, the United States, Vietnam and more recently Japan, boasts a combined gross domestic product (GDP) of over US$33 trillion (RM99 million) as at end-2012. Being a trading and foreign direct investment (FDI)-reliant nation but with a small domestic market and a GDP of less than a hundredth of the GDP of total 12 Pacific rim economies, at first glance, the TPPA would appear as a godsend to fast-track Malaysia’s ambition become a developed, high income nation by 2020.

Nonetheless, TPPA is not just a conventional FTA. As it aims to be “a comprehensive, next generation regional agreement that liberalises trade and investment and addresses new and traditional trade issues and 21 century challenges”, it does not deal only with market access for goods and services namely removal of tariff and non-tariff barriers but also contains cross-cutting “horizontal issues” that has a direct impact on our legal and judiciary system, economic structures and democratic institutions which undermines our national interest and sovereignty. At present, the US has FTAs with 6 of the TPP countries, namely Australia, Canada, Chile, Mexico, Peru and Singapore. The TPPA has clearly gone beyond trade in goods and services to encompass ’WTO-plus’ issues.

Being the major trade policy initiative of the Obama administration, little wonder that the US is the leading negotiator behind most proposals while the TPPA is mainly based on the typical US FTA template. With its 29 chapters in total as opposed to at most 10 chapters in an usual preferential FTA, Keadilan views TPPA as an attempt by the US, as its main driver, to impose its brand of economic model of total free market, laissez-faire approach, deregulation and small government. The glaring absence of China, South Korea, Taiwan and Indonesia in the TPPA only lends credence to this theory of modern-day American hegemony that promotes primarily the US economic, business and geopolitical interests.

While some degree of confidentiality is not unexpected in any negotiation, the extent of secrecy and clandestinity in the TPPA is extremely worrying and disconcerting. Since the TPP negotiations have been shrouded in secrecy, what we have learned so far regarding the content of all 29 chapters under the TPPA either came from leaked position papers of TPP countries or can be inferred by analysing existing US FTAs.

The truth is, the negotiating protocols for such international agreements must adhere to accepted international standards especially with regards to transparency (the negotiated agreement text for WTO is made publicly available) and the democratic principle of ratification by the respective legislatures.

Currently, we have an expansive FTA framework through ASEAN and our own bilateral agreements that already include 9 out of the 12 TPP partners which provide equal market access suitable to each signatory country’s developmental stage and competitive capacity. In essence, it is both a Free and Fair Trade Agreement (Fair to each country’s situation unlike TPPA which disproportionately appears to benefit big multinationals).

In fact, Malaysia is negotiating another two major trade agreements, which are the Regional Comprehensive Economic Partnership (RCEP) and the Malaysia-EU FTA.

Since Malaysia is the world’s 17th largest trading nation, Keadilan would like to reiterate its commitment to any on-going negotiations and principles of free and fair trade. However, we would prefer to err on the side of caution by withholding our support to the TPPA since we remain unconvinced that benefits will eventually outweigh the costs in the long run. In the absence of a full public disclosure of a comprehensive and thorough Cost-Benefit Analysis (CBA) undertaken by the Malaysian government, we should take with a pinch of salt an assessment as a result of a study conducted in 2012 by the Peterson Institute for International Economics, the Washington DCbased think-tank that Malaysia would be among the biggest winners under the TPPA with gains of up to RM41.7 billion in exports and RM26.3 billion in gross national income per annum by 2025.

For illustration, although TPPA may theoretically give Malaysian companies access to the US$500 billion in annual US government procurement market, the chunk of this market is for defence, which is exempt from the TPPA while all 50 US states have the authority to determine their own procurement policy and hence, no obligation to observe any US FTAs.

It is interesting to note that apart from the TPPA, the US is also in the midst of negotiating a Trans-Atlantic Trade and Investment Partnership Agreement (TTIP) with the European Union (EU). What is important to note is the different approaches used in negotiating these two agreements. The European Commission is officially quoted as stating that it negotiates on behalf of the EU and will keep its Member States and the European Parliament regularly informed and updated. The EU is committed to providing as much information as possible for the public, the media, and all other stakeholders as they move through the TTIP negotiations. For example, they have taken the unprecedented step of making available to the public a number of the EU’s initial position papers on various aspects of the negotiations and made available the list of the lead negotiators for all the areas covered by the process.

Therefore, on this difference alone between the Atlantic and Pacific regions, Keadilan holds the position that we should reject the TPPA outright until and unless a comprehensive and impartial CBA and comparative advantage study are conducted whose results are extensively communicated to the public, TPPA’s key points are made available to all stakeholders especially our members of Parliament, and the final agreement (when the entire text is disclosed) is duly ratified by our respective legislature.

We can never emphasise enough that any FTAs, whether bilateral or multilateral, must be based on mutual benefits, taking into account the level of economic development, social needs and competitive capacity or each TPP partner. While there is little disagreement over the need to push through the agenda of holistic reforms premised on innovation, creativity and high value addition in order to provide a conducive ecosystem for a sustainable economic development, thriving businesses and prosperous citizens, Keadilan believes Malaysia’s economic liberalisation and market opening should be done at our own pace and according to our needs.

In view of the 58 redlines or “red stops”, the US-Malaysia FTA talks that began in 2006 were suspended in 2009. Since there is not much difference between US-Malaysia FTA and the template for TPPA, it is mind-boggling and implausible that all these red lines seem to have suddenly disappeared only four years later.

Taking into account major fears and concerns among the public, Keadilan would urge our negotiators during the remaining rounds of the TPPA to defend our rights and privileges no matter how difficult and sensitive the issues are by pushing clear-cut redlines in particular for:

1. Trade in goods particularly exclusion of tariff elimination for rice, other food products, tobacco crop, alcohol, automobile`and other sensitive industrial products with significant local production; no restriction of export taxes to promote local processing of commodities and manufacturing of derivative products or other downstream activities; no “yarn forward rule” for the textile industry; no general or specific provisions in the sanitary or phytosanitary (SPS) or technical barriers to trade (TBT) with requirements to liberalise Malaysia’s halal certification process or lower Malaysia’s halal standards

2. Services liberalisation which should be based on the “positive list” framework instead of the “negative list” framework whereby all services sub-sectors would be assumed as liberalised unless placed on a “negative list” beforehand

3. Investment related issues such as no to investor-to-state dispute settlement (ISDS) mechanisms that will render the government vulnerable to claims and lawsuits filed by foreign investors from TPP countries; no restrictions on performance requirements beyond the WTO

4. Intellectual property particularly no requirements beyond the WTO’s Trade-Related Aspects of Intellectual Property Rights (TRIPS); any extension of patent term or copyright term; any provisions requiring data exclusivity, linkage between patent status and medicine registration, patents on new uses or ban on pre-grant patent opposition, etc especially for the sake of public access to affordable healthcare, medicines and pharmaceutical products

5. State-owned enterprises (SOEs) or government-linked companies (GLCs) and small-and-medium enterprises particularly no enforcement of competition via state-state dispute settlement

6. Financial services particularly no obligation to liberalise Malaysia’s financial services industry or bind the level of its financial openness; no restriction to Malaysia’s ability or policy flexibility to regulate the financial sector and to introduce new or reinforce existing capital controls over flows of funds in order to safeguard financial sector stability and other mandates of Bank Negara Malaysia

7. Food safety and labelling particularly no restrictions to Malaysia’s ability to regulate its food safety policy especially no requirement to amend existing laws that require the identification and labelling of genetically modified organisms (GMOs) and products of such organisms including GM food

8. Native customary rights and environmental issues

9. Effective exceptions applicable to all 29 chapters

Given Malaysia’s bad track record in international negotiations or disputes, putting the fate of our future in the hands of our negotiators, either from MITI or other ministries/government agencies could be too big a risk to take. A series of failures in recent times makes us seriously wonder whether they can do a good job this time around in fighting for our principles and positions.

As such, the TPPA at this juncture appears to be more lopsided to the detriment of Malaysia as a whole without significant benefits. Keadilan would like to reiterate that there is no valid reason why Malaysia should rush to sign the TPPA before conducting the following:

(a) public disclosure of the results of an independent, holistic and detailed CBA in terms of impact of reduction in tariffs and non-tariff barriers, and services sector liberalisation as well as trade-offs with ex-sovereign commitments such as dilution or even loss of sovereignty in the areas of policy space, constitutional amendments, government procurement, vulnerability to investor-state disputes, intellectual property rights, etc.

(b) engagement with all stakeholders via round table discussions or public forums

(c) Parliamentary scrutiny and debates

While we would prefer the establishment of a Parliamentary Select Committee (PSC), Keadilan still lauds the move recently to set up a multipartisan Parliamentary Caucus, comprising both Barisan Nasional and Pakatan Rakyat members of Parliament with the objectives of protecting the interests of all stakeholders including consumer associations, business & industry associations, non-governmental organisations (NGOs) and other groups with vested interests while scrutinising all decisions made by the government regarding the TPPA. We sincerely hope that this Parliamentary Caucus will turn into a strong pressure group with the ability to exert due influence on Cabinet decisions regarding TPPA.

Keadilan is of the view that it would be more appropriate and ideal for Malaysia to focus on strengthening its regionalisation efforts through ASEAN Economic Community (AEC) which will come into force by 2015. Then, leveraging on a much more powerful trade, investment and economic bloc i.e. AEC, Malaysia would be in a better position to negotiate for preferential access to developed countries instead of undertaking negotiations individually in plurilateral FTAs such as the TPPA. Furthermore, by maintaining our current geopolitical posture especially within ASEAN and the BRIC nations where China being our largest trading partner followed by Singapore and Japan; we already have access to a market that is 60 per cent of the world’s population and 40 per cent of the global economy.

Instead, the real challenge for Malaysia is to enhance our competitive capacity with adequate social security networks which unfortunately have suffered badly through BN’s continued mismanagement of our economy, bad education, training and human capital development policies along with the subversion of our democratic institutions.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malay Mail Online.

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