The Trans-Pacific Partnership (TPP) is arguably the most controversial trade agreement to date. Small wonder, given that it includes 12 nations and covers nearly 40% of the global economy. The TPP will undoubtedly bring enormous gains but detractors are asking to whom, and at what cost?
The perceived complex, secretive, and seemingly anti-democratic way the TPP is being crafted rubs a lot of people the wrong way. The agreement will have profound and long-lasting effects on countries that sign on, yet voters in those countries would not even be allowed to see the text until negotiations are over and it is too late to make changes, or so goes the argument.
Negotiations for the TPP have been long-drawn. (Business Circle had covered TPP previously and you can read about it here.) And despite early optimism that the talks could be wrapped up last month, ministers from the 12 nations negotiating the TPP fell short of a deal.
The Ministry of International Trade and Industry (MITI) has stressed that the TPP negotiations are not done in secret. Minister Datuk Seri Mustapa Mohamed was quoted saying: “It needs to be clarified that in international negotiations, the negotiating text which indicates country positions is not made public. All the issues being negotiated, however, have been openly discussed in all our engagements with various stakeholders. It is not the intention of the government to keep the text a secret. In the event that an agreement is reached, we will present the document to Parliament for debate and the Malaysian public before we sign on it.”
Earlier in the month, he said a cost-benefit analysis of TPP deal, done by PricewaterhouseCoopers and the Institute of Strategic and International Studies Malaysia, will be ready soon; and will be presented to the public and Parliament once completed.
MITI continues to believe that the trade pact, considered a “gold-standard” agreement, would be beneficial for the country’s trade and investment.
Economists and market analysts tend to concur.
For one, the successful conclusion of the TPP is anticipated to open an unprecedented market of 793 million people, with a combined GDP of US$27.5 trillion – far surpassing the limited domestic market of 29.5 million people and a GDP of US$300 billion in Malaysia.
The Peterson Institute of Economics says Malaysia stands to gain over US$41.7 billion (RM133.9 billion) increase in exports and US$26.3 billion in income gains by 2025 if it stays on the TPP track.
One economist noted that in many instances, Malaysia is moving into value-add investment. “We won’t be able to compete with Thailand, Vietnam and the likes on being a low-cost producer. Going forward, Malaysians will need to be more competitive. Our mindset has to move up. This is where TTP, on a longer term, will benefit us as it gears us towards being a liberalised country. It’s a nice way to head towards being a high-income nation. There will be hiccups in the short term. Some players may lose out at the beginning if they choose not to improve themselves.”
Etiqa Insurance & Takaful’s head of research/ head of products & alternative investments Chris Eng likewise believes the TPP will be beneficial to Malaysia as a whole given the greater market access for our goods.
“There are concerns about the pricing of medicines which are valid but I believe the other concerns such as for government procurement may eventually be worked out,” he said.
Expanding Malaysia’s market access opportunities
Malaysian International Chamber of Commerce and Industry (MICCI) President Datuk Wira Jalilah Baba (pic) empathetically believes that, despite its controversies, the TPP is an important initiative for Malaysia to expand its market access opportunities, enhance its competitive advantage, and build investor confidence which will serve to attract foreign investment into the country.
“With the TPP, Malaysia will be able to go on the offensive and take advantage of new international markets. We will also continue to be an integral part of the deepening economic integration taking place within the Asia Pacific region, and engage more tangibly with important trade partners such as the US, Canada, Mexico and Peru, with whom we currently do not have any structured framework or trade agreements.
“Just like the recently implemented FTA with Australia, which has enabled Malaysia to enjoy duty-free access into the Australian market, the TPP will offer opportunities for seamless markets with preferential access far beyond our population, opening up regional and global investment opportunities,” she said.
Nevertheless, several sensitive and contentious issues remain on the table, including next-generation drugs, autos and dairy products.
Jalilah stressed that these issues will be addressed in due course and that the government, through MITI, is doing its best to protect the best interest of all parties.
Firmly on the other side of the fence is Hassanal Noor Rashid, Programme & Event Coordinator at International Movement for a Just World. Hassanal in an open letter expounded on the negatives of the TPP.
Among the key issues he pointed out was the Investor to State Dispute System (ISDS) whereby foreign companies will be able to claim billions of ringgit from governments for any loss of future profits due to introduction of changes in national or state policies, or even through the implementation of new laws and policies.
He highlighted that even former US Secretary of State Hillary Clinton is of the view that the ISDS mechanism empowers investors to sue foreign governments to weaken their environmental and public health rules.
“If approved, the ISDS may supplant the role of the judiciary as an arbiter in disputes. One such example would be the case of Thailand which had lost a suit to a tobacco company, Phillip Morris, on the grounds that the country’s anti-smoking regulation, namely the graphic health warnings on cigarette packs, which had increased in size, had adversely affected the brand image of the tobacco company, undermining Thailand’s efforts in progressing its social health policies,” he said.
He warned that the sovereign right of the nation to make policies and of parliament to enact laws and the judiciary to interpret laws may be jeopardised because of the TPP’s ISDS system whereby foreigners can sue the government in a foreign tribunal which has been shown to be biased in favour of foreign investors.
“Even if the ISDS cuts both ways in this regard whereby Malaysian investors abroad can utilise the same protection mechanisms in the TPP countries, by virtue of agreeing to the TPP, we still open up the Malaysian economy and regulatory policies to be circumvented by stronger and larger MNCs that will be able to dictate policies and regulations,” he pointed out.
Hassanal stressed that even the claims about growth and benefits in trade revenue, are contestable, pointing to a 2014 paper by senior economist in the United Nations Rashmi Banga which showed evidence that the TPP may prove detrimental to Malaysia and its local industries.
“His paper noted that while there may be an increase in Malaysia’s exports to TPP countries, its import rates may also further increase. Industries like steel, electrical machinery and automotive will also face stiff competition that may affect the jobs of tens of thousands of Malaysians. These are industries which are dependent on government support that can now be circumvented by the pro-MNC policies of the TPP,” he said.