With the TPP, Malaysia will theoretically gain access to a market of 800 million people with a combined GDP of US$27.5 trillion. The Peterson Institute of Economics says Malaysia stands to gain over US$41.7 bil (RM133.9 bil) increase in exports and US$26.3 bil in income gains by 2025 if it stays on the TPP track (photo credit: Westports).
By Alice Hunter
United States President Barack Obama’s visit to Malaysia at the end of April was touted as a landmark visit for many reasons.
He was the first serving US president to set foot in Kuala Lumpur since the 1960s – a trip he used to have an audience with the Yang di-Pertuan Agong, meet Malaysian Prime Minister Dato’ Sri Najib Razak, and host dialogue with young leaders from ASEAN and civil society. He was also the first US president to visit the National Mosque.
His arrival also came amidst rising tensions in the South China Sea due to territorial disputes between China and some Southeast Asian nations, sparking speculation that his Asia tour to Japan, Korea, Malaysia and the Philippines was a move to counter the increasingly assertive economic powerhouse.
More importantly, President Obama’s presence in Malaysia was expected to bring some progress to the highly controversial Trans-Pacific Partnership negotiations, a trade agreement pursued by the US and 11 other countries including Malaysia.
This has sparked protests in Kuala Lumpur throughout Obama’s three-day visit, and Dato’ Sri Najib has since gone on record at their joint press conference to reassure Malaysians that the country was not bullied into signing the TPP.
“Keep in mind, I’ve got protests back home from my own party about TPP,” President Obama said empathetically at the press conference.
“So there’s never been a trade deal in which somebody is not going to at some point object because they’re fearful of the future or they’re invested in the status quo. And I think it’s just very important for everybody to wait and see what exactly is the agreement that has been negotiated before folks jump to conclusions,” he adds.
But what exactly is the Trans-Pacific Partnership agreement? Isn’t it odd that after four years of negotiations very little is confirmed about what was being negotiated?
Business Circle attempts to answer some of the most frequently asked questions about the negotiations.
- What is the TPP and who is behind it?
The Trans-Pacific Partnership agreement started as Trans-Pacific Strategic Economic Partnership agreement between Brunei, Chile, Singapore and New Zealand that came into force on May 1, 2006.
In 2008, the United States expressed interest in entering into talks with the four countries to liberalise trade in financial services and Australia, Vietnam and Peru followed suit. Malaysia joined in 2010, and Canada and Mexico joined in 2012.
Japan was the last to join the talks last year, making it the 12th country to enter the TPP talks. Recently, South Korea has also officially expressed interest to join the talks.
There is a widespread belief that the US is the lead negotiating country in the TPP, but reports suggest that other negotiating countries have also formed pacts to push their positions on controversial issues like intellectual property.
- Malaysia is a member of the World Trade Organisation and has signed many free trade agreements. How is the TPP different?
Malaysia has signed free trade agreements with many countries and trade blocs, including TPP members Japan, New Zealand and Australia. However, these free trade agreements are usually limited to agreements between countries to lower their tariffs for certain goods and services.
The TPP has 29 chapters and covers issues that are beyond most free trade agreements. The new rules that are negotiated will determine how TPP member countries approach competition, labour, environment, government procurement and intellectual property rights.
Many of these rules have been discussed in the World Trade Organisation but consensus among its 159 members has been elusive.
- Why are there so many protests against the TPP?
Critics of the agreement are mainly against the secrecy involved in the negotiations, proposed clauses that favour perceived corporate profit over public interest, and the likely removal of measures designed to protect local industries.
The negotiating text was out of bounds for the general public and even lawmakers of all TPP member countries.
In the US, “cleared trade advisors” to the US Trade Representative’s office has access to TPP’s negotiating text but not members of Congress. In Malaysia, members of a Parliamentary Caucus are regularly briefed on the progress of the negotiations but the negotiating text was released only to the Unit Peneraju Agenda Bumiputera (Teraju) and Institute of Strategic and International Studies (Isis) for separate cost-benefit analysis.
Even then, drafts of two most controversial chapters – on investment and intellectual property rights – have been leaked, leading to outrage over proposed investor-state dispute settlement (ISDS) clauses and extensions of patents and copyrights for medicines and books.
- Why can’t we have access to the negotiating text when the TPP affects us too?
Negotiators argue that releasing the negotiating text is akin to showing your hand in poker, and all of them have signed confidentiality agreements before entering the negotiations.
The Malaysian International Trade and Industry Ministry offered this explanation:
“A level of confidentiality is required for two main reasons: (a) regulations and the evolving process of negotiations and rules surrounding the TPPA oblige negotiators to maintain confidentiality of the negotiating texts and (b) negotiators advancing the interests of Malaysia strategically do not want to publicly disclose their bargaining positions to ensure the best outcome during the negotiations.”
- But how does the TPP push up medicine prices and allow companies to sue our government for protecting its citizens?
A recent leaked draft of the intellectual property rights chapter suggests that a proposal has been tabled to compel TPP countries to compensate patent applicants with patent extensions for “unnecessary delays” in the granting of the patent.
This could delay Malaysia’s access to cheaper generic drugs as generic manufacturers could not produce and market the drugs before these patents expire.
Investor-state dispute settlement clauses that are being negotiated could allow foreign investors or corporations to take governments to international tribunals for actions that are deemed to hurt profits or violate their rights to be treated “fairly”, even though the actions are taken in the interest of public health or environment.
- If the TPP is so bad for us, why does the Malaysian government want a part in it?
With the TPP, Malaysia will theoretically gain access to a market of 800 million people with a combined GDP of US$27.5 trillion. The Peterson Institute of Economics says Malaysia stands to gain over US$41.7 bil (RM133.9 bil) increase in exports and US$26.3 bil in income gains by 2025 if it stays on the TPP track.
As Malaysia is an open economy that is heavily reliant on international trade, the Malaysian government believes the TPP will open doors to many markets – including the US – after the Malaysia-US FTA talks fell through.
Malaysian negotiators are currently pursuing more access for Malaysian textiles to the US market and plywood to the Japanese market.
- What do we stand to lose if we walk away?
In a recent media briefing, Malaysian Minister of International Trade and Industry Datuk Seri Mustapa Mohamed said Malaysia will miss out on the opportunity to write the rules for future trade in the TPP if it backs out at this stage of the negotiations.
Malaysia may also face significantly higher tariffs for some of its products that are exported to Canada as she will graduate from the Canadian Generalised System of Preferences programme in January 2015.
Under the GSP, developed countries grant preferential treatment to eligible products imported from developing countries so that the products would be competitive in the developed markets.
- What are Malaysia’s known positions in the TPP negotiations?
Malaysia is seeking a total carve-out of tobacco from the TPP negotiations and adequate safeguards to allow sufficient policy space for governments to regulate without being exposed to frivolous legal challenges through the ISDS.
Malaysia negotiators are also seeking for Malaysian state-owned enterprises to be excluded from TPP demands. They have not agreed to provisions that allow patents to be extended beyond existing timeframes.
- What do other negotiating countries think about this whole deal?
There has been mixed views in almost all negotiating countries as industry players welcome the opportunity for greater market access amidst growing concern by non-governmental organisations and interest groups about the agreement’s public health, labour rights, the environment and the survival of local industries.
In Malaysia, the Federation of Malaysian Manufacturers and Malaysian Textile Manufacturers Association have openly supported the negotiations while a coalition of NGOs called Bantah TPPA have been voicing their concerns through engagements with TPP negotiators, the media and people on the street.
The Malaysian civil society is mainly concerned about the impact of the TPP on medicine prices, local small and medium enterprises and the Malaysian government’s sovereign rights to regulate within the country. There are also groups that are concerned about the TPP’s impact on bumiputera rights.
- Is Malaysia prepared to walk away from the agreement if the risks outweigh benefits?
Several ministers, including MITI minister Datuk Seri Mustapa Mohamed and Prime Minister Dato’ Sri Najib Razak have made statements that Malaysia would not sign the TPP if it does not benefit Malaysia.
While trade agreements in the past are not required to be tabled in the Parliament, the TPP is an exception. Mustapa has reassured that the finalised TPP text will be tabled in the Parliament for debate before Malaysia signs the agreement.
- What is the progress of the negotiations, and when will it be concluded?
There have been 19 rounds of official negotiations that are hosted by all member countries.
Since then, several meetings between trade ministers have been held in Salt Lake City, US, Bali, Indonesia and Singapore. The next meeting among government officials from TPP countries would be held in Ho Chi Minh, Vietnam from May 12 to 16, 2014. In between these formal meetings, negotiations are going on through bilateral meetings among delegations.
Negotiators are now working through challenging issues in market access and chapters like government procurement, intellectual property and state-owned enterprises, and has stopped giving themselves deadlines to conclude the talks.