Prime Minister Datuk Seri Najib Razak announced in the 2016 Budget that Malaysia agrees in principle to join the Trans-Pacific Partnership (TPP) agreement. He said the text of the trade agreement would be tabled in Parliament, following which the cabinet would decide about signing.
We can be certain that those who are opposed to it on ideological grounds will remain adamant that Malaysia should not join the TPP, irrespective of the conclusions of the cost-benefit analysis or the wishes of the business community.
The ideologists will cling to their arguments that the TPP is a United States-led treaty; it is not just a simple trade agreement; it is in fact a strategic move by the world super power to show its presence in the Asia-Pacific region, in view of the rising influence of China on the global stage.
Conspiracy theorists will continue to claim that it is an attempt by the Americans to come through the back way into the less developed countries to force us to introduce reforms on environmental protection, labour rights, intellectual property, government procurement and state-owned enterprises. They say by using the TPP to make the playing field level, the Obama administration is playing to the tune of US corporations that have been complaining that while the US has opened its doors to the rest of the world, other countries have been frustrating American regarding access to their markets by placing various trade and non-trade barriers to fair competition.
Economists in Malaysia who support signing argue that while it’s true there are strategic interests from the US behind the TPP, we cannot dispute its economic value to us because, collectively, the 12 member countries account for 40 per cent of the world gross domestic product and a quarter of its trade.
Malaysia is highly dependent on trade to power its economy, and the access to world markets for the export and import of goods, and services are an important factor driving the development of the country. Although the dependence on trade has been reducing as the domestic sectors grow, manufacturing and service sectors will need to find external markets to expand as Malaysia is too small a market for our global players.
We are the 23rd largest exporting and the 25th largest importing country in the world. Being a small country, we therefore need trade to prosper.
A TPP country is more likely to be the preferred destination because of the high standards of governance that are imposed under the treaty.
Malaysia is well placed to comply with these standards because of the transformation programmes that the government has launched for several years now to improve its governance system.
It can be argued that the level playing field created under the TPP will be an incentive for Malaysian entrepreneurs to innovate and spend money on expensive research and development.
In short, the guarantees that the international business community is seeking in fair competition under the TPP are also the guarantees that Malaysian companies need to operate in other member countries such as Vietnam, Peru and Mexico.
As regards the Investor-State Dispute Settlement, this is not new to Malaysia as it is already incorporated in many of our existing free trade agreements with other countries. As long as there are safeguards on mandatory consultation and mediation as protection against frivolous claims and other such provisions for ensuring fairness in settling the dispute, the ISDS should not be onerous to comply with.
Let’s remember that Malaysia has signed 13 free trade agreements with other countries, with similar provisions, although the one with the US under the TPP will be the most ambitious in terms of its coverage of the trade in services and the governance issues affecting international competition.
The International Trade and Industry Ministry negotiators apparently have managed to get concessions on other sensitive matters of government procurement and state enterprises that have drawn much attention in local politics because they are related to our national economic policies. As these concessions are said to provide enough breathing space for compliance, there is no reason to walk away from the TPP because the cost of disengagement could be extremely expensive for the country. If other countries join now and we do not, the scope for getting concessions if we decide to join later may not be available at all.