The Prime Minister announced in his Budget speech that Malaysia agrees in principle to join the TPPA (Trans Pacific Partnership agreement). He also said the text of the trade agreement will be tabled for debate in parliament, following which, the cabinet will make the decision 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 TPPA, 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 TPPA is a U.S- led treaty; its 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 TPPA to make the playing field level, the Obama administration is playing to the tune of U.S corporations which have been complaining that while America has opened its doors to the rest of the world, other countries have been frustrating American access to their markets by placing all kinds of trade and non-trade barriers to fair competition. U.S politicians are particularly critical of countries using currency devaluation to make their exports competitive, at the expense of American business and jobs. Despite some of their politicians pledging in the current election campaigns to oppose the TPPA in Congress, the main consensus is that the bill will be approved in view of its strategic importance to America.
Economists in Malaysia who support signing would argue that while it’s true there are strategic U.S interests behind the TPPA, we cannot dispute its economic value to us because collectively the 12 member countries account for 40% of world GDP and a quarter of its trade. Malaysia is highly dependent on trade to power its economy. and the access to world markets for the exports and import of goods and services is an important factor driving the development of the country. Although the dependence on trade has been reducing as the domestic sectors grow in size, the manufacturing and some service sectors will need to find external markets to expand as Malaysia is too small a market for our global players.
We are ranked the 23rd largest exporting and the 25th largest importing country in the world. Being a small country, we therefore need trade to prosper. Membership will also send a strong signal that we are willing to undertake the reforms as required in the agreement. This willingness is a plus factor for making Malaysia attractive to foreign investment. As is well known, integrity, transparency and accountability have become important considerations in investors making decisions where to locate their business. A TPPA 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 various transformation programmes that the government has launched for several years now to improve its governance system.
The TPPA will push us to make the reforms faster, which will be a good thing for raising the level of confidence in the country for both local and foreign investments.
It can be further argued that the level playing field created under TPPA will also be an incentive for Malaysian entrepreneurs to innovate and spend money on expensive R&D to invent new products using our natural resource base and our scientific achievements in palm oil and rubber, to break into the higher technologies when they know that their products will get patent rights and intellectual property protection in other member countries. They will feel more comfortable when they know that all the efforts they make to automate and introduce new technologies will not be negated by unscrupulous competitors in other countries stealing the market through unfair practices e.g using child slave labour and ignoring good environmental protection practices to undercut the market and drive the Malaysians out of business. Our business leaders will feel more assured that a state enterprise in another country will not suddenly enter the market with government subsidies to compete with Malaysian products which have been developed through patient experiments over several years, with all the heart – breaking trials and errors of finding the perfect solution.
In short, the guarantees that the international business community is seeking under the TPPA for fair competition are also the guarantees that Malaysian companies need in order to operate safely 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 U.S. under the TPPA that is now before us will be the most ambitious in terms of its coverage of the trade in services and the governance issues affecting international competition.
Our MITI negotiators apparently have managed to get concessions on the other sensitive matters of government procurement and state enterprises which 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 TPPA because the cost of disengagement can 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.
Let us take note that Japan, one of the 12 negotiating partners, is considering joining after obtaining concessions on agriculture, a highly emotional subject among the Japanese. And according to some reports, China is also interested, though not so soon because it has difficulty in undertaking the reforms at this juncture. Western experts agree that having an open architecture to let China and others join the TPPA will be especially important for using trade as a catalyst for reforms and high standards of commercial practices across the Asia Pacific region.
The winds of change are sweeping across our part of the world through trade. Malaysia would lose the first mover advantage if we let internal politics to once again interfere with national progress.