Top Malaysian Economist Jomo questions TPPA for Malaysia

January 11, 2016

by Adrian Wong Gah Junn http://www.malaysiakini.com

While the Malaysian government is keen to sign the Trans-Pacific Partnership Agreement (TPPA), why countries such as Thailand and Philippines have opted to distance themselves from the treaty?

This is a question leading Malaysian economist Jomo Kwame Sundaram posed to the Malaysian government and public.”Why is Thailand is not interested? Why is the Philippines, which is very close to the US, not interested?

“Are there are so many benefits that the Philippines and Thailand can’t see?” he asked reporters, after attending the 2016 TPPA Forum, in Kuala Lumpur, organised by Malaysian Economic Association.

However, according to news agency Reuters, Thailand’s Deputy Prime Minister Somkid Jatusripitak has said Thailand is “highly likely” to seek membership of TPPA, while the Philippines is certain to join TPPA, reported the Manila Times quoting Philippines Department of Trade and Industry (DTI) Secretary Adrian Cristobal Jr.

In the case of Indonesia, Jomo explained, some might argue that the nation has experienced a change of government, coupled with a stronger sense of nationalism, that caused them to pull out of the TPPA.

“As far as Singapore is concerned, they have made more concessions than what is required in the TPPA. So for them, it’s painless, completely painless.Brunei is a small country, it is not trying to develop, it hopes its oil will go forever.In the case of Vietnam, it was at war with China about 35 years ago. It is having a lot of problems with China and is very frustrated with the Chinese government. It has made a strategic decision – embrace the US,” the former United Nation senior official said.

By signing TPPA, Najib government will be abandoning his late father Abdul Razak’s commitment to make ASEAN a ‘zone of peace, freedom and neutrality’ he argued.

Exclusion of China

It is no secret that the main US motivation for TPPA, he said, was to exclude China.”One can understand why Vietnam, an erstwhile US enemy, was keen to join the TPPA, in order to strengthen its hand in its often difficult bilateral relations with its giant neighbour.But why is the Malaysian government so keen to join, considering the dubious economic benefits as well as the huge risks involved?. In response to President Barack Obama’s ‘pivot to Asia’, Prime Minister Najib may want to signal his own pivot to America’,” he said.

Others speakers at the forum included Bank Muamalat chairman Munir Majid, Federation of Malaysian Manufacturers president Saw Choo Boon and Universiti Malaya law professor Prof Gurdial S Nijar.

Munir and Saw were of the view that TPPA would bring more benefits to Malaysia than disadvantages, but Jomo and Gurdial disagreed. Saw pointed out that Malaysia is already working under seven bilateral free trade agreements (FTA) and five regional FTAs, but the domestic market is still small.

Even a one percent growth projection over a period of 10 years, which was one of the scenarios provided by PricewaterhouseCooper (PwC) in its cost-benefit analysis, would be welcome.”The TPPA can’t be worse than what we already have. Even if it is one to two percent growth, we need it. Give it a try. If you don’t like it, you can opt out of it later,” he said.

However, this led to criticism by Jomo. In the “game” of TPPA, countries such as the United States are professionals. Malaysia, on the contrary, is merely an amateur, he said.

The discussions among TTPA proponents, he added, were mainly “one-sided”, which emphasised the benefits without taking the costs into account.

“It’s like saying ‘let’s go in, then we learn how to swim’. That’s not how the world works, it’s very naive.We are going to an unknown territory, whereas these people are very experienced. They have drafted these things many times, and they keep improving each time they draft. Yet we think we are very smart (by signing it),” he said.

Insignificant economic gains

Regardless of what economic model is applied, be it computable general equilibrium (CGE), which was used by PwC in its report, or the UN Global Policy Model (GPM) provided by Jomo, they all led to one conclusion: TPPA brings insignificant economic gains to Malaysia, but the price paid is huge.

According to Jomo, UN GPM finds that:

• TPPA will generate net GDP losses in some countries, though not Malaysia;
• Economic gains will be negligible for other participating countries – less than one percent over 10 years for developed countries, and less than three percent for developing countries;
• TPPA will lead to employment losses in all countries, totalling 771,000 lost jobs;
• TTPA will lead to greater inequality, with a lower labour share of national income; and
• TPPA will lead to losses in GDP and employment in non-TPPA countries.

Companies suing governments

Gurdial, on the other hand, analysed the treaty from the angle of investor-state dispute settlement (ISDS).TPPA proponents claimed that the mechanism can protect the government from being easily sued by companies, he said. However, he pointed out that there were still abundant instances of companies suing governments over policies that they claimed interfered with their ability to earn money.

In 2014 alone, he said, there were 608 cases against governments, mainly by American corporations, with 60 percent in developing countries.

“We are now suspending bauxite mining operations because of public health and environmental hazards. Imagine with ISDS, if a foreign company was involved in mining and we stopped them, we could get sued.”