January 16, 2016
TPPA: To Sign or Not to Sign
by Lim Teck Ghee
The TPPA is neither a poison pill nor a panacea. While there is a price to pay, the Government has made the right choice by opting to join it. The discipline that the TPPA will demand will further the cause of the rule of law and force the Government to think twice before embarking on rule changes. Membership will force the Government to reconsider and amend existing rules that have the effect of furthering protective and rentier practices… [t] TPPA is also not the ultimate game changer for the country’s economic fortunes and future. Sound, prudent, competitive and merit-based policies together with much needed but still suppressed structural reforms along a broad front are the only way forward.–TG Lim
An array of disparate groups and individuals have emerged in the country to dissuade the Government from signing the Trans Pacific Partnership Agreement (TPPA). They include political parties, non-governmental organizations, individual academics and various professionals.
They join a number of trade unions, advocacy groups, activists and elected officials from other participating countries who have protested against the treaty, in large part because of the secrecy of negotiations, its all-compassing scope, and various controversial clauses contained in early drafts.
But does this diversity of national and international opposition signify that our Government has made the wrong decision in joining 11other Pacific Rim countries in this landmark agreement?First, it is necessary to note that the agreement’s stated goals are to “promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty in countries; and promote transparency, good governance, and enhanced labor and environmental protections.”
Trade is seen by all the signatory countries as an instrument to help achieve national and regional economic and social goals that are desirable.Second, although the current agreement covers the initial 12 countries which have been engaged in the 7 years of negotiation, five other countries – Colombia, Philippines, Thailand, Taiwan and South Korea – have expressed interest in joining; whilst Indonesia has expressed intent to join.
All the Governments that have joined now or may join in the future can be presumed to have their own national interest at heart. Twelve have weighed the losses and benefits of the agreement and decided that it is in the best interests of their country and people to sign on.
Has the Malaysian Government somehow been taken for a ride, deceived or been derelict in protecting our national interests? How valid are the concerns expressed and should Malaysia stay out of the TPPA?
Many of the objections put forward in our country are cut and paste jobs mirroring those articulated by critics in the United States, New Zealand and some of the other Pacific Rim countries. Thus, a major concern has been over the special rights provided to foreign investors and what has been denounced as a straight jacket around policies and laws relating to GM labelling, foreign investment laws, price of medicines, etc.
These objections have been responded to by the Malaysian government which will be presenting two separate cost analyses on the agreement in Parliament soon.Looking beyond the lens of trade and a narrowly economic perspective, we can see three areas of larger concern stressed by the the TPPA’s critics and detractors in the country.
The first relates to the possibility that the TPPA will lead to or result in greater inequality in Malaysia due to its negative impact on the country’s access to affordable medicines, education, food security and employment generation.On this concern, it is possible that we will see greater inequality and wealth concentration take place in Malaysia in the foreseeable future. But this will not be because of the TPPA. In the last 20 and more years we have seen low wages and the high cost of living hurt our lower and middle class. Wealth concentration has led to a serious and increasing gap between the rich and the poor. At the same time corruption, extravagance and waste has resulted in less resources being made available to develop the nation and assist the poor.
At the heart of our inequality malaise is not trade policy. It is not how we have been or will be integrated into international markets and trading blocs.It is due to economic mismanagement and badly implemented policies, especially in education, which have squandered our comparative advantage and resulted in the inability to sustain our global competitiveness or raise our game when we had the opportunity with our strong post-independence head-start and the bonanza of oil and natural gas wealth in the 80s and 90’s.
A second concern is that we will have a loss in our national sovereignty by signing the agreement. The red flag of national sovereignty or national security, unsurprisingly, has been raised by Perkasa and other Malay rights groups and individuals who want NEP (New Economic Policy) and pro-Malay policies in the economy and society to continue indefinitely.
On this concern, developments in the drafting work point to the fact that the Minister of International Trade and Industry and his team have done a good job of negotiating an agreement which in Dato’ Seri Mustapa Mohamed’s words “ensures that our Constitution, sovereignty and core policies of the nation – including the interests of the Bumiputera community – are safeguarded and upheld.”
Whether the retention of pro-Malay policies in government procurement and other key areas will in fact work out to the advantage of the Malay community or will turn out to be a dead weight working against our national, including Malay interests, remains to be seen.
A third objection is that the TPPA is the creation of US multinationals and investors who, together with US foreign policy interests, are aiming at curbing the rise of China and Chinese economic dominance. It is possible that an anti-China bias is part of the agenda of some US multinationals and of US policy makers. But this really is not any concern of ours as a sovereign and non-aligned nation and is no reason for us to stay out.
At the same time, opposition against US foreign policy and dominance of the world is best expressed at the appropriate fora and various channels of state and public opinion – not in a multilateral trade agreement.
The arguments advanced by critics of the TPPA on the lack of trade benefits or losses especially those focusing on loss of national sovereignty are premature, exaggerated and overdrawn. Of course, we need to do due diligence to all chapters of the TPPA and ensure that our national interests are protected.
But at the end of the day, we must not avoid being integrated into the existing dominant trading system. We cannot afford a retreat into isolationism; neither should we fall prey to the romantic belief that we have special characteristics which can enable us to stand against the tide of global or regional economic integration.
We risk losing more especially if foreign businesses and investors stay on the sidelines or reduce their investment should we opt out of the TPPA. Without the TPPA too, it is likely that many local businesses will face greater international barriers in addition to the local and national constraints and handicaps already in place.
It is not only big local corporations and their workers that will be hurt. The Malaysian consumer and ordinary worker will also suffer from the direct and knock on effects of a closed or isolated economy. Look at Cuba, North Korea and Iran.
Most scholars and policy makers are in agreement that globalization and growth in trade have contributed to the reduction of poverty and raising of living standards in many countries. Unless contrary evidence is produced to show that this hypothesis does not apply to Malaysia, we can assume that our present and future prosperity and development rests with an open economy (and society).
The TPPA is neither a poison pill nor a panacea. While there is a price to pay, the Government has made the right choice by opting to join it. The discipline that the TPPA will demand will further the cause of the rule of law and force the Government to think twice before embarking on rule changes. Membership will force the Government to reconsider and amend existing rules that have the effect of furthering protective and rentier practices.
Finally, the TPPA is also not the ultimate game changer for the country’s economic fortunes and future. Sound, prudent, competitive and merit-based policies together with much needed but still suppressed structural reforms along a broad front are the only way forward.