November 25, 2015
Cherry-picking the TPPA
by Tan Siok Choo
Malaysia is fortunate that TPPA negotiations were led by International Trade and Industry Minister Datuk Seri Mustapa Mohamad – one of a handful of ministers who are intellectually competent, diligent and who are intellectually competent, diligent and without a whisper of corruption.-Tan Siok Choo
CONCLUDED on October 6 this year, the Trans-Pacific Partnership Agreement (TPPA) promises to usher in a new era of free trade among 12 countries that collectively contribute 40% of the world’s gross domestic product (GDP).
These countries include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.
TPPA signatories have promised to cut or eliminate 18,000 tariffs on a vast number of goods and services. Tariffs ranging from 2% to 11% will be abolished for Malaysian made exports including wood products, palm oil, rubber, car spare parts as well as electrical and electronic goods.
Services covered include information and communication technology, retailing, entertainment, electronic payments systems and software.
Comprising 4,500 pages and 30 chapters while weighing a hefty 100 pounds, the TPPA offers thousands of issues for proponents and opponents to cherry pick.
Malaysia is fortunate that TPPA negotiations were led by International Trade and Industry Minister Datuk Seri Mustapa Mohamad – one of a handful of ministers who are intellectually competent, diligent and without a whisper of corruption.
Mustapa announced MPs will debate and vote on the TPPA at a special sitting of the Dewan Rakyat in January 2016.
Underscoring the remote possibility the TPPA will be rejected, the first reading of Budget 2016 last Monday received 128 votes in favour, 74 against and seven abstentions by PAS members of Parliament.
Two PAS MPs weren’t present in the Dewan Rakyat, three PAS MPs voted against Budget 2016 while suspended DAP MP Lim Kit Siang was unable to vote.
Could dislike for some TPPA clauses prompt BN MPs to risk giving the opposition a victory on this issue? This is unlikely. Mustapa succeeded in ensuring bumiputras, small and medium enterprises and those from Sabah and Sarawak will continue to be preferential suppliers for up to 40% of state-owned enterprises’ (SOE’s) annual purchases.
SOEs include Permodalan Nasional, Tabung Haji and MARA.Similarly, Petronas can continue to give priority to Malaysian enterprises to supply goods and services up to 70% of its annual budget for upstream businesses in the first year of the TPPA and scaled down progressively to 40% in the 6th year of the trade pact.
A major contentious issue in the TPPA is pharmaceuticals. Leading generic medicine manufacturer Mylan has warned it would be prohibited from doing business in TPPA member countries. By disallowing generic drugs, the TPPA could keep prices of drugs in this country higher for a longer period until patents expire.
Malaysian AIDS Council’s policy manager Fifa Rahman said a 12-week treatment for Hepatitis C using the generic version of Sofosbuvir costs RM750.06 to RM1,579.07 compared with an exorbitant RM357,000.
Writing in The Malaysian Insider, Joseph Stiglitz, a Nobel laureate in economics, and Adam Hersh, senior economist at the Roosevelt Institute, said economists at the UN Conference on Trade and Development have forecast joining TPPA would make Malaysia a net loser because its trade balance would fall by US$17 billion annually.
Sectors that would be hurt by the TPPA include iron and steel, aluminium, mineral fuels, plastics and rubber, Stiglitz and Hersh say.
Challenging the belief that intellectual property rights promote research, Stiglitz and Hersh noted after the US Supreme Court invalidated Myriad’s patent on the BRCA gene, a burst of innovation resulted in better tests at lower costs.
Another controversy is the investor-state dispute settlement (ISDS) system. Using arbitration to settle disputes rather than the courts, foreign investors will have new rights to sue governments for instituting regulations that diminish investors’ profits.
Instead of forcing manufacturers of harmful products like asbestos to shut down and compensate their victims, the ISDS could hit taxpayers twice – paying for the illnesses caused and compensating manufacturers for their lost profits, Stiglitz and Hersh argue.
Although tariffs will be abolished for Malaysia’s major exports like electrical and electronic products, will Malaysians be the biggest beneficiaries in a sector dominated by US and Japanese multinationals?
For products like palm oil, the campaign alleging plantation companies destroy the habitat of orang utans is a bigger barrier than high tariffs.
Hopes the TPPA will reduce corruption could be stymied by Malaysia’s high threshold exempting construction companies from competitive bidding for five years for contracts valued under 63 million Special Drawing Rights (SDRs) or RM374 million. After 21 years, the threshold will decline to a still hefty SDR14 million (RM80 million).
Kelana Jaya MP Wong Chen noted other TPPA countries accepted a much lower threshold of 5 million SDRs (RM30 million); only Vietnam’s threshold of SDR 65.2 million (RM387 million) is higher than Malaysia’s.
In summary, TPPA’s benefits must be spelt out in greater detail and more convincingly.
Opinions expressed in this article are the personal views of the writer and should not be attributed to any organisation she is connected with. She can be contacted at email@example.com