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Soon after President Donald Trump was sworn in, his administration announced the U.S. withdrawal from the Trans-Pacific Partnership (TPPA), a trade pact championed by former President Barack Obama and Japanese Prime Minister Shinzo Abe. The White House on 20th January 2017, also wasted no time in declaring a renegotiation of the North American Free Trade Agreement, or NAFTA. Trump was sworn in as the 45th president of the U.S. on 20th January 2017, repeating his campaign pledges of putting American interest’s first and restoring national glory to a deeply polarized public.
The Trans-Pacific Partnership (TPP) is a 12-nation trade pact aiming to liberalise the flow of goods among countries in the Pacific Rim. The product of more than seven years of negotiations and a signature achievement of Barack Obama's presidency, the TPPA would cut tariffs on thousands of items and attempt to unify copyright laws across its members. To be sure, the TPPA has little to do with trade. The US already has free trade agreements, of the bilateral or regional variety, with six of the 11 other countries in the pact. Trade barriers with the remaining five countries were already very low in most cases, so there is little room left for further trade liberalisation in the TPPA.
Being a trading nation and signed member of TPPA, it is undeniable that TPPA is a gateway to a wider markets for Malaysian, hence we can now have access to international market of 11 more countries of TPPA. Being a trading country, we Malaysian can’t agree more that Malaysia need to proliferate our foot print into every single corner of the globe to gain market access.
However, to ensure that the above objectives are met, we must not missed out other pertinent points of TPPA, which Malaysia is signing too, that it is not just a trade agreement. We are signing for a pact which is far beyond just trades. What is far more important, we also bind to intellectual properties, environmental and the most importantly, Malaysian rules of law.
Trades are good and being a trading country, we must not go against trades and open competition especially in gaining market access. By all means, Malaysian entrepreneurs need to encroach the global market and grow, which will in turn increase Malaysian GDP and TPPA, might probably able to provide that. But the question now, are we ready for this ruthless liberalisation? Does TPPA is able to provide a level playing ground to all members, in the spirit of “fair and equitable treatment”. Do we have enough muscle to compete with a country of 318 million population and a GDP of USD17 trillion and per capita income of USD54,000?
It is not about free trade but it is about the ability to compete. Therefore, government must allow more time for Malaysian to gain more muscles to compete effectively than just release the flood gate of free market to rule and decide. The playing field is still not level and there’s no way Malaysian can compete squarely. In spite, we should rather take a gradual approach hence over time we can gain more strength and compete in a gradually larger market. Thus, we should concentrate to perform well in AFTA first, and as we speak, now came AEC. We can’t even compete firmly and convincingly in AFTA and AEC, how do we expect Malaysian to perform in TPPA if it do becomes a reality. The most classic example is Proton which is still defying the AFTA free market requirement for automotive industry. If Proton is still struggling, things are even tougher for normal SMEs to compete.
Yes there are many reasons for not been performing in AFTA, perhaps due to one’s internal own flaws. But that does not mean we should punish them. Responsibly, in the spirit of protecting our local own businesses, the government should “walk them through” until they are more capable to compete. Why not we fix those flaws first. Thus, by opening the market gradually Malaysian businesses and indeed, the whole eco system will gain capability and be ready and more capable to go global.
If we expose us all through a global world of TPPA, which is literally WTO, as stated under the Preamble and Chapter 1 of TPPA, we will be suffocated in the flood of trades and do not have enough time to learn, recoup our strength and compete. And again this is free trades, so they won’t wait until you are ready. Are we going to let to the market to decide on the fate of our businesses? Isn’t it the responsibility of the government to protect them? Yes there are some clauses in TPPA that provide remedial exemption, but that is not forever and it is not free. This is well stated in Chapter 6 Trade Remedies of TPPA, i.e. maximum remedial period is three years and over the period, compensation is chargeable to applicant country.
What have been mentioned here is just the technicality of an open trades in TPPA. As mentioned earlier above that TPPA is just not trades, it is far beyond that and the one that is very worrying is the sovereignty of our rules of law. This is as mentioned in Chapter 25 Regulatory Coherence that says there must be an alignment between the Malaysian rules and laws and the international law. Which Malaysian rules and regulations that we need to amend? And if all are amended according to the requirement of TPPA, which rules are more superior to the other? International laws or Malaysian? If this is done, how can we be sure that our laws have the ability to protect our interest, being the rakyat of Malaysia? It may sounds terrifying right? But we still need to do those legal alignment as it is required to uphold the whole spirit of TPPA of “fair and equitable” treatment as clearly mentioned in Chapter 2 National Treatment and Market Access for Goods.
The other most debated clause is on intellectual property which in turn will substantially affect the price of drugs. Over the time of this sensational debates, the government have been trying to convince the rakyat that this is not the case. However, confidence for rakyat is not forthcoming. Even Malaysia Medical Association (MMA) is still confident that this complication won’t happen as they are worry about rakyat’s access to generic drugs.
TPPA is also on environment. But having reading the text on Chapter 20 Environment, there are senses of some double standard exists even before the agreement started. TPPA require all members to abide and comply with the Kyoto Protocol on ozone protection, which Malaysia ourselves have successfully done. However, it is very one sided as the US themselves have not ratified the protocol and still, as we speak, stands as the biggest emitter of CO2 in the world. Let’s not be prejudice, but how do we expect a fair game when there is unfairness right from the start.
There are a lot of vague and other worrying matters in TPPA. Matters like Investment-State Dispute Settlement (ISDS) and State Owned Enterprise (SOE) are also primal pressing. What is going to happen to Petronas and its vendor system in the long run, plus there is no clear escape clause mentioned for this agreement, etc?
As it is repeatedly mentioned earlier, it is not about competing, it is about timing. Given the right opportunity and time, Malaysian is able to be global too, which some of Malaysian, including many of our companies and entrepreneurs, have successfully done. Even without TPPA. Hence, why we were so rushing then pushing for TPPA. With this new blessed uncertainty of the fate of TPPA, lets pull back and recoup our strategy to ensure that Malaysia can better be successful in the globalise world and avoid the predicament of TPPA.
Hence, the newly inaugurated US President has stirred old concerns anew, with the retreatment of the US from TPPA. The pact that was mooted and dominated by US through its 60% trade building capacity is almost firm of collapsing. Nevertheless, let’s not be worried of what next for our global trading as even without the TPPA, Malaysia still stands a good chance of positive growth in many areas.
This is because Malaysia still has more friendly regional trade pacts such as the AEC and RCEP. As we speak, the AEC, which came into effect 1st January 2016, is growing at 4% a year. Furthermore, with China being an essential member of the RCEP, Malaysia has an established channel to compete effectively in the RCEP.
This is even more compelling as the Malaysian economy is 70% backed by SMEs. Thus, the regional pact would create a fairer playing ground for our SME players. Therefore, Malaysia can endeavour to enhance its involvement in the AEC and RCEP, rather than fret about the TPPA, as the Malaysian economy would be able to grow more visibly and sustainably under these two pacts.
MAZLI ZAKUAN MOHD NOOR
Kota Bharu, Kelantan.
25th January 2017.
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