CAP calls on Prime Minister to withdraw from Trans-Pacific Partnership Agreement (TPPA)

Or at least not to make any concessions to the US President during his visit to Malaysia

The Consumers’ Association of Penang (CAP) has called on the Government to inform the United States President that Malaysia will be withdrawing from the Trans-Pacific Partnership Agreement when Mr. Barack Obama visits Malaysia later this week.

If this is not the right time to do so, then at the least Malaysia should not make any new concessions on the TPPA negotiations during this visit, says CAP.

CAP President Encik S.M. Mohamed Idris said this in a letter to the Prime Minister Dato’ Sri Mohd. Najib Bin Tun Haji Abdul Razak which was sent on 21 April 2014.  Similar letters were sent to other Cabinet members, including Deputy Prime Minister Tan Sri Dato’ Muhyiddin Mohd. Yassin, International Trade and Industry Minister Dato’ Sri Mustapa Mohamed, Minister in the Prime Minister’s Department Dato’ Sri Abdul Wahid Omar and Second Finance Minister Dato’ Seri Ahmad Husni bin Mohamad Hanadzlah.

In the letter to the Prime Minister, which summarised several serious concerns that CAP has regarding Malaysia joining the TPPA, Encik Idris said:  “In light of all the above points, we believe that YAB should take advantage of the US President’s visit to brief him about Malaysians’ concerns about the TPPA, and to withdraw from further negotiations.  We believe this is the course that is in the best interests of the country.”

“It could be remembered that Malaysia and the US attempted to negotiate a bilateral FTA several years ago, but the negotiations were not concluded due to many differences (including reportedly in some of the same issues that now raise concerns in the TPPA).  The non-conclusion of that negotiation did not cause any adverse effects on US-Malaysia relations.”

“If the visit of the US President is not judged to be the best occasion to announce an exit from the TPPA, we request at the least that no new concessions be offered to the United States during YAB’s meeting with the President, or during the meetings between Malaysian and US officials.”

Encik Idris said that CAP would like to put on record its views on the TPPA on the occasion of Obama’s visit as the TPPA will reportedly be on the agenda of the talks between the President and Dato’ Sri Najib.

According to CAP, the TPPA will bring few benefits to Malaysia even in market access, since Malaysia has higher tariffs in many products than the US, and we will thus have to make significantly more concessions than the US.

For issues other than tariffs, Malaysia will be very adversely affected in economic and social terms, said Encik Idris.

Among the damaging effects, said CAP, are the following:

• Malaysia will have to agree not to use export taxes for almost all of our commodities, thus preventing us from using a policy tool that has worked for Malaysia to have flourishing processing, refining and manufacturing activities in resource-based sectors such as timber, rubber, palm oil, steel, etc.

• On intellectual property (IP), based on publicly available TPPA texts, the US proposals would lengthen the patent term for medicines, and additionally significantly delay our ability to produce or import new generic medicines (due to tight data exclusivity rules). The proposed rules on IP and agriculture would go against Malaysia’s law on plant variety protection and disadvantage our farmers by raising the cost of their inputs.  The proposed rules on copyright would extend the copyright term to at least 70 years (from the present 50 years).  The result of all this is that consumers’ right and access to affordable medicines and to information and knowledge will be harmed, and farmers’ rights to seeds will also be hurt.

• On government procurement, based on past USFTAs, Malaysia’s present freedom to set our own rules will be severely affected. In particular, it will be impossible to give preferences to local products, services and suppliers (for purchasing above the threshold value for Ministries which liberalise their procurement), which have been important in boosting the domestic economy.  The preferences to Bumiputra businesses will also be affected.  Although Malaysia has reportedly asked for a higher threshold, and for broad exemptions for the Bumiputra policy, it is uncertain and unlikely that these requests will be agreed to.

• The rules on state owned enterprises, will make it more and more difficult for Malaysia’s government-linked companies to operate or even survive.  The TPPA will challenge and undermine the political-economy institutional arrangements of combining the state and commercial practices and entities, that has served Malaysia for many years.  This will have major implications for our political economy and our freedom to choose our own economic and social institutional forms.

• The investment chapter provides pre-establishment rights to foreign companies of TPPA countries, and this puts pressure on Malaysia to open up the whole range of sectors to foreign ownership and control, and to progressively give up the existing restrictions in various sectors. This will affect the business of local firms.

• The investment chapter also requires TPPA countries to give almost total freedom to foreign investors to bring in and take out funds, thus making it difficult for the government and financial authorities to regulate the flow of funds.  This makes Malaysia vulnerable to financial volatility and to future financial crises that could result from excessive speculative inflows, as well as sudden and excessive outflow of capital.  The selective capital controls introduced by Malaysia in 1998 to effectively address capital outflows (and thus avoid a serious crisis) would not be allowed under the new TPPA rules.

• The investor chapter also has an ‘investor protection’ component. Malaysia’s obligations involve ‘fair and equitable treatment’ and ‘indirect expropriation’:  under these terms, many developed and developing countries have been successfully sued by foreign companies, including for lost expected profits due to existing or new government policies, or changes to and non-renewal of contracts.

• The danger is exacerbated by the TPPA’s investor-to-state dispute settlement (ISDS) system in which the foreign investor can take the government to an international arbitration tribunal to enforce the investment chapter provisions above. The government is exposed to being sued and having to pay out large amounts up to hundreds of millions or even billions of dollars.

Health and environment policies of the government will be seriously compromised. For example, the government’s present and future tobacco control measures will be constrained by many TPPA chapters. The prices of medicines will also remain higher for longer periods. Both of these will result in damage to the health of Malaysians, including the loss of many lives. On the environment, measures taken by the government including to control pollution, address climate change and biodiversity loss, and conserve natural resources, are likely to result in legal suits, especially taken by foreign investors under ISDS, as has happened often to governments that signed FTAs with the US.

• The US and perhaps other countries may assure Malaysia that there can be exceptions and other flexibilities but experience with previous USFTAs, and the chapters that are publicly available on the internet, indicate that these flexibilities and exceptions are likely to be limited and grossly inadequate. Many flexibilities are only in the form of a transition period of a few years, after which the obligations have to be complied with.  The exceptions in the general exception chapter in existing USFTAs do not apply to many of the key chapters and obligations and are so difficult to use as to often be inoperable.  Thus it is important not to rely on the flexibilities when deciding whether it is safe to sign the TPPA unless they are found to be genuine, broad, easy to use and permanent.

According to CAP, these effects on Malaysia are bad enough, but we also have no guarantee that whatever is offered by the US negotiating team, will hold.

This is because trade policy, including the TPPA, is under the authority of the US Congress. Thus Congress can reject portions of the TPPA and ask for the Administration to get the other TPPA countries to accept amendments.

Encik Idris added that the President has been trying to obtain fast-track authority from Congress (in which Congress can only approve or reject but cannot change the TPPA), but he has been unable to obtain this due to opposition by a majority in Congress. Due to this, some countries are reported to have stated that they would not sign on to the TPPA if the US President does not get fast track authority.  “We believe that Malaysia should also take this position and should certainly not make concessions when the USA does not have fast track authority” said Idris.

Moreover, a clear majority of Congress members are insisting that a ‘currency manipulation’ element be included in the TPPA.  Any TPPA country that is manipulating its currency will have its products blocked by additional tariffs.  Malaysia is one of two TPPA countries (the other being Singapore) that has been named as a currency manipulator according to criteria relied on by a Congressional leader.

CAP reminded the Prime Minister that during the TPPA Summit held in Bali in October 2013, he had stated that issues like IP, government procurement, state owned enterprises, environment, labour and ISDS are issues that fundamentally impinge on the sovereign right of the country to make regulation and policy.

“We thus believe that YAB shares the concerns that we and many other Malaysian citizens and groups have of the dangers posed by the TPPA and the very limited potential gains.”

Encik Idris therefore called on the Prime Minister to announce Malaysia’s withdrawal from the TPPA, or at least not to make any concessions when he meets Obama.

Press Statement – 24 April 2014