Don’t wait for trade deals

POLICY MATTERS

THE secretary-general of the Ministry of International Trade and Industry (MITI), Datuk Seri J. Jayasiri, has said that businesses should take steps to exploit opportunities abroad rather than wait for free trade agreements to materialise.

This is a bold statement that deserves to be taken seriously. It is a demonstration of MITI’s sense of realism. Hopefully, these are remarks that will guide the future direction of Malaysia’s trade policy.

Why should the secretary-general’s statement be taken as being positive and significant?

First, it is an honest acknowledgment of the impasse that Malaysia finds itself in.

To be sure, Malaysia was keen on seeing the TPP through. The TPPA has taken a turn and it has morphed into the Comprehensive and Progressive Agreement for TransPacific Partnership (CPTPP).

It is far too early to say how the CPTPP will turn out.

There are divergent voices in the TPP 11. At the risk of over-simplifying, it can be claimed the arrangement rests on the wager that the post-Trump administration will be receptive to the TPP.

Clearly, the CPTPP requires a gestation period before it can be delivered.

Second, the Regional Comprehensive Economic Partnership (RCEP) has seen many delays in its conclusion. The obstacles are not simple ones that will fall away. The RCEP needs more time for its resolution.

With China solidly behind the RCEP and Japan willingly lending its backing, the RCEP will see closure before too long.

One can be certain about RCEP’s conclusion, but one cannot be too certain about the deadline.

Meanwhile, it is simply not sensible to expect companies to sit around and wait for the RCEP to solidify, important as the agreement is.

Indeed, companies have been exercising their own initiative. Malaysian companies have been penetrating the US market as well as other advanced countries, Top Glove being one example.

A recent statement by International Trade and Industry Minister Datuk Seri Mustafa Mohamed similarly takes into account ground realities.

Mustafa has declared that the Trade and Investment Framework Agreement (TIFA) is an instrument that can be leveraged upon for greater economic engagement with the US. Thus, one need not wait listlessly for the CPTPP to be concluded.

Malaysia has not dismissed the importance of trade and investment with the US. Prime Minister Datuk Seri Najib Abdul Razak has offered to help the US with its development. This is a clear indication of how much he values economic engagement with the US. Admittedly, the statement was framed as a hyperbole, to the point of being ludicrous.

The fact that Malaysia wants to invest in infrastructure projects in the US and buy Boeing jets does not spring from any intention of creating comic effect, rather Malaysia wants to reduce the trade surplus it has with the US.

Trump does not like trade cheaters; and Malaysia wants to get off the list of trade cheaters.

In other words, Malaysia is doing its level best to improve economic ties with the US even in the absence of the TPP or a bilateral agreement. It is in this spirit that MITI wants companies to try to penetrate into foreign markets, instead of waiting for FTAs to materialise.

Given the complexities surrounding the CPTPP and the delayed RCEP, Malaysian companies can take advantage of the low tariffs that Malaysian goods already enjoy.

In fact, FTAs these days come with a more comprehensive list of chapters covering non-trade, but trade-supporting issues.

These include intellectual property rights (IPR), environment, state-owned enterprises, investor-state dispute settlement and the like. Some of these issues could be problematic; and in the interim period there is nothing to stop companies from trading.

An approach that is not often presented as a viable alternative is to unilaterally work towards satisfying the conditions that are required by the global trading environment. This means that Malaysia can go ahead and meet the expected IPR, labour or environmental requirements at its own pace and without being compelled to do so by any FTA. This would prepare Malaysia ahead of signing any agreement.

Malaysia has to rethink its trade policy in the face of complicated circumstances. It appears that the secretary-general of MITI is offering first steps in that direction.

Dr Shankaran Nambiar is author of Malaysia in Troubled Times. The views presented in this article are his own. Comments: letters@thesundaily.com