As TPPA negotiations finish up, Malaysia has some tough decisions
It’s been a very long race, but the finishing line is now fast approaching.
The Trans-Pacific Partnership Agreement (TPPA) negotiations are coming to an end, with the ministers meeting in Hawaii last week to wrap up outstanding issues.
It is unlikely that there is final closure, as not all the contentious issues can be settled in detail.
But the remaining negotiations must be finished very soon, in a matter of days or within a few weeks, to meet the tight deadline of the United States’ political process.
Malaysia is one of the countries making the toughest decisions.
We are one of the countries resisting the U.S.’ push for very strong intellectual property clauses that will affect the prices of and access to medicines.
But we also have serious reservations on two problematic chapters — state-owned enterprises and government procurement.
The rules in these chapters will affect some of the core policies of the country as well as its economic and social structure and makeup.
In government procurement, Malaysia has always given preference to local companies when the government buys materials or services or implements construction projects.
Under the TPPA, the other countries’ firms have the right to be treated at least as well as locals when bidding for government projects and contracts.
Thus, local firms cannot be guaranteed their biggest source of business anymore.
This will be a big blow to the affected companies, which now have to compete on equal terms with the bigger foreign companies.
However, in U. S. free- trade agreements, small projects are usually exempted if the value of the projects is below about US$200,000 for goods and services and about US$8 million for construction projects.
Malaysia has been requesting special treatment — a higher threshold for construction projects, many times more than the usual US$8 million.
According to news reports, the U.S. can consider a higher threshold for Malaysia, but only for a transition period.
The questions are: how much higher will the threshold be, how long the transition period, will other countries all agree, and whether this will be good enough for Malaysia, since the level of relief may be inadequate and is only temporary.
On the state-owned enterprises (SOEs), Malaysia also faces quite a drastic change in policies if it joins the TPPA, which seeks to break the tight connection between the government and its agencies and enterprises.
SOEs ( or government- linked companies, in our local jargon) play very important roles in our economy, and society.
Major banks, estates, oil and mining companies, and a range of manufacturing, agricultural and service enterprises are stateowned or government-linked.
They include Petronas, Khazanah Nasional Bhd, Permodalan Nasional Berhad, Proton, Maybank, CIMB, government and private hospitals, pharmaceutical drug companies, steel plants, aquaculture projects, Malaysia Airlines, as well as companies in telecommunications, energy, transport and water supply.
It is true there has been misuse of the support to SOEs, and there should be urgent reforms undertaken to curb abuses.
But this is not a good reason to join a binding agreement like the TPPA if it drastically erodes the viability of a whole range of public enterprises and agencies.
The adverse effects could include raising the prices of essential goods and services; making some goods or services unavailable because it is not profitable to produce them; and enabling foreign companies to take over the market share of local companies.
Besides these two issues, other contentious TPPA topics include how giving more rights to foreign companies that own patents will lead to higher prices of medicines, and how the investment chapter with the right given to foreign companies to sue the government in an international tribunal will affect the making of public policy can override national laws and courts.
Malaysia may benefit from having access to markets of other TPPA countries; on the other hand they too have greater access to our market as the tariffs will be eliminated and the local producers face stiff competition.
Since Malaysia’s tariffs are on average higher than those of the U.S., we could expect to open up relatively more, where the U.S. is concerned; and similarly with regard to Singapore.
The time for making a decision whether to join the TPPA is fast approaching.
It’s now a matter of days, as the TPPA must be now be concluded to suit the U.S. political calendar.
The problems that will emerge have to be assessed against the benefits. Many of the former are real; while the benefits are potential or general rather than specific.