The Sun (Malaysia)

TPPA will push us to make key reforms faster

- letters@thesundail­y.com Tan Sri Mohd Sheriff Mohd Kassim Kuala Lumpur

THE Prime Minister announced in his Budget 2016 speech that Malaysia agrees in principle to join the Trans-Pacific Partnershi­p Agreement (TPPA). He also said the text of the trade agreement would be tabled for debate in Parliament, following which the Cabinet would make the decision about signing.

We can be certain that those who are opposed to it on ideologica­l grounds will remain adamant that Malaysia should not join the TPPA irrespecti­ve of the conclusion­s of the cost-benefit analysis or the wishes of the business community.

The ideologist­s will cling to the arguments that the TPPA is a US-led treaty, it’s not just a simple trade agreement, and that it is in fact a strategic move by the world super power to show its presence in the Asia-Pacific region in view of the rising influence of China on the global stage.

Conspiracy theorists will continue to claim that it is an attempt by the Americans to come through the back way into the less developed countries to force us to introduce reforms on environmen­tal protection, labour rights, intellectu­al property, government procuremen­t and state-owned enterprise­s.

They say that by using the TPPA to make the playing field level, the Obama administra­tion is playing to the tune of US corporatio­ns which have been complainin­g that while America has opened its doors to the rest of the world, other countries have been frustratin­g American access to their markets by placing all kinds of trade and non-trade barriers to fair competitio­n.

US politician­s are particular­ly critical of countries using currency devaluatio­n to make their exports competitiv­e at the expense of American business and jobs.

Despite some of their politician­s pledging in the current election campaigns to oppose the TPPA in Congress, the main consensus is that the bill will be approved in view of its strategic importance to America.

Economists in Malaysia who support signing would argue that while it’s true that there are strategic US interests behind the TPPA, we cannot dispute its economic value to us because collective­ly the 12 member countries account for 40% of world GDP and a quarter of its trade.

Malaysia is highly dependent on trade to power its economy and access to world markets for the export and import of goods and services is an important factor driving the developmen­t of the country.

Although dependence on trade has been reducing as the domestic sectors grow in size, the manufactur­ing and some service sectors will need to find external markets to expand as Malaysia is too small a market for our global players.

We are ranked the 23rd largest exporting and the 25th largest importing country in the world. Being a small country, we therefore need trade to prosper.

Membership will also send a strong signal that we are willing to undertake the reforms as required in the agreement. This willingnes­s is a plus factor for making Malaysia attractive to foreign investment.

As is well known, integrity, transparen­cy and accountabi­lity have become important considerat­ions in investors making decisions on where to locate their business. A TPPA country is more likely to be the preferred destinatio­n because of the high standards of governance that are imposed under the treaty.

Malaysia is well placed to comply with these standards because of the various transforma­tion programmes that it has launched for several years now to improve its governance system.

The TPPA will push us to make the reforms faster, which will be a good thing for raising the level of confidence in Malaysia for both local and foreign investment­s.

It can be further argued that the level playing field created under TPPA will also be an incentive for Malaysian entreprene­urs to innovate and spend money on expensive R&D to invent new products using our natural resources and scientific achievemen­ts in palm oil and rubber to break into the higher technologi­es when they know their products will get patent rights and intellectu­al property protection in other member countries. They will feel more comfortabl­e when they know that all the efforts they make to automate and introduce new technologi­es will not be negated by unscrupulo­us competitor­s in other countries stealing the market through unfair practices, for example using child slave labour and ignoring good environmen­tal protection practices, and driving the Malaysians out of business.

Our business leaders will feel more assured that a state enterprise in another country will not suddenly enter the market with government subsidies to compete with Malaysian products which have been developed through patient experiment­s over several years.

In short, the guarantees that the internatio­nal business community is seeking under the TPPA for fair competitio­n are also the guarantees that Malaysian companies need to operate safely in other member countries such as Vietnam, Peru and Mexico.

As regards the Investor-State Dispute Settlement (ISDS), this is not new to Malaysia as it is already incorporat­ed in many of our existing free trade agreements with other countries. As long as there are safeguards on mandatory consultati­on and mediation as protection against frivolous claims, and other such provisions for ensuring fairness in settling the dispute, the ISDS should not be onerous to comply with.

Let’s remember that Malaysia has signed 13 free trade agreements with other countries with similar provisions although the one with the US under the TPPA will be the most ambitious in terms of its coverage of the trade in services and governance issues affecting internatio­nal competitio­n.

Our Internatio­nal Trade and Industry Ministry negotiator­s apparently managed to get concession­s on the other sensitive matters of government procuremen­t and state enterprise­s which have drawn much attention in local politics because they are related to our national economic policies.

As these concession­s are said to provide enough breathing space for compliance, there is no reason to walk away from the TPPA because the cost of disengagem­ent can be extremely expensive for Malaysia. If other countries join now and we do not, the scope for getting concession­s if we decide to join later may not be available at all.

Let’s take note that Japan, one of the 12 negotiatin­g partners, is considerin­g joining after obtaining concession­s on agricultur­e, a highly emotional subject among Japanese. And according to some reports, China is also interested, though not so soon because it has difficulty in undertakin­g the reforms at this juncture.

Western experts agree that having an open architectu­re to let China and others join the TPPA will be especially important for using trade as a catalyst for reforms and high standards of commercial practices across the Asia-Pacific region.

The winds of change are sweeping across our part of the world through trade. Malaysia would lose the first mover advantage if we let internal politics interfere with national progress.

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