Malaysia in a post-TPP world

THE Trans Pacific Partnership Agreement (TPPA) can be put to rest. It seems so, at least for now. If there is a flicker of hope, it comes from the talks that Japan Prime Minister Shinzo Abe had with President-elect Donald Trump during his visit (Nov 17-18) to the US. It is not clear if Abe managed to convince Trump about the need for the TPPA during their meeting.

Can Abe do enough to change Trump’s mind? As things go, that is an unlikely possibility.

At best one would expect Trump to relook the agreement. He might want a changed agreement. It may not be legally possible to change the terms already agreed upon by the 12-member partnership. The agreement will have to proceed as it is, or not at all.

What else is possible? Perhaps the other like-minded members of the TPP can agree to go ahead with the TPPA. That would have to be without America’s participation.

Not having the US as part of the deal will substantially weaken any such agreement that emerges. The outcome would be thin. It would not be desirable for Malaysia, which has been having declining trade with the US over the years. Malaysia’s focus would be to enjoy more access to US markets and gain from greater US trade and interest in Malaysia.

Neither will the TPPA minus the US be attractive to some of the other members. Vietnam will probably balk at such an idea. Singapore will not be fazed because it already has a bilateral free trade agreement (FTA) with the US. What, then, could Malaysia do?

One possibility is to rekindle interest in a US-Malaysia FTA. A US-Malaysia FTA was considered in 2006 and negotiations came to a halt in 2009.

If the bilateral exercise was tough back then, it would be even more demanding under Trump’s scrutiny.

He is not likely to be appreciative of Malaysia’s stand on government procurement, stateowned enterprises and national agenda (or bumiputra policy). All of these policies restrict the entry of American business into the Malaysian business space.

Since a bilateral FTA with the US seems more remote under the Trump regime, Malaysia’s trade policy in the post-TPPA era runs into a wall. Two possibilities are open.

One is to pursue the Regional Comprehensive and Economic Partnership (RCEP) agreement with additional vigour. Malaysia can extend itself by providing RCEP with the leadership that Asean needs.

This depends on whether Najib is up to the task. He has some natural advantages, one of which is his recent visit to China. This might help him with the traction that he has gained from his relationship with China.

However, President Joko “Jokowi” Widodo may be a more difficult entity to handle. Jokowi has little patience for abstractions, wants to see quick results and has little time for endless meetings. Asean does not quite fit this mould. It might be more difficult convincing him of the usefulness of Asean as an institution whose integration will bring better trade and investment to all member states. If Najib can convince Jokowi, prod China, and get India to soften its negotiating stance that would do much to accelerate the RCEP process.

RCEP negotiations may not meet the 2016 deadline. The timeline might be pushed further to the end of 2017.

What if there are tensions that may further delay the completion of RCEP? What, can Malaysia do then?

The most serious endeavour that Malaysia can initiate is to unilaterally liberalise. That does not need the assistance of any other country. That will also skirt disagreements amongst different countries and their differing agendas. And, ultimately, resources do not have to be wasted on expensive trade negotiations if only Malaysia will undertake domestic reforms, without waiting for any external compulsions.

It is absolutely clear Malaysia has to resolve some problems if it is to take full advantage of trade in goods and services, and investment. If there is a need for a checklist of issues, the TPPA comes in handy. Although we obtained concessions on a number of points, an FTA of a higher standard would be one without those waivers.

In the absence of any multilateral liberalisation efforts from the World Trade Organisation, the best approach is to approach trade from a unilateral perspective. Whether we have the political will to do so is a different question.

Shankaran Nambiar is the author of the recently published book, Malaysia in Troubled Times.