Explaining the Trans-Pacific Partnership
J ayasiri: ‘As a trade dependent nation, the current engagement in FTAs is largely motivated by the desire to open up markets and source investments in order to promote economic growth.’
The 18th round of the Trans-Pacific Partnership (TPP) negotiations is set to start in Kota Kinabalu on Monday.
The TPP has been in the limelight lately including in Parliament as there have been significant confusion and misundertanding about the free trade agreement.
Senior officials from the Trade and Industry Ministry too have been engaging actively with various organisations, NGOs and the media to address their concerns.
At the Kota Kinabalu meeting, Japan will be on board as the 12th participating country in the negotiations.
The TPP is an on-going plurilateral negotiations involving Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam, representing about 40% of world trade and population of more than 750mil people.
Malaysia’s chief negotiator and Miti’s senior director (strategy and monitoring) J.Jayasiri addresses some of these issues in an interview with StarBizWeek.
You have been engaging various stakeholders through talks and panel discussions on the TPP. Do you think Malaysians understand what the TPP is all about?
There is a lot of mis-information floating around about the TPP, which is creating a high level of discomfort among Malaysians. We are trying to close the information gap through our consultations.
I believe those who understand the principles of free trade and liberalisation know that what the Government is doing is to try to bring Malaysia to the next level. We have a number of programmes with similar objectives being undertaken domestically. The TPP provides us an opportunity to ensure that what we are trying to do at home is also in line with the realities of the global market place. Looking at the bigger picture, the TPP is just part of a process that the Government has undertaken to achieve the goal of becoming a developed, high-income economy by 2020. Our experience has shown that openness of the economy has contributed significantly to our growth and prosperity.
What are the major concerns raised by the NGOs apart from potential closure of SMEs and intellectually property rights? Are they backing their arguments with proof?
NGOs have also raised concerns on labour rights, environmental standards, higher cost of medicines and sovereignty of the nation. Some of the concerns are genuine, like the potential delay in generic drug production if the proposal to extend patent protection is agreed. Negotiations on this complex issue, however, are far from over. And the Government is on the same page with the NGOs on this issue. On other issues like labour and environment, the concerns are mainly based on the perception that the TPP will erode workers’ rights and lower environmental standards. This is not the case, as current proposals in the negotiations call for implementation of higher standards in both areas. There is also the fear that the Investor State Dispute Settlement would affect the sovereignty of the nation. The ISDS does not take away the right of Governments to regulate. It merely outlines the process by which disputes over rules in the TPP with respect to foreign corporations will be arbitrated.
There is a lot concern that TPP will result in increased competition in the domestic market for SMEs. The Government has given a lot of care in dealing with SME issues in the negotiations and refrained from making any commitments that would jeopardise this sector. On the other hand, a dedicated chapter has been negotiated to assist in the further development of SMEs and facilitate their participation in the global supply chain. SMEs can take advantage of these provisions to improve, innovate and market their goods and services in the larger market that the TPP will create.
In your “road tour” you keep on saying free trade agreement is good for you and me? How do you explain to the consumers that they are really benefitting from the TPP?
One of the main benefits of the TPP to consumers is trade liberalisation. Tariff elimination, a key feature of FTAs, allows us to enjoy a wider range of imported goods and services, with better quality and at competitive prices.
Gradual competition brought about by liberalisation has also made domestic producers of goods and service suppliers to be more competitive.
A good example is the local furniture industry. Gradual liberalisation has resulted in better quality products for the domestic consumers and made the industry competitive in the international market. In the services industry, the liberalisation of the education sector has allowed Malaysians to be educated locally in reputable institutions at a much lower cost.
The TPP also deals with technical regulations on products and health and sanitary matters. These chapters build on the WTO provisions and will facilitate regulators to ensure that consumers are protected through high standards and also health and food safety measures.
The Minister has said in parliament that details of the TPP study cannot be revealed yet. As the chief negotiator, what can you reveal to pacify your critics.
The Government commissioned an impact study on the TPP. The study was undertaken by the UNDP and included consultations with various stakeholders including NGOs. The study highlighted the benefits and challenges for Malaysia and contained recommendations of positions and strategies to be taken in the negotiations. The study has been used by our negotiators as a guide and for this reason we were not able to make this document public. But in the interest of transparency, the Ministry has shared this document in a limited way with a selected group of parliamentarians.
Do you think Malaysia will withdraw from the TPP?
We had three options. One was not to join the TPP at all and be a mere bystander as our competitors participate in an arrangement that offers huge potential for trade, investments, technological collaboration and capacity building. The second option was to wait till the negotiations are concluded before deciding to accede to the TPP agreement. This would mean accepting all that has been decided by the others.
The third option, and the one we took, was to get into the negotiations early and try to produce an outcome that takes care of our interest and concerns.
We are going into the 18th round of the negotiations. To date we have managed to address many of our concerns. There are still challenges, but we have not exhausted negotiations yet. There is still room for us to explore flexibilities in order to deal with our respective areas of concern and take care of national interest.
As negotiators, it is our job to push Malaysia’s interests and address our concerns as best as we can. If these are not addressed, or the final outcome of the agreement falls short of our objectives, then Cabinet will decide on the next course of action.
One main issue is drugs patent (trying to strengthen by extending the patent period). This would affect the makers of generic medicines. How does the TPP ensure that the poor continue to have access to cheaper medicines, or are they only concerned about patents and profits?
There are arguments in favour of providing sufficient incentives for drug companies to continue to develop and innovate. There are also concerns that extended patent protection would delay the entry of generics into the market. The challenge in the negotiations is to strike a fine balance between the need for incentives to innovate and the need for access to affordable drugs. Notwithstanding, countries can still introduce compulsory licensing, a right stipulated under TRIPS, to access generic drugs while the patent is still in force.
Often allegations surface the negotiations are being done rather secretively, very little transparency and no outside civic or activist groups are involved and only those with vested interest are part of the negotiations. How true is this?
This is not true. Negotiations are carried out among Governments, but it has not prevented consultations with stakeholders. As in all international negotiations where positions are evolving a certain degree of confidentiality need to be adhered to with regard to negotiating documents.
The Government has engaged all interested NGOs and politicians from both sides. In addition, the Government has undertaken consultations with business groups and professional bodies. All stakeholders consulted are given an opportunity to contribute their ideas to the TPP process, as well as to highlight their concerns on the impact of specific provisions or Chapters. These concerns are given serious consideration by the negotiators and positions are also taken on the basis of these consultations.
Japan will be joining negotiations in Sabah, how do you see Japan’s participation after 17 rounds?
Japan will finally join the other members at the later part of the 18th round. There is of course the worry that their late entry may delay negotiations. There is, however, an agreed process which will facilitate the smooth integration of Japan into the negotiations. With Japan’s experience in extensive FTA negotiations, I am certain they will be able to hit the ground running.
What has been Malaysia’s stand when it negotiates multi-lateral trade agreements?
Malaysia is fully committed to the completion of the stalled Doha Development Agenda in the WTO and we will continue to push for an open and fair trading system.
However, we are cognisant of the fact that the negotiations at the multilateral level is based on consensus, and with the complexity of the issues being negotiated as well as the increase in Membership (159 Members), the positions of Members vary considerably and the prospects of concluding the negotiations remain some distance away. Therefore, as a trade dependent nation, the current engagement in Free Trade Agreements (FTAs) is largely motivated by the desire to open up markets and source investments in order to promote economic growth.
How does the Government balance between the give-and-take that exists in trade negotiations?
Careful assessment is carried out throughout the negotiating process as new or revised proposals or revised emerge. These proposals are discussed in depth with all relevant stakeholders and their feedback is duly taken into consideration when formulating the national positions on these issues. Our negotiating positions are also governed by existing laws and policies.
Malaysia is not new to trade negotiations. We have been involved since the 1960s as a member of the GATT and subsequently the WTO. Along the way, we have undertaken liberalisation as part of our multilateral commitments as well as unilaterally. So in fact we already have a basis from which to build on and through our many consultations undertaken, we also know where our limits are and the maximum positions that we can take in any negotiations. For sensitive areas that we must concede, we will look into flexibilities in implementation of such commitments so that the impact on the stakeholders can be mitigated.
How does the issue of bumiputra rights figure in trade and market access negotiations?
Trade and market access negotiations will not impede any Government’s social agenda. Every nation has their own social development priorities to uplift the lives of those affected and marginalised.
Bumiputra rights continue to be an important consideration in all our FTA negotiations.
In all our commitments, every effort is made to ensure that the measures under the affirmative action policy are preserved. This has been addressed in all areas of the as negotiations either in the form of carve-outs and exceptions.
How does Malaysia balance between giving up domestic protection, and greater market access for the country in overseas market? (eg was the liberalisation of the 18 sub-sectors)
The Government undertakes careful assessment of current policies before deciding on any liberalisation commitments, whether pursuant to international negotiations or unilaterally. Among the issues considered would be the existing protection, competitiveness and strategic nature of the sectors.
These assessments would involve consultations with all relevant stakeholders, including regulatory bodies and existing players in the sectors concerned.
For the autonomous liberalisation of services, the 18 sub-sectors were chosen as these were areas that Malaysia wanted to develop and where there were limited local players involved.
The Government does not make unilateral decisions to give up any protection accorded for the benefit of the rakyat. Instead, any market access commitment undertaken will go through extensive consultations domestically, before decisions are arrived at. Our experience has shown that sectors that are most open have developed and strengthened faster than the closed sectors.
With trade increasingly shifting towards countries in Asean and China, how does that influence Malaysia’s position when it comes to negotiating trade agreements with the West?
Malaysia’s trade policy is based on a pragmatic approach. Our FTA engagements have been driven by the requests of the business community in Malaysia looking to expand overseas and into larger markets.
Malaysia is involved in the TPP, but it is also involved in trade negotiations to consolidate the Asean+1 FTAs into a regional grouping – the Regional Comprehensive Economic Partnership.
The goals of these two FTAs are the same but the approach is different as RCEP involves parties that may not be ready to undertake the kind of liberalisation envisaged in the TPP.
Both are complementary and offer manufacturers choice. Both arrangements aim to produce a seamless business environment for their members.
Those that wish to pursue market access in the US can use the TPP while those that wish to expand into China can use RCEP.
How do businesses and the government reconcile different requirements when it comes to all the different agreements, bilateral and regional, that the Government has and will commit to?
The biggest issue arising from the multiple trade arrangements that we have entered into is the different rules of origin which exporters have to comply with.
Rules of origin, however, are a necessity to avoid non-parties (free-riders) benefiting from preferential treatment that FTAs offer.
Regional arrangements such as the TPP and RCEP have the possibility of reducing this complexity through a common rule of origin.
How much is self-interest and politics now influencing trade agreements and its negotiations?
All countries have different reasons, but most of them pursue FTAs for economic objectives. What is important to remember is that countries embark on FTAs on their own volition and not forced to enter into negotiations. And there has to be a willing partner to negotiate with.
Our FTA engagements have been driven by the requests of the business community in Malaysia looking to expand overseas and into larger markets.
We have also witnessed closer integration of the region as a result of participation in FTAs.
Source : The Star
Date : 13 July 2013
Chup Iftar (16/07/13/119/797)
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