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on 11 Feb, 10:22

10 things to do before the TPP gets implemented

10 things to do before the TPP gets implemented
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The TPP was finally signed last week, even though its implementation is not a done deal yet. There are now 2 years until the ratification and certification processes take place, before the TPP comes into force.

If the TPP does come into force in a couple of years, there are certain things that Malaysians won’t be able to do anymore. So here I give you 10 things to do before the TPP gets implemented, before it’s too late:

1. Increase minimum wage

Can the TPP halt the government to increase the minimum wage? Yes it can. ISDS protects the foreign investor against what is called ‘indirect expropriation’: measures from the government which reduce the value of the investment. A minimum wage increase can be considered a case of indirect expropriation, since it can make the investor decrease its expected profits. And as such, the foreign investor can challenge the government in an international court, as it has happened to Egypt.

2. Keep devaluating the ringgit

Similar to the previous point, an investor whose expected profits are lowered due to a weaker currency may resort to ISDS to sue the country, seeking for compensation. This is a great risk particularly to governments in crises, such as Argentina in 2001. After Argentina devalued its currency and defaulted on its debt in 2001, it got multiple suits by hedge funds not willing to accept the country’s sovereign debt restructuring.

3. Get sick… and recover!

Prices of medicine will go up. Médecins Sans Frontières/Doctors without borders has called the TPP “the most damaging trade agreement ever for global health”, stating that “brand-name drugs and vaccines would not face direct competition for excessively long periods of time while patients, medical providers like MSF, and people in TPP countries endure unnecessarily high prices.”

I don’t wish anyone getting sick. However, if you’re ever going to, do it now! Afterwards, you might not be able to afford the medicine.

4. Swap seeds with your neighbour

TPP prohibits farmers from saving and exchanging many varieties of seeds. If they do, they can be sued by seed companies, such as Monsanto.

5. Enjoy Malaysian rice

Malaysia’s rice sector is highly protected, with the protection justified largely by arguments for food security. TPP will eliminate the subsidies given to farmers and the high duties to import rice to Malaysia. TPP will not, though, eliminate the domestic subsidies that the US government gives its own farmers, possibly making the Malaysian rice farmer unable to compete with cheaper US rice.

This is what happened to Mexico. After signing into NAFTA—a free trade agreement similar to the TPP— in 1994, Mexican tariffs on corn imports and programs supporting small farmers were removed, yet U.S. domestic subsidies were left intact. US corn farmers were then able to export their corn for a lower price than the cost of production of Mexican corn. The result has been 1.1 million small farmers, and 1.4 million other Mexicans dependent upon the farm sector, driven out of work.

Ironically, even though the price of corn went down after NAFTA, the deregulated retail price of corn-made tortillas–Mexico’s staple food–shot up almost three-fold. This is because NAFTA included service sector and investment rules which allowed a few large firms to dominate the food-processing activities and raise consumer prices. This result stands in sharp contrast to promises by NAFTA’s boosters that Mexican consumers would benefit from the pact, as some backers of the TPP are doing nowadays.

6. Take a selfie/make a video without worrying about copyright infringement

TPP will lock-in the DMCA notice-and-takedown system for monitoring copyright infringement, but with fewer requirements about the contents of takedown notices as compared to the DMCA in the US, allowing for abuse of the system.

If you have a video of your toddler dancing to some famous song and want to share it with your friends, you already possibly can’t upload it to Youtube, but still can upload it to some Malaysian website. Not for long.

7. Implement policies against climate change

With ISDS, climate action can be rendered ineffective. Governments can be contested in international courts when implementing measures to curb the use of fossil fuels, as it happened to Canada when implementing a moratorium on fracking, or when kick-starting a renewable energy project by giving subsidies or encouraging local industry, as when the US launched a WTO attack on India’s Jawaharlal Nehru National Solar Mission in 2012.

8. Buy a proton

If prices of automobiles imported from TPP-signing countries come down, that means there the price difference to buy a Proton, a Ford or a Toyota car will keep shrinking. I wonder then, who will buy Proton after TPP gets implemented?

9. Support the local industry

Due to the elimination of tariffs, SMEs from all TPP-signing countries will be able to buy raw goods at the same price, giving a natural advantage to those countries with a higher productivity performance. The US, Canada, Japan, Australia, New Zealand, Singapore all outpace Malaysia in this aspect.

When the preferential price for the raw goods goes away, Malaysian SMEs will be at a disadvantage and will not be able to compete in the domestic market, let alone overseas. As a result, according to the Malaysian Small and Medium Enterprises Association, 30% of Malaysian SMEs risk disappearing.

10. Blame the Chinese

Talking about support to the TPP, PAS president Datuk Seri Hadi Awang said “The DAP agrees. Why? Because the Chinese control trade in Malaysia. It’s the Bumiputera who are tired with the TPPA,” to which DAP publicity chief Tony Pua sarcastically replied “Umno supports TPPA, so they must be Chinese.”

The Chinese have been blamed time and again in most incredible ways (“The Chinese tsunami!”). Yet, the TPP is indisputably an anti-Chinese pact: “TPP allows America – and not countries like China – to write the rules of the road in the 21st century,” said Obama after the deal was signed. Likewise, the Malaysian Chinese won’t be able to take full advantage of the deal with the Bumiputera protections in place.

So, in the future, if Malaysia gets sued and must pay a multi-billion award to an American investor, who will be blamed? Still the Chinese? Maybe the Americans? Or maybe the local politicians who signed the deal?

on 4 Feb, 16:01

In retrospect: notes from Malaysia’s signing into the TPPA

In retrospect: notes from Malaysia’s signing into the TPPA
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The TPPA has finally been signed today. Even if it makes little difference now, I’d like to point out how some of the pro-TPP arguments used to justify Malaysia’s signing are not valid. In addition, I have seen how anti-TPPA campaigners have been unjustly attacked, so I’m bringing this issue up too.

Justifications to sign

Achieving the “high income nation status”

“Given the current scenario, the high income nation status aspired to be achieved by 2020, it seems blurry if the TPP is not signed”
—International Trade and Industry Minister Datuk Seri Mustapa Mohamed (source)

High-income nation means that Malaysia’s average GDP per capita will be USD 15000. Given the current economic situation, this number seems to be very far off for the average Malaysian, right? Indeed, people nowadays must economize, what we afforded last year we can’t afford anymore, the quality of living has only decreased lately, not increased. Yet, since Malaysia’s GDP has increased, then why are Malaysians worse off? Simply because Malaysians are not sharing the benefits of bigger economic outputs, as their experience of last year’s economic decline clearly shows. So then, what’s in it for them?

TPP may only aggravate this problem. As Dr. Jomo Kwame Sundaram has indicated that, once the TPP comes into force, unemployment and inequality may actually rise, making the average Malaysian even worse off.

 

Malaysia will not get unjustifiably sued by investors

“With governance and rule of law, there is very little to fear over this [being sued through ISDS].”
—MITI secretary-general Tan Sri Dr Rebecca Fatima Sta Maria (source)

Governance and rule of law are not enough to not be sued using ISDS. Simply consider two recent cases from the United States:

  • TransCanada Corp launched US$15-billion lawsuit against the U.S. government for rejecting the Keystone XL pipeline. Why was it rejected? Based on a 7-year long study of its environmental impacts and economic benefits, the US Government considered that the pipeline was not in the interest of the country.

  • Monsanto filed a lawsuit to stop California from listing glyphosate—the main ingredient in its widely used weedkiller, Roundup—as a known carcinogen. California’s Office of Environmental Health Hazard Assessment (OEHHA)’s decision to add glyphosate to the state’s list of chemicals known to cause cancer came after the World Health Organization’s cancer research arm declared that glyphosate was a “possible carcinogen” in March 2015.

What wrong did the US Government and the State of California do? Trying to protect the environment, trying to protects its citizens from a carcinogen. And yet, they got sued. So governance and rule of law are not enough. If the investor feels to have been treated unfairly, they have the legal right to sue the country.

 

Attack to anti-TPPA campaigners

Mr Wan Saiful Wan Jan, Chief Executive of think-tank IDEAS, has repeatedly attacked anti-TPPA campaigners. Below are some of the things he said, and my response to them.

From Lessons from the TPPA debate:

“The anti-liberalisation movement operates globally and has never failed to mobilise demonstrations when major trade deals are being decided.”

The activists campaigning against the TPP came all together because of their shared opposition to the TPP, not because they are “anti-liberalisation”. And there is no need to suggest that this is a globally coordinated effort: activists are mostly Malaysians, with the BantahTPPA coalition being lead by MTEM, an organization which champions local Malay economic issues.

“Their strategy is almost always the same globally. Focus on spreading doubts and fear. Repeat the same mantra over and over again.”

Both pro and against-TPP sides have their own fears and are expressing them to get supporters. Is expressing one’s fears called fear mongering? If that were the case, shouldn’t trade minister Mustapa Mohamed also be accused of spreading fear? Mustapa said: “We [the federal government] want the country to be more progressive, but I am worried that the country will slip should it take the path of anti-foreign investment and anti-trade [by rejecting the trade pact].” Possibly Mr Wan Saiful will think this fear is reasonable. Is Charles Santiago’s fear of price of medicine going up unreasonable?

“Tell the public that the issue is too complex for anybody to understand it all.”

Yes, the TPP is complex. It is 6000 pages long, written in an ambiguous language, and it was released to the public less than 3 months ago. That’s why you rely on experts, who have followed the negotiations and analyzed the text, to communicate to the public in a manner that they can understand (and that, I assume, is something think-tanks do). How is this a problem?

“If one issue is answered, quickly move on to the next one without acknowledging the clarification for the earlier issue.”

Charles Santiago issued 15 questions concerning the TPP to Mustapa, and even offered Mustapa to debate these on either FMT or MITI. I believe that Mustapa did not address any of these 15 questions, completely ignoring Charles Santiago’s valid request.

The assertion that responses have been given is clearly false to those who are looking for the responses. “If Saiful can’t confidently tell me, without an iota of doubt, that prices of medicines won’t increase after the TPPA, then he should shut his mouth,” said Charles Santiago. However, it is not clear to people out there, those reading the newspapers and trying to get sense of the situation from what the contenders are saying. That’s why this assertion is made: to make people believe that all concerns about the TPP have been answered, that all opposing parties have been proved wrong. It doesn’t matter if answers have actually been provided or not, but the perception of it by the people.

For more insights on strategies on how to blur a debate, I will invite the reader to read acclaimed book Merchants of Doubt, or watch the documentary based on the book.

“Use selective data and statistics, and discredit others’ studies using any means necessary.”

Economic expert Dr Jomo Kwame Sundaram, a former Assistant Secretary-General in the United Nations. Dr Jomo has analyzed in great detail the effects of the TPPA, even co-authoring the working paper “Trading Down: Unemployment, Inequality and Other Risks of the Trans-Pacific Partnership Agreement”. This study concluded that the TPP would lead to employment losses and higher inequality in all countries.

Joseph Stiglitz, recipient of the Nobel Prize in Economic Sciences, was addressing Najib when he wrote “the big winners are corporate interests in the US, the big losers are ordinary citizens, both in the US and elsewhere.”

When BantahTPPA states that the TPP serves the interests of the wealthiest, that is none of their conclusions, they are just quoting Joseph Stiglitz. When they state that the TPP will not improve economic welfare for Malaysians, it is none of their findings, they are just quoting Dr Jomo.

I believe we can trust both Dr Jomo and Joseph Stiglitz to be reliable sources of analysis. Or will Mr Wan Saiful imply that his capabilities in economy are better than theirs? What are Mr Wan Saiful’s own credentials to suggest that Dr Jomo and Joseph Stiglitz got it all wrong and he got it all right?

“The anti-liberalisation activists campaigned loud and long enough to create the impression that they represent public opinion.”

The irony is that people have never, ever, been asked if they want Malaysia to join the TPP. Negotiations have been secret, and the decision to join has been taken exclusively by BN’s MPs. People have been utterly left out of the picture, no say whatsoever.

Since Mr Wan Saiful implies that his stance represents the will of the people, then shouldn’t he have expressed his support to PAS’ proposal to have a public referendum, to ask Malaysians to cast their vote and decide to join the TPP or not?

 

From Be wary of anti-TPP ideologies:

“They usually start by saying the TPP was negotiated in secret and therefore it must be bad. It does not matter how many times you explain to them that it is normal practice to negotiate the final deal before making it public.”

It is not true that negotiations are normally kept secret until the deal has been reached, but quite the opposite. This practice was started by US negotiators with the TPP, after their attempt to create the Free Trade Area of the Americas collapsed, back in 2005, due to strong opposition from an informed public. And it’s not because this is about trade that it must be kept secret, since even in the WTO the negotiation texts can be seen by the public.

If there’s nothing people might fear from it, why should the deal be kept secret? No proper response can be given to this question, since there really is none. So, please stop justifying the secrecy of the deal.

 

From TPP good but more research needed, says research group:

“They have been opposing it for years, before reading the actual text of the agreement”

The text had been leaked in Wikileaks and people had to do analyzing this incomplete version. What can they do, if the text is kept secret? Wait until the last moment when it’s released, and then examine it all in the less than 3 months given to them, until the deal is signed? How is this reasonable?

In addition, the final text happened to be quite similar to what had been leaked… So what is this complaint all about? Why doesn’t Mr Wan Saiful focus on what the campaigners are saying, instead of accusing them of incompetence for extracting information from a leaked version of the text?

 

While criticizing anti-TPPA activists, Mr Wan Saiful asks the average person to go read the TPP text all by themselves. He seems to suggest that doing so, instead of relying on others for its interpretation, will undoubtedly make us support the TPP. He seems to be unaware that, after reading the text, you can actually oppose what it says. If you do so, evidently you got it all wrong…

In article Study TPPA text without prejudice, Ideas tells rakyat, he said:

“We urge the Malaysian public to carefully study this document and they certainly must not be influenced by the anti-globalisation activists and politicians who are trying to score cheap points.”

I wonder if Mr Wan Saiful himself has actually read the full 6000+ pages of the TPP; if he has all skills needed to make sense of all of it (knowledge of law, economics, intellectual property, environmental issues, human rights, labour, history of previous trade agreements and how they were implemented, among others); if he has read all the footnotes, and tried to anticipate all the loopholes; if he can understand all ambiguous language used in the text (such as “comparable market outcome” to establish the biologics medicine monopoly’s term, which nobody knows what it means, and it won’t be known until 6 years from now).

I wonder if he really expects Malaysians to read the TPP and make sense of it. The TPP is not a text the average person reads and understands; instead, you rely on what the experts say about it. And there is not way around it. If you read it and understand all its implications, you can be safely considered an expert. To imply that Malaysia has 30 million experts is an oxymoron.

Experts such as Dr Jomo and Joseph Stiglitz have expressed what’s wrong with the TPP. Are these what Mr Wan Saiful calls “anti-globalisation activists”? Is Charles Santiago, whose aim is to have Malaysians be able to afford their needed medicine, what Mr Wan Saiful calls “politicians who are trying to score cheap points”? These are all highly respectable people; when they express their concerns on the TPP, you do expect people to pay attention to these concerns, make them personal even.

To ask these experts for their opinion on the TPP, that is reasonable. To ask the average person to go read the full text and make sense of it, that is not.

on 28 Jan, 14:18

On fear mongering and the TPP

On fear mongering and the TPP
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During the days prior to the vote on the TPP in Parliament, there had been some accusations from TPP supporters to the against-TPP side, on creating fear mongering against TPP, such as: Fear of being sued not good enough reason to reject TPPA, says ministry sec-gen.

Let me please point out a few things that trade minister Mustapa said on his speech on day 1 of the debate and vote on the TPP in Parliament:

“Given the current scenario, the high income nation status aspired to be achieved by 2020, it seems blurry if the TPP is not signed” (source)

“We (federal government) want the country to be more progressive, but I am worried that the country will slip should it take the path of anti-foreign investment and anti-trade (by rejecting the trade pact)” (source)

This is what Klang MP Charles Santiago had expressed on why he opposes the TPP, among other reasons:

“Extending the patent rights of pharmaceutical companies would undermine competition from generic medicine. It would allow the patent owners to extend their monopolies and continue charging exorbitant prices for live-saving drugs.” (source)

“The ISDS allows for a foreign investor to sue governments in a tribunal if it deems a certain country is interfering with its profit margin. This essentially undermines democracy as it gives tycoons more power than those who have been elected by the people.” (source)

Does these sound like fear mongering to me? Yes, they do. Both of them. Yet, these fears are valid and perfectly justifiable. Indeed, both pro and against-TPP sides do fear things, and they are just expressing them. What the trade minister fears is that the country will lose out on economic terms if not signing to the TPP. What Charles Santiago fears is that, if signing to the TPP, the price of medicine will go up and people won’t be able to afford it anymore, and that democracy will be further undermined.

Are these fears driven by ideology? Absolutely. Everyone is driven by ideology, you like it or not. It’s incredibly naïve to accuse the other side of being driven by ideology but claim to be oneself driven by the truth. Those accusations can simply be dismissed as just a strategy to deviate attention away from the actual content of the issue, the actual meat.

So let’s discuss the meat. How valid are these fears? Actually, how valid are them from the rakyat’s perspective?

Charles Santiago is worried about the price of medicine. What happens if you have a relative with breast cancer or HIV? You might well know that your family must chip in to buy the medicine, since the Ministry of Health in Malaysia is already unable to subsidize all medicine for all Malaysians. What happens after signing into TPP? Will the price of medicine will go up? Most likely. There are facts and figures to justify this position, and there is no need to dismiss this—in fact, New Zealand’s Prime Minister has acknowledged that prices will go. As Charles Santiago remarked, how could prices in New Zealand go up yet not in Malaysia? It doesn’t make sense, right?

So, in my opinion, Charles Santiago’s fears justifiable from the rakyat’s point of view. We all might get sick, or have relatives or friends who’ll get sick, and we need affordable medicine.

What about Tok Pa’s fears on Malaysia not becoming a high-status income nation?

During 2015, the implementation of GST, continued withdrawals of subsidies, and falling ringgit have meant a steady increase in the cost of living for the average Malaysian, with the lower segments being hit the hardest. When Deputy International Trade and Industry Minister Datuk Ahmad Maslan suggested to Malaysians to work 2 jobs to make ends meet, many Malaysians actually replied: “We already are working 2 shifts, and yet we can’t make ends meet!”.

The idea of high-income nation brings to me a notion of Europe: people being economically well off, with enough money for leisure spending, like going to a concert, consuming culture, etc. Yet, given the current economic situation for the average Malaysia, this seems well far off. Indeed, people must economize, what we afforded last year we can’t afford anymore, so the quality of living has only decreased lately, not increased. If the GDP has increased, then why are Malaysians worse off? Why are they not sharing the benefits? If Malaysians are not going to benefit from the extra economic output, then what is it in it for them? Indeed, Jomo Kwame Sundaram has indicated that, due to the TPP, unemployment and inequality may actually rise, making the average Malaysian even worse off.

So, seen in this context, to tell your average Malaysian, who is fighting each month to make ends meet, having to work 2 or even 3 jobs, to support the TPP so that Malaysia can become a high-status income nation seems to me not justifiable, and disconnected from reality.

on 27 Jan, 18:18

Response to Mustapa Mohamed’s speech in Parliament, Part 2

Response to Mustapa Mohamed’s speech in Parliament, Part 2
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This is TPPDebate.org’s 2nd-part response to International Trade and Industry Minister Datuk Seri Mustapa Mohamed’s speech yesterday, on day 1 of the debate and vote on the TPPA in Parliament.

 

What Mustapa said (source):

Malaysia risks losing foreign investment and its competitiveness should it reject the TPP. “We (federal government) want the country to be more progressive, but I am worried that the country will slip should it take the path of anti-foreign investment and anti-trade (by rejecting the trade pact).”

Our response:

Malaysia did not sign the Malaysia-US FTA in 2007. Back then, PM Abdullah Badawi chose not to sign, because the cabinet decided it was not on Malaysia’s national interest. What happened after that? Nothing happened. Malaysia kept exporting as it has been until today, and kept getting foreign direct investment.

So if Malaysia doesn’t sign the TPPA, what happens? We continue as today.

 

What Mustapa said (source):

Mustapa said Malaysia now had the choice to be open or stay closed.

Our response:

So, not signing into the TPP will suddenly make Malaysia become North Korea? Malaysia is already a member of the WTO and will continue doing business, as usual, as it is doing today.

 

What Mustapa said (source):

He added that the ISDS would also protect local investors overseas. “ISDS is meant to protect local investors in countries that have signed trade agreements with Malaysia.”

Our response:

This is an extremely asymmetrical concession. How many Malaysian companies are investing abroad? You have Petronas, Sime Darby Bhd and Khazanah Nasional Bhd. Which others? How many US companies are operating in Malaysia? Is there space in this page to list all of them down?

In addition, Malaysian investors can already trust to have a fair trial at domestic courts in developed countries, namely USA, Canada, Australia, New Zealand, Japan, and Singapore. Brunei and Vietnam are in ASEAN, so investors already have extra protection under the ASEAN free trade agreement. Malaysia already has a treaty with Chile which protects Malaysian investors in Chile. That leaves Mexico and Peru. Is it worth all the trouble of ISDS just to have Malaysian investors protected in Mexico and Peru? How much investment from Malaysia will there be in Mexico and Peru? How does it compare with the amount of US investment in Malaysia?

 

What Mustapa said (source):

“ISDS is nothing new in Malaysia. Until today, we have signed 74 bilateral trade agreements and eight free trade agreements that contain ISDS.

Our response:

Yes, but none of those FTAs are with the United States.

When you look at statistics from ISDS cases, the American investors are among the most litigious in the world. According to Sanya Reid Smith, American companies sue twice as often as next the most litigious country’s investors. And when they sue, they have a 98% chance of a broad interpretation of their rights. So when they sue you are almost always going to lose.

Giving these same rights to the Americans is a big deal, a big extra exposure of legal liability.

 

What Mustapa said (source):

Mustapa said the investor-state dispute settlement (ISDS) does not restrict the Government’s rights to supervise matters related to public health, safety and environment.

Our response:

One of the ways that“fairly and equitably” treatment for investors can be interpreted, is that the government cannot change the laws and regulations, or have new laws and regulations, in a way that harms the foreign investor from the other TPP countries.

Because of NAFTA, which has similar provisions to TPP, Canada has become the most-sued country under free trade tribunals in the world. About 63 per cent of the claims against Canada involved challenges to environmental protection or resource management programs that allegedly interfere with the profits of foreign investors. The government has lost some of these environmental challenges and has been forced to overturn legislation protecting the environment.

If it happens to Canada, why will it not happen in Malaysia?

In 2007, Italian investors sued South Africa in relation to its Black Economic Empowerment Act that aims to redress some of the injustices of the apartheid regime. As a consequence, the South Africa Government has moved to terminate its investment treaties that include ISDS because its review found that they “pose risks and limitations on the ability of the government to pursue its constitutional-based transformation agenda” and “growing risks to policymaking in the public interest”.

Why is Malaysia going in the opposite direction?

What amount of money can be requested in awards under ISDS? There is no limit in the TPP. In 2014, the Russian Government lost one case and had to pay the foreign investor 50 billion USD. They had 180 days to find the money.

Does the Malaysia Government have a spare US$50billion to spend like this?

 

What Mustapa said (source):

Explaining further, Mustapa said Malaysia would also lose out on abundant business and investment opportunities if the country choses to opt out of the TPPA.

Our response:

Brazil has no investment treaty in force, and yet they are the 5th largest recipient of foreign direct investment in the world. This is because foreign investment comes if you have a big population, so companies can sell their products; if you have natural resources, such as oil, gas, minerals; if you have human capital, people who can work in the factories.

These are what the economists agree are the main reasons for getting foreign investment. It’s not whether you sign this treaty or not.

 

What Mustapa said (source):

Malaysia must not lose out while other countries benefit from the Trans-Pacific Partnership Agreement (TPPA).

50 years ago, Singapore was poorer than Malaya but now their per capita income was five times that of Malaysia. “Look at Singapore that does not have oil reserves or even palm oil but it has five times higher income per capita than us because of its open system policy.”

Our response:

Singapore is not richer than Malaysia just because of its open system policy. Among other things, Singapore established an education system which created a world-class workforce to fulfill their ambitious economic goals.

Interestingly, under ISDS provisions, Malaysia risks having to compensate foreign investors with multimillion awards. This money to pay them will come from taxpayers. Hence, that money will not be used for government spending, such as education. That happened to the Philippine government, which spent US$58 million defending two cases against a German investor; this money could have paid the salaries of 12,500 teachers for one year.

 

What Mustapa said (source):

“This could result in Malaysia gradually being left behind and the development gap between all three countries [Singapore, Vietnam, Malaysia] will widen as the TPPA will bring many benefits to countries participating in it especially in terms of more market access and state-of-the art technology.”

Our response:

A free trade agreement alone does not mean that the investor will bring along state-of-the-art technology. Indeed, even though Vietnam already has a free trade agreement with the US, signed in 2000. Back then, the US was being heralded as “a strategic investor” who would become “the top investor” in Vietnam.

However, so far the US is only the seventh largest foreign investor in Vietnam, behind many ASEAN countries. They have been unable to attract high tech, because of the difficulties finding skilled workers in the country. In addition to unskilled labour, US businesses cite the lack of policy transparency and corruption for not investing more in the country.

 

What Mustapa said (source):

He said operation costs for SMEs would also be less due to the decreased import duty, which would lower the cost of importing raw goods.

Our response:

Similarly, SMEs from all other countries will be able to access Malaysia’s raw goods with decreased import duty. Currently, an SME in the USA is more competitive than a similar SME in Malaysia. If they are both able to access Malaysia’s raw materials at the same price, then the Malaysian SME is at a disadvantage and will not be able to compete in the domestic market, let alone overseas.

on 27 Jan, 11:35

Response to Mustapa Mohamed’s speech in Parliament, Part 1

Response to Mustapa Mohamed’s speech in Parliament, Part 1
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This is TPPDebate.org’s response to International Trade and Industry Minister Datuk Seri Mustapa Mohamed’s speech yesterday, on day 1 of the debate and vote on the TPPA in Parliament.

 

What mustapa said (source):

Mustapa said Malaysia decided to join TPPA as the nation did not have any free trade agreement (FTA) with the United States, Canada, Mexico and Peru, adding that TPPA would pave the way for local companies to penetrate the huge US market.

Our response:

How much tariffs from each of these four countries (US, Canada, Mexico and Peru) will be reduced by signing into TPP? This must be compared against the baseline today: all the 12 TPP countries are in the World Trade Organization (WTO) already.

When doing trade with Malaysia, WTO members are not allowed to raise their tariffs above the level that they are bound at at the WTO, even on Malaysia’s products, even if Malaysia doesn’t sign the TPP. They are locked in. According to legal advisor Sanya Reid Smith from the Third World Network, the average locked tariff rate is just 3% for the US and 6% for Canada, they are pretty low already, so there is not much difference going to 0% in the TPP. That leaves just Mexico and Peru. If it is really such an important thing to get Malaysian exports into Mexico and Peru, then why not just having a free trade agreement with Mexico and Peru?

 

What Mustapa said (source):

“Malaysia is the only country among the 12 member countries involved in the treaty to debate it in Parliament,” he added.

Our response:

Possibly true, however since UMNO’s MPs are the majority and they are voting in bloc, as Lembah Pantai MP Nurul Izzah Anwar has suggested, then how is this debate different from a PR campaign?

 

What Mustapa said (source):

Similarly, Mustapa said the import tax on textile products will be reduced by 70% and it will give a 30% boost to exports of Malaysian textiles.

Our response:

The textile industry in Malaysia will not benefit, actually quite the opposite will happen, because of the Yarn Forward Rule. This rule forces the textile industries in TPP countries to buy yarn from within the TPP. The only country within the TPP with an economy of scale big enough as to provide the yarn is the US. However, US yarn is more expensive than Chinese yarn. As such, the end price in the USA of the zero-tariff Malaysian product is likely to be higher than the taxed products from competing non-TPP countries such as China, making Malaysia actually lose market in the textiles exports to the US.

Even the Vietnamese Chamber of Commerce and Industry has acknowledged that, with this rule, Vietnam gets no benefits from the TPPA. If Vietnam, with its lower costs in producing textiles than Malaysia, will not benefit, then how shall Malaysia?

 

What Mustapa said (source):

He said the obligation on labour under TPPA is to increase the standard of the current labour force like having the freedom to form workers union, collective agreements, minimum wage, safety and health aspects as well as abolishing forced and child labour.

Our response:

These labour obligations are enforceable only between Malaysia and the US, by having each country sue each other. The Australian Government cannot sue Malaysia because of Malaysia’s violation of labour rights, only the US Government can sue. This is because these provisions are not in the labour chapter itself, but in the side letter, the Labour Consistency Plan, signed between Malaysia and the US.

Why is this a problem? According to Sanya Reid Smith, the US Government doesn’t sue about these labour rights. It has sued only once, Guatemala, after intense pressure from their trade unions. There is US-Colombia free trade agreement. Trade unionists get murdered in Colombia quite regularly, yet the US hasn’t sued Colombia yet. And only their government can sue; their trade unions, citizens, human rights activists cannot sue. If the US Government chooses not to sue, there is nothing we can do to enforce it.

 

What Mustapa said (source):

International Trade and Industry Minister Datuk Seri Mustapa Mohamed said Malaysia could exit TPPA without having to pay any penalty as stipulated in Chapter 30 of the proposed agreement.

“If the agreement is detrimental to the country, we can always scram after giving six months’ notice,” he said during a briefing on the TPPA’s costs and benefits here yesterday.

Our response:

What is interesting about this statement, is the contradiction his own statement on why Malaysia must sign in first place. Mustapa had said that by staying in the TPPA, Malaysia will send the right signal that the country is open, business-friendly, worker-friendly and environment-friendly. “If we stay out, we are sending the opposite signal,” he said.

So, how does this compare with actually pulling out? Just think about it: ‘I’m not friending you anymore, right? I’m withdrawing.’ Politically, it might look a bit unfriendly, right? So far, no country has withdrawn from a free trade agreement with the US, once it’s taken effect. We believe this is not by chance.

 

What Mustapa said (source):

“There are pros and cons. Compared to the time when the 12-page Pangkor Treaty was signed in 1874 where the nation was sold out (to British imperialism), we are smarter now.

Our response:

This comparison is pointless, we are living different times, and the world hegemonies (Britain back then, US nowadays) impose their might in different ways than in 1874.

Indeed, Mustapa has recently said that the nation’s sovereignty will not be harmed with the TPPA as the people are getting smarter and knowledgeable. This looks like dumbing down the whole issue on how Malaysia could potentially lose its sovereignty, as in lose its ability to take decisions to safeguard the interests of the country, if contested under the ISDS. Certainly, “the people are getting smarter and knowledgeable” is not a proper response to this very serious issue.

The irony of it, is that this “explanation” was given by Tok Pa one day after TransCanada Corp launched US$15-billion lawsuit against the U.S. government for rejecting the Keystone XL pipeline. I think you don’t get much more “smarter and knowledgeable” than the US government, yet they got sued. We wonder, is Tok Pa implying that people in Malaysia are smarter than people in the US? That this shall not happen in Malaysia? That even the possibility of it ever happening is null?

 

On ISDS, what has been left unspoken:

Quite importantly to ask is, have all local governments been part of the decision to sign into TPP?

As Sanya Reid Smith explains, ISDS will bind across local, state, federal governments. Say the PJ Government doesn’t comply with the agreement, and they ban something that is not allowed to be banned. The Malaysian national or federal government gets sued by the US company under ISDS. Then the national government defends the case, and let’s say they lose, say 100 million USD. Then, say the Malaysian federal government pays the money, and they turn around and say to PJ: ‘It was your fault, so you pay me the money back.’

Can the federal government get the money back from the PJ local government, or in another case, from the Penang state government? If PJ or Penang refused to pay back, the federal government could get the money from different means, such as withholding the allotments, or withholding the discretionary spending on highways that the federal government was going to give the state, thus forcing them to pay back.

If that’s the case, then the federal government on the 4th of February will be signing on behalf of all the state governments and all the local governments, including PJ and Penang, and binding them in those chapters and making them liable because the federal government can, and will, get the money back from them.

Have all the subnational governments been informed? Have they all been consulted? Did they realize? Have they consented? Have they set aside in their budgets enough money to pay the legal fees?

 

What Mustapa said (source):

He said Malaysia had been given the green light to continue using the halal certification system acknowledged by the Malay­sian Islamic Development Depart­ment.

Our response:

Here the devil is in the details. As BantahTPPA has stated, what is included in the TPP is an exception for food ‘in accordance with Islamic law’, however it is not clear which ‘Islamic law’ to comply to. Malaysia’s version of Islamic law is more strict than US’, eg: pork meat cannot be transported in the same vehicle together with halal food. As such, Malaysia may have to lower its standards of halal food.

In addition, Malaysia currently has halal systems for medicines, cosmetics, shampoo, and there is no exception for these on the TPP.

 

What Mustapa said (source):

Mustapa said it will also increase cooperation in customs and the development of small and medium industries.

Our response:

The Malaysian Small and Medium Enterprises Association has stated that only 19% of Malaysian SMEs are export-oriented and the rest is still focused on producing goods and services for the domestic market. As such, they expect 30% of SMEs to go bust.

We assume they should know what they say, right?

 

on 24 Jan, 19:20

TPP Miscellaneous: The Yarn Forward Rule

TPP Miscellaneous: The Yarn Forward Rule
Post

In this article, we explain the Yarn Forward Rule as a case of how in certain cases, the benefits of zero tariffs on exports provided by the TPP are negated because of other imposed rules in certain industries. The Yarn Forward Rule is a rule that forces the textile industries in TPP countries to buy yarn from within the TPP. The rule favours the US yarn industry, and limits TPP countries’ ability to buy cheap yarn (for instance, from China) to make their textiles. As such, the end price in the USA of the zero-tariff Malaysian product is likely to be higher than the taxed products from competing non-TPP countries such as China, which will restrict the expected increase in Malaysian textile and clothing exports to the USA under the TPP.

This series is brought to you by TPPDebate.org based on a recent NGO briefing on the Trans-Pacific Partnership (TPP) in Malaysia by Ms Sanya Reid Smith, an expert on Trade and Investment Rules. She has been monitoring the Trans-Pacific Partnership Agreement (TPPA) since 2011, and is also the resource expert for Bantah TPPA Malaysia. The entire talk is uploaded on YouTube in a seven part series and can be accessed here; this article is drawn mainly from Part 6 of the talk. The index of the series is attached at the end of the article.

Video starts at 3:53

TPP is only useful for products with high tariffs, e.g. clothing

We are supposed to increase Malaysian exports to other TPP countries, that’s the purpose of a free trade agreement, right? To increase our exports. Remember that all the 12 TPP countries are in the World Trade Organization, which already sets a maximum for their tariffs. It locks the tariffs in. So for the US, its tariffs on imports from Malaysia etc are already locked, on average, at 3%. They cannot go above that. In the TPP the 3% will go to zero, but to get to zero you need to prove that this is made in Malaysia, and the cost of doing that goes back up to 5%.

So, the TPP is only really useful for the tariff peaks, the few things that have high tariffs left in the US, like clothing. But for clothing, we have the ‘yarn forward rule’. For clothing, the US says that, to prove this shirt is made in Malaysia, the thread onwards, the benang, from the benang onwards, must be from a TPP country. And this is, basically, to artificially support their benang industry, because it’s expensive, it’s dying, and nobody wants to buy their yarn.

TPP countries have to buy costlier US thread

In Malaysia, like most countries, we import the yarn from China. It’s cheaper. So today, the textile and clothing factories in Malaysia import the thread, the benang, from China, sew it here, send it to the US, with some high tariff, I don’t know what it is, 20% or something. In the TPP, to get the tariff to zero, you have to buy the benang, the thread, from some TPP country. But, for this benang industry, you have to have a big population, to have economies of scale: cotton, rayon, polyester, nylon, silk… Basically, the only country in the TPP with a big enough population for a yarn industry is the US.

So, their rule says: you must buy the US thread, which is more expensive, import it to Malaysia, sew it here into a shirt, send it back to the US, to get the zero tariff. But, if you do that, you are more expensive than the Chinese shirt made in China with Chinese yarn, even though tariffs have to be paid on the Chinese shirt entering the US. They start with the thread that is cheaper, so they are cheaper than the Malaysian one. So even the Vietnamese Chamber of Commerce and Industry, like the Federation of Malaysian Manufacturers (FMM) in Vietnam, said that with this rule, the yarn forward rule, that you must use the benang from America, they get nothing from the TPP.

As a result: yarn exports will not increase

Because you’re supposed to be able to export cheap textiles and clothing, but if you start with the more expensive US thread, you cannot increase your exports anyway. So Vietnam is a cheaper textile manufacturer than Malaysia, right? Lower costs of production, lower wages. So if they can’t make it, how can Malaysia? You also cannot gain from that sector. So because of rules like that, even the PricewaterhouseCoopers and the United Nations don’t expect Malaysia’s exports to increase by much in the TPP.

Everybody is already in the WTO, and the US is already locked at the WTO at an average of three percent tariffs, the maximum the US can impose. So even if Malaysia doesn’t join the TPP, the US cannot raise its tariffs above 3 percent on average on Malaysian products.

 


Index of the Series

This series contains 20 articles on the TPP, and can be read in any order:

Transcriptions are kept chiefly ad verbatim, with some minor edits for readability. The text has also been checked by Ms Smith for accuracy.

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