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

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?

 

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