This article explains how the TPPA can affect member countries’ ability to govern themselves. It focuses on the Malaysian perspective, and looks at why developing countries like Malaysia need to update laws constantly for new developments in current affairs, and how the TPPA might restrict that. There have been cases of the US interfering with law making in countries such as Peru and Australia.

It is recommended that this article be read in conjunction with other articles such as the ratification and certification processes after signing, the investment chapter with ISDS, and TPP’s impact on taxpayers and citizens.

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 Parts 1, 2 and 4 of the talk. The index of the series is attached at the end of the article.

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Governments restricted in ability to make laws that harm foreign investmentors

The TPP investment chapter protects the rights of investors from other TPP countries, eg “to be treated fairly and equitably”. What’s the problem, right? We must treat everybody fairly and equitably. But, recently, this has become widely interpreted by the international tribunals who decide the case. One of the ways that it 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.

Eg because, when Philip Morris the tobacco company came to Malaysia 45 years ago, he expected constant laws and regulations until he leaves Malaysia in 99 years’ time. Never mind that along the way they found out that smoking kills people, and you want to ban tobacco advertising, and you want to have health warning labels, and you want to have a tobacco tax. Too bad. Unfair to the foreign investor. He must have a constant regulatory environment, otherwise it’s unfair to him.

If that is the case, then parliament close shop lah, what’s the point? The parliament’s job is to make laws, change laws, amend laws – often in response to new circumstances.

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We need to update laws due to new circumstances

I don’t know if you remember the plastic in baby bottles – the BPA in baby bottles right? We banned the BPA in baby bottles. Ten years ago we didn’t know. We found that it was a newly dangerous chemical and it was banned. Banning is a problem under this fair and equitable treatment obligation. It’s been a problem in many of the cases we can look at, when governments ban a dangerous chemical and they get in trouble.

Or you have a financial crisis, so you have to re-regulate, tighten the regulations on the banks so you don’t have another one, and each time the crisis is for a different reason, right? You have to close a new loophole. And the same for climate change. Now we know about climate change, we want to restrict the emissions of the factories, so they don’t put out too much carbon dioxide.

Developing countries in particular change their regulations more

So these kinds of reasons for changing – especially in developing countries, often we need to change our laws more, because we might not yet have all the laws. Does Malaysia have a noise pollution law, that says no construction in a residential area after midnight? If we don’t have yet, then we need to introduce. As we are developing, we need to change our laws and regulations. As the economy changes, society changes, the ability of the government to regulate changes, then laws need to be changed.

So usually developing countries need to change their laws more than the developed countries. So this fair and equitable treatment standstill provision can be even more of a problem for developing countries if they cannot change their laws and regulations. You could even think about making anti-corruption laws tougher, raising the minimum wage… we’ll come to those cases.

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(This is a continuation of what has been discussed in another article on what happens after we sign the TPP. Within the certification process that comes after ratification, the US government can make further demands on TPP member countries, as part of their certification process. The letter of certification comes after the US is satisfied with the implementing laws in these countries, thus setting the TPP in motion.)

Peru: US wrote their environmental law

What they do for some countries is, they write your implementing law. This happened to Peru. Their whole environmental law was written by the US government. The US government gave it to the Peru parliament, and said, ‘you pass this with no changes. Cannot change one letter, otherwise the US free trade agreement won’t come into force.’ So the Peru parliament is a rubber stamp for the US government, and the Peru parliament said ‘yes sir America, we passed it, with no changes, please let it come into force.’ So it did.

So with this certification process for the TPP, what is the role of the Malaysian parliament? The Malaysian parliament is supposed to do the least worst implementation of this problematic agreement, but the US Government can write the implementing law in the way that favours the US, add a few extra things that are good for the US, and the Malaysian Parliament may have to say ‘Yes sir, I’ll pass it with no changes.’

Australia: Forced to narrow its exception to copyright

This doesn’t just happen to developing countries. Even Australia went through this. In the Australia-US free trade agreement, the Australian Government had to give an extra twenty years in copyright, like Malaysia in the TPP. They didn’t want to. They are a net importer of intellectual property. They wanted affordable textbooks for their students, but they had to give a copyright period of ‘life plus 70 years’. So they said ‘okay, we’ll have a broad exception to copyright for our students, and fair use in this law.’ So that’s what the Australian Parliament passed as the implementing law. It had a big exception to copyright.

The US government looked at what came out of the Australian Parliament, they said, ‘That is unacceptable. You failed. Go back and do it again. Narrow the exception for copyright, otherwise we won’t let the FTA come into force.’ So the Australian Parliament had to have an emergency overnight sitting with three hours’ notice, passed a narrow exception for copyright that cannot be used and has not been changed, and then the US government said, ‘Ok now it is acceptable. Now we will let it come into force.’ So this even happens to the developed countries.

Index of the Series

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

• Introduction
• TPP Basics
  • Before signing – the negotiation process
  • After signing – ratification and certification process
  • What-ifs – if we do not sign, or violate the agreement, or withdraw
  • Investment Chapter/Investor State Dispute Settlement (ISDS) – what it means for the country
  • Export Taxes on Goods – may restrict Malaysia’s movement up value chain
  • Liberalisation of services – is binding across all levels of government (federal, state and local)
• TPP Stakeholders
  • Taxpayers and citizens – who will pay for lawsuits against Malaysia
  • Business owners and investors – local businesses and Malaysian investments overseas
  • Students – intellectual property rights in education
  • Patients – intellectual property rights in medicine
  • Farmers – agriculture and food security
• TPP Impacts
  • On sovereignty – regulation, colonisation, ISDS (you are here)
  • On governance – different levels of government (federal, state and local), corruption, separation of power
  • On economy – trade balance, GDP
  • On environment – environmental regulations and the environment chapter
  • On society – human rights, labour, privacy
• TPP Miscellaneous Topics
  • Geopolitics – the link with China, and TPPA as a geopolitical tool of the US
  • Corporate dominance in the US – corporate influence in US FTAs, cleared advisors within the TPPA
  • Yarn Forward Rule – How zero tariffs may still mean less exports

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