TPPA: Its benefits and challenges

IMPORTANT INITIATIVE: Country’s GDP set to improve, while its goods and services will reach a wider market, says Miti

 THE Trans-Pacific Partnership Agreement (TPPA), an initiative to establish a free trade agreement (FTA) between 12 countries - Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam - will see a market of 800 million people and combined gross domestic product (GDP) of US$27.5 trillion (RM89.1 trillion).

 The agreement covers new elements such as competition, labour, environment, government procurement and intellectual property rights. The International Trade and Industry Ministry (Miti) has put together a Q&A (question and answer) to address public concerns and fears about the ongoing talks.

Here are the excerpts from part one:

Question: What is the rationale of joining the TPPA negotiations?

 Answer: The government views the TPPA as an important initiative as Malaysia seeks to expand market access opportunities, enhance its competitive advantage and build investor confidence. The comprehensive study conducted by the United Nations Development Programme (UNDP) also identified several major economic benefits to Malaysia, including welfare gains of 1.46 per cent and higher wages for skilled and unskilled labour by 2020, in addition to improved GDP growth due to greater market access among member countries.

 The successful conclusion of the TPPA will form a huge market of 800 million people with a combined GDP of US$27.5 trillion. This far surpasses Malaysia's limited domestic market of 29.5 million people and a GDP of US$300 billion.

According to a simulation study done by the Peterson Institute of Economics in June last year, by 2025, Malaysia will benefit with an increase in gross national income by RM26.3 billion and increase in exports of RM41.7 billion.

Admittedly, the government is aware of the challenges and controversies surrounding the TPPA because unlike other FTAs, it is comprehensive and covers more areas of interest, which would naturally invite more public opinion and debate. The government appreciates all views expressed on the TPPA and will continue to engage the stakeholders and NGOs for inputs and feedback.

Question: What are the benefits of TPPA for Malaysia?

Answer: Consultations with various stakeholders prior to joining TPPA negotiations have revealed an increasing request from Malaysian companies for more open markets and trade facilitative measures. There are increasing numbers of Malaysian companies becoming global investors and they require a level of predictability that can be guaranteed effectively through binding agreements like FTAs.

 Concurrently, there is also interest from foreign companies from non-TPPA countries that are exploring Malaysia as a base for their operations as the hope to enjoy the benefits of the TPPA. The combination of greater market access for Malaysian products and services under the TPPA and the continued inflow of foreign investments will create a powerful catalyst in driving Malaysia's economic transformation agenda.

With TPPA, Malaysia will become an integral part of the greater economic integration within the Asia- Pacific region. It will also significantly enhance Malaysia's engagement with important trading partners such as the US, Canada, Mexico and Peru. As a member of TPPA, Malaysia will also be able to increase it participation in the regional supply and value chains and facilitate access for Malaysian products and services into bigger markets.

Question: What are the challenges of the TPPA for Malaysia?

Answer:  The government is aware of the many benefits and the challenges involved. For instance, government procurement is one of the new elements in TPP, which was never part of the FTAs that Malaysia has signed. This is one strategic area the government is negotiating cautiously, after taking into consideration feedback from stakeholders, particularly on the concern of safeguarding the interest of local enterprises and the Bumiputera commercial and industrial community.

Intellectual Property Rights (IPR) is another difficult area. One of the main concerns on IPR revolves around access to affordable medi-cine and healthcare as well as longer protection term which might delay manufacturing of generic drugs.

Malaysian negotiators will continue to negotiate an outcome that will give Malaysians access to affordable medicine and healthcare.

Question: What will happen if Malaysia does not join the TPPA?

Answer: The TPPA offers Malaysia an opportunity to be part of a consumer market with 800 million people. Abandoning the TPPA negotiations now would mean allowing other countries to set the terms of agreement without considering Malaysia's interests and concerns. Acceding to the TPPA later would result in Malaysia having to accept the rules, disciplines, terms and conditions decided by others.

By not joining the TPPA, Malaysia would be at a disadvantage in terms of seeking bigger and better market access for its products and services. The impact of that disadvantage will be even more significant should countries like China, Indonesia and other competitors decide to join later.

Once realised, the TPPA will result in a huge consumer market for Malaysian goods and services. Market access to 800 million people is not an opportunity we can afford to miss, especially since we are an open economy highly dependent on international trade. In an increasingly competitive global environment, our absence will make Malaysia less attractive as an investment destination, compared with those that are TPPA members. As investors avoid Malaysia, this could result in fewer opportunities for job creation.

Question: Who is in charge of the TPPA negotiations?

Answer: The cabinet has mandated Miti to coordinate Malaysia's participation in the TPPA negotiations. Miti acts as the chief negotiator but other ministries and agencies will lead the working groups for areas under their responsibility. (See Table 1).

With the mandate from the cabinet, the lead ministries and agencies involved are focused on safeguarding Malaysia's best interest in the ongoing negotiations. Before every negotiating round, the cabinet is briefed on all issues, and for the necessary mandate to be given to all negotiators.

Question: Was there a lack of consultation in forming Malaysia's position in TPPA?

Answer: The government admits more consultations could have been carried out. In this regard, Miti has made many statements assuring the public that consultations have been carried out by negotiators in their respective fields.

It had also organised a TPPA open day on August 1 to update the public and the media on issues surrounding TPPA, to clear misconceptions about it and to hear the public's concerns about it.

Miti welcomes the establishment of a bipartisan caucus in Parliament. Its minister had met and briefed the caucus on developments and issues concerning the matter. The caucus provided constructive inputs to the government.

It must be noted that inputs and feedback from industry associations, interest groups and business chambers play a key role in the formation of Malaysia's negotiating positions. To illustrate a point, Malaysia's position in the negotiations on government procurement, led by the Finance Ministry, strongly reflects the concerns of stakeholders, the Bumiputera business community and state-owned enterprises (SOEs) as well as that the small and medium enterprises (SMEs).

 Malaysia has also maintained the rights of all states on matters related to land and water. On SOEs, Malaysia's position is determined by the Finance Ministry and Khazanah Nasional Bhd.

The government will continue to engage all stakeholders. In addition to the open day, Miti met the Coalition to Act Against the TPPA Malaysia on August 6 and discussed ways to enhance engagement with stakeholders. Miti welcomes feedback and opinion from all parties regarding the TPPA.

Question: Why the secrecy in TPPA negotiations?

Answer: While the negotiating texts have never been made public as negotiations are ongoing, the government has and will continue to share its negotiating position with relevant stakeholders during the consultation sessions.

A level of confidentiality is required for two main reasons: (a) regulations and the evolving process of negotiations and rules surrounding TPPA oblige negotiators to maintain confidentiality of the negotiating texts and (b) negotiators advancing the interests of Malaysia, strategically do not want to publically disclose their bargaining positions to ensure the best outcome during the negotiations.

Mindful of the public feedback, the Miti minister will put this issue on the agenda of the forthcoming TPP Ministerial Meeting in Brunei.

Question: Why rush TPPA by October this year?

Answer: As in all negotiations, there is a need to work towards a target date to conclude negotiations. It should be noted that the Trans Pacific Partnership Leaders Statement issued on November 12 2011, in Honolulu, clearly called on the negotiating teams to continue talks with other Asia-Pacific partners that have expressed interest in joining the TPPA in order to facilitate their future participation. TPPA leaders have set an October target for substantial conclusion of the negotiations.

However, this is not a definitive deadline for the conclusion of the TPPA as the parties involved are still negotiating on a number of sensitive issues. It is in Malaysia's best interest that TPPA is concluded in a manner that benefits the people.

Question: Why is China not in the TPPA?

Answer: The position of all TPPA members is for this agreement to be a building block for the Free Trade Agreement of the Asia Pacific (FTAAP), which will encompass all the Asia-Pacific Economic Cooperation (Apec) economies, of which China is also a member. Membership in TPPA is voluntary. Every Apec member, including China, is free to decide when to join TPPA.

China is a very important trading partner to Malaysia. As such, Malaysia certainly welcomes China into the TPPA.

Read more: TPPA: Its benefits and challenges at Btimes