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How will the Trans-Pacific Partnership Agreement (TPPA) affect Malaysia?

Updated 19 Oct 2018 – By Loanstreet


TPPA is a proposed trade agreement of 12 countries including the United States and Malaysia and was confirmed on 5 October 2015 after five years of negotiations. The TPPA has 29 chapters which include goods market access, textiles, apparel, intellectual property rights, government procurement, dispute settlement and exceptions, to name a few.

However, as recently as January 23 2017, a shock move by the United States President Donald Trump caused the TPPA to be renamed as the CPTPP. We take a look at the original Agreement throughout these years while we await the final signing of the CPTPP.

The goals of the TPP agreement

To promote economic growth; improve innovation, productivity and competitiveness; increase living standards and diminish poverty; and enhance transparency, good governance, and enhanced labor and environment protections.

The history of the TPP agreement

The table below shows the history of TPP agreement

The history of the TPP agreement

What happens now?

The TPP agreement was a landmark 21st century agreement that aimed to set a new standard for global trade while taking up next-generation issues. However, when the United States President Donald Trump signed a Presidential Memorandum to withdraw the USA from the TPP on January 23 2017, the Agreement was unable to enter into force. This was because the USA accounts for 60% of the combined GDP of the 12 TPP members.

As such, the Agreement was renamed as the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) on November 9 and 10 2017 in Da Nang, Vietnam. The 11 members had agreed on the text of the Agreement, where the CPTPP will incorporate the original TPP Agreement with suspension of a limited number of provisions, while maintaining the high standard and comprehensive nature of the Agreement.

The signing of the CPTPP is expected to take place in March of this year after a deal was reached on Tuesday (January 23 2018) after two days of talks in Tokyo.

What are the arguments of supporters?

  1. Unprecedented market

    TPPA- What are the arguments of supporters?

    Theoretically, with the TPPA, Malaysia is able to gain access to a large duty-free market. According to The Peterson Institute of Economics, by joining the TPP, Malaysia can gain over US$41.7 billion increase in exports and US$26.3 billion in income gains by 2025.

    Do not misunderstand that only 12 countries are involved in this partnership. There are countries which might be potential TPP members in future including South Korea, Taiwan, the Philippines, Colombia, Thailand, Laos, Cambodia, Bangladesh and India as well as the most notable country, China. Recently, Indonesia’s President Joko Widodo declared interest to join the TPP.

  2. Fair global trading environment

    There are many rising Malaysian companies that are demanding for doors to open in many markets and trade facilitation measures and predictable secure like legal constraints in a free trade agreement. Thus, an increasing number of foreign companies are exploring Malaysia as a potential base for regional operations free trade with the TPP member markets. Thus, it spurs foreign investment and helps Malaysia to ‘secure’ the third largest recipient of Foreign Direct Investment (FDI) in ASEAN.

    Malaysia’s second and seventh largest export markets are China and India respectively. The worst case scenario for Malaysia is that China and India decide to participate in TPP because it will definitely undermine the attractiveness of Malaysia as an investment location.

What are the arguments of opponents?

It is undeniable that Malaysia will be benefited from TPP agreement since it provides a wider economic opportunity through trade liberalization and the removal of trade barriers. Of course, there are costs involved behind the beauty. Because of these costs, here anti-TPP protests are. Let’s see what opponents think about TPP agreement.

  1. The secrecy of the negotiations

    Critics of the agreement are mostly against the secrecy involved in the negotiations. Moreover, this is under the sentiments that proposed clauses are viewed as favoring perceived corporate profit instead of public interest and more likely to remove measures designed to protect local industries. Its secrecy has made the negotiating text out of bounds for the Rakyat and even lawmakers of all TPP member countries including our representatives in Parliament.

    Opponents claimed that once signing the agreement, Malaysia has to change the existing policies. It affects different areas including government procurement, state-owned entities (SOE), intellectual rights, labor practices, health and environment policies and even Bumiputra rights. All of these have made the public increasingly concern on the agreement.

  2. Strict intellectual property laws

    Though the TPP’s text is still confidential, a few chapters of the discussion regarding the TPP agreement have been leaked to the public. Based on publicly available TPPA texts, Intellectual Property (IP) rules increases patent and data protections for pharmaceutical companies. It results in high prices for medicines and for longer periods, leading to the critical situation of many because they cannot afford the increasing costs of medicine for serious illnesses like AIDS and cancer.
    Moreover, you might not be able to access information freely on copyrighted material such as movies, music, research papers and may have to pay for it as long as that information is copyrighted, trademarked or patented.

  3. The implied impact of foreign investment

    Without a doubt, the TPP agreement can bring us more foreign investments, but it’s implied impact should not be neglected. The Investor-state dispute settlement (ISDS) system in the TPP allows foreign investors to sue the government when they think any implementation of new policies or changes of existing policies affecting their revenues. The government is exposed to being sued and has to pay out large amounts of penalties up to even billions of dollars.

    Also, capital control imposed by former Prime Minister Mahathir Mohamad during the year 1997 Asian financial crisis to successfully cope capital outflows will not be allowed under the new TPP agreement’s rules. It causes Malaysia defenseless to financial volatility and to forthcoming financial disasters that result from excessive speculative inflows

Conclusion

In short, our minister Mustapa claimed that the TPPA is the first trade agreement to recognize Bumiputera rights and our country had won several concessions from parties to the TPPA. Although assurances have been by the government to the Rakyat, many quarters including opposition leaders, environmentalists, and advocacy groups have continuously and variously expressed their concerns over this agreement.

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