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A fair trade agreement among Pacific Rim economies can be enormously beneficial [05-08-2013]  
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THERE is one simple, straightforward principle in any form of negotiation – there must be compromise. For what is there to negotiate if there is none. If someone gets everything they want or if someone gets nothing of what they want, the negotiations have failed – utterly.

But yes, one must remember not to compromise too much in negotiations and depending on how one represents one’s case and the tone of the discussions, it is often possible to achieve much to mutual benefit. If negotiations unlock resources which would otherwise be trapped, then they have succeeded.

That’s the spirit in which the Trans-Pacific Partnership (TPP), a free trade arrangement being negotiated among Pacific rim economies which include Malaysia, Singapore, Vietnam, United States, Japan, Canada and Australia amongst others has to be viewed. If it is to be successful, there will be no outright winner – or loser – but everyone will gain from the productive gains it will unlock.

That even after the 18th round of negotiations the TPP has not been concluded is indication that negotiations are intense, difficult and contentious and shows that nobody is about to surrender their sovereignty or their legitimate interests to the mighty United States, now or anytime later.

Bear in mind that Malaysia is not negotiating alone with the United States. All of us are negotiating simultaneously and it is highly unlikely that we are going to be squeezed by any one party.

It helps if we break up the argument into three questions to disperse the current storm of protests over the TPP, even before there is a draft agreement to take back for final approval.

First, will a TPP be beneficial for Malaysia? Second, is there provision for local and bumi businesses which need to be protected or excluded? And thirdly, is all that secrecy necessary? Lets take it in turn.

Malaysia is a large trading nation with a small domestic market. If we can have better access to a larger market we certainly should try and get that on fair terms.

The gross domestic product (GDP – goods and services produced) of TPP countries amounted to over US$33 trillion (including Japan which joined the 18th round just recently) in 2012 while that of Malaysia is just US$300bil, less than a hundredth of that.

A key part of our transformation programme to take us to developed status (a per capita income of US$15,000) by 2020 is improving our export earnings. Greater and better market access will certainly help Malaysia. And not only Malaysia will gain.

Three years ago, United Nations Development Programme (UNDP) conducted a study on the impact of the TPP on Malaysia. Their findings shows that Malaysia will benefit from the TPP in that it would help Malaysia achieve vision 2020. It found that the welfare of the people would improve and the GDP would grow while there would be a shift in employment from the agricultural to other sectors.

According to a June 2012 study of the TPP by the Peterson Institute for International Economics, the agreement, then in negotiation among nine Asia-Pacific countries, could yield annual global income gains of US$295bil (including US$78bil for the United States) and offers a pathway to free trade in the Asia-Pacific with potential gains of US$1.9 trillion. According to their simulation study, by 2025 Malaysia will benefit from TPP, with an increase in gross national income by RM26.3bil and exports will increase by RM41.7bil.

Larger economies are likely to focus on bigger countries while for us there is a whole new market world out there – a hundred times our own. Imagine if we are not part of the TPP and those markets don’t give us equal access – that would be disastrous.

China and Indonesia are baulking from coming into the TPP because of their large market and fear that if they open up straight off there might be consequences. But even for them, and especially China, they depend on overseas markets and trades. They may well join in future, especially if the TPP is fair.

There can be no question that we should be actively involved in the TPP proposal and help bring about a fair agreement. We definitely must be involved in the negotiations right now – it also helps us to protect our interests right from the start.

Second, as has been pointed out numerous times by Trade and Industry Ministry (Miti) secretary-general Rebecca Sta Maria and chief negotiator J Jayasiri, there are provisions to exclude some sectors and industries from the provisions. This can be in sectors such as defence and food.

Even the US practices some form of affirmative action with states and the federal government allocating quotas for disadvantaged groups and communities for which they would want exemptions under the TPP.

As a form of protection for local and bumi companies, these can be done through the following mechanisms:

● We can negotiate the financial threshold below which only local/bumi companies can participate in Government tenders;

● We can also negotiate “carve outs”,where specific industries are left out;

● We can also negotiate special agreed-upon margin of preference for local/bumi companies in competitive bids. Indeed, all these are subject to negotiation and even after negotiations are complete, they will still need Cabinet approval. Indeed, if the overall deal does not benefit Malaysia, we should walk away from the TPP. However, if the TPP will benefit Malaysia, we should welcome it.

There are concerns that the TPP could negative impact state-owned enterprises or government-linked companies (GLC). The Government has obtained the views of the GLC and these will be part of the negotiating positions of Malaysia, recognising the roles played by GLCs in nation building and development. It is important to note that many of the other countries also have GLCs and have similar concerns as Malaysia.

Industry, even in the United States, is just as concerned as some industry sectors here. When Japan entered the 18th round of the TPP recently concluded in Kota Kinabalu, the US auto industry expressed serious concern that their markets will be opened up. It’s not a question of just developing countries alone being worried over TPP.

The final major concern centres around secrecy. Most governments will prefer to negotiate in secrecy and indeed it is often better that way or else pressure points will build up and result in tough positions being taken even as the negotiations are progressing. In its engagement with stakeholders, Miti has been open about its position, without giving away details of its final mandate and negotiating tactics.

But it is important to realise that the final draft agreement will not be secret and also that all those who want their interests protected can make representations to the various government departments involved in the negotiations.

At the end of the day, the agreement has to be ratified and at that stage it will become public. The Cabinet will have to approve it then.

There is a very vocal minority that is protesting the TPP even before everything has been agreed upon but it is important to remember that many industries in Malaysia, especially those doing well, welcome with open arms the opportunity of better access to a much bigger market place.

We certainly should not shun the TPP just to protect a narrow base of highly inefficient producers who have not made the grade even after years of protection at the expense of all the efficient and competitive Malaysian producers and exporters who are waiting to leap into the lake from the pond.

Let’s remember one thing – the countries which will gain the most in any move to open markets are the ones who are most competitive but even uncompetitive ones will prosper because they will have comparative advantage in at least some products in a larger market. Trade prospers everyone even if it prospers some more than others.

The lesson over the centuries is that increased trade opens up opportunities for everyone – just stop to imagine what the world would be if all countries in the world had completely closed their markets to only their products. How much poorer, how much less diverse and how much more insular we would all have been!

Free – and fair – trade is always better. And let’s benefit more by it by simply becoming more competitive. That’s one of the aims of transformation too.

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