At the TPPA Open Day

Martin Khor

Last Thursday I took part in an unusual Open Day on the Trans-Pacific Partnership Agreement in Kuala Lumpur.

A thousand people turned up at the event, showing how this trade agreement has aroused great public interest and concern.

The organiser of the half day event was the Ministry of International Trade and Industry (MITI), which had been criticised by several citizen groups as not revealing enough information about the TPPA.

It was unusual because the Trade Minister Datuk Seri Mustapa Mohamed spoke frankly of a “trust deficit” on TPPA between MITI and the public.

He stressed that the Open Day was not a public-relations exercise, invited the participants to be “as frank as possible” and assured that he would convey their views to the Cabinet, which will hold a special meeting on TPPA on 19 August.

Also unusual was the scope and depth of outspoken views aired by so many groups and individuals, almost all of them critical of various aspects of the TPPA and how the negotiations are conducted in secrecy.

Malaysia’s deputy chief negotiator for the TPPA, Isham Ishak, presented the case for the TPPA, arguing that huge market access opportunities would be opened for Malaysian exporters. He mentioned textiles, shoes, palm oil, plywood and electronic products as having significant U.S. tariffs which would be eliminated to the country’s benefit. Overall, he painted an optimistic picture of the benefits.

At the same time, he said, Malaysia has raised concerns in the negotiations. The four issues mentioned by Isham were investor-state dispute settlement (ISDS) and sovereignty (where the country is seeking exceptions to protect policy space), government procurement (in which Malaysia is requesting a carve-out for Bumiputra rights and high threshold levels above which liberalisation will take place), state-owned enterprises (which play an important role in Malaysia) and intellectual property (where Malaysia is against longer terms for patent holders).

I was a speaker at the subsequent plenary forum, with six speakers representing academia, business and NGOs discussed the pros and cons.

My role was to highlight concerns about the TPPA.  My seven-minute speech covered the following:

• The adverse effects of tariff elimination on jobs in sensitive sectors such as rice-growing and automobile.
• Investment liberalisation could lead to crowding out of local companies and the rules on free capital flows would reduce the ability to implement capital controls.
• The TPP would grant excessive rights to foreign investors, including the right to enter and operate in the country and to have rights of national treatment, “fair and equitable treatment”, and to sue the government for compensation for expropriation (defined to also include changes in government policy that affects future profits).
• A rise in medicine prices due to a lengthening of the 20 year patent term and new rules on data exclusivity and requiring that patents be given for minor innovations.
• An extension of the copyright term from 50 years to 100 years.
• The government procurement business will opened up to foreign companies of TPPA countries, for purchases or projects above threshold levels of about RM25 million for construction projects and about RM700,000 for non-construction services and products. Local businesses, which now enjoy a preference, will be affected.
• State owned enterprises (SOEs) will face new disciplines on how they are to operate, and governments will be constrained on what institutional and economic relations they can have with SOEs and local private firms.
• Although general exceptions and “non-conforming measures” are allowed, these are inadequate as the first would only cover goods and services, but not IPR, investment and procurement; and the second can only cover half of the eight new investment obligations that government would have to take on.

Another big issue is the investor-state dispute system (ISDS), in which foreign companies can sue the host government for not meeting their obligations.

The government will have to pay out millions of dollars (even billions, as Ecuador found out in a recent case) to companies who succeed.

The ISDS has many serious flaws, including the interpretation of obligations such as “fair and equitable treatment” and “expropriation”, and an international arbitration system which is not predictable (as decisions do not set precedents) and where studies have found that arbitrators have been in  conflict-of- interest situations with respect to their cases.

If Malaysia joins the TPPA, it can expect to be brought to an international tribunal for one of a whole range of issues.

Many speakers from the floor, representing consumer and health NGOs, trade unions, Malay interest groups including small and medium businesses (MTEM), and an umbrella organisation with 50 affiliated groups and unions (BANTAH) voiced a wide range of concerns, all in an animated way.

That gave the clear impression that the public is involved and worried about many aspects of the TPPA, with some calling on the government to give more information on the negotiations, or to pull out of the TPPA altogether.

Workshops on specific issues were held in the Open Day’s late morning. At the workshop on investment and ISDS, many participants quizzed the negotiators from Bank Negara, Attorney General’s Chambers and MITI about their stand on various issues.

The participants were clearly worked up on many issues:  about whether Malaysia would still be able to regulate speculative financial activities including through capital controls and how the ISDS would compromise the country’s judicial independence since foreign companies would have resort to international tribunals that may rule on the basis of laws or interpretations that are contrary to Malaysia’s.

A Bank Negara representative gave an assurance that the Bank is insisting on the ability of Malaysia to regulate finance according to our own rules and standards, and to undertake capital controls if needed.  The impression given was that it would not agree to anything less.

In a closing speech, Datuk Seri Mustapa colourfully said that MITI had been subjected to close scrutiny at the Open Day, exposing the gap that exists with the public.

He said “we have a lot of red lines” in the negotiations and reiterated three main principles, that the TPPA would not be allowed to go against the Constitution, or the rights of the states, or core national policies such as socioeconomic policies or regional development.

How the national positions play out in the negotiations, and how the public perceives the process remains to be seen in the months ahead.

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