World top economists: CPTPP is a bad deal for Msia
Focus Malaysia 12 Oct 2018 11:38
Khazanah Nasional’s Megatrends Forum held on 8-9 October 2018 featured two renowned economists who shared a common view on the dangers of unfair free trade towards developing economies such as Malaysia.
At the forum, both Joe Stiglitz and Ha-Joon Chang advised Malaysia not to proceed any further with free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which they believe does not offer any benefits at all. On the other hand, Malaysia’s sovereignty and ability to enact new laws will be undermined by the various investment rules – that totally prohibit any law - which affects the foreign investors’ profitability; which require them to transfer technology and employ local professionals and workers; or even to protect the environment.
Malaysia has signed the CPTPP however for it to be enforceable, Malaysia must ratify it by changing some 80 laws and regulations – which the government until today has not disclosed what they are. Malaysia however can walk away from the CPTPP without penalty or simply keep it unratified indefinitely.
CPTPP is the same trade agreement called TPPA but without the participation of USA. The economic gains reported by various cost and benefit analyses carried out for Malaysia are in fact very, very small in contrast to the huge risks and costs we will bear. In fact, the already very small gains that MITI was pitching to justify the previous TPPA will now become totally insignificant without the US markets.
Malaysia already has trade treaties with 7 signatory countries of the CPTPP. Countries which Malaysia do not have any trade treaties are Canada, Mexico and Peru. Even without participating in the CPTPP under the WTO – average US tariffs on Malaysian goods is only about 3.5%. The main issue Malaysia faces in exporting our goods and services to the advanced economies is in fact not tariff-related but rather asymmetric non-tariff barriers – which the CPTPP does not resolves.
The ‘first-mover’ and “we will lose out to Vietnam” arguments some proponents of the CPTPP used are weak and outright disingenuous. Studies have shown that worthy investors do not regard the accession to any trade agreements as a major factor. Investors however gave higher value to good infrastructure, supporting industries, educated and skilled manpower, rule of law, political stability – all of which Malaysia already possessed and are improving on. For the group of unworthy investors in sectors that are polluting, labor-intensive looking out for cheap labour, weak labour and environment laws – we should not welcome them in the first place.
According to Stiglitz, author of Globalization and Its Discontents, Malaysia will not benefit much from a free trade agreement that was designed to benefit first and foremost American companies. Without the American market – which previously was MITI’s main pretext for the TPPA, there is simply no sense to be part of the CPTPP if we start considering the costs such as burdensome intellectual property rights for critical medicines, liberalizing government and GLCs’ procurements, and the high potential of being sued in a foreign, private court - the ISDS mechanism for billions of dollars.
Ha-Joon Chang has long argued that advanced economies have made use of the so-called free trade doctrine to further their selfish economic interests. In fact, the history of most advanced economies showed that they themselves vigorously practiced protectionist trade policies far longer than they became more open in their trade policies which they now religiously recommend to poor countries without regard to the latter’s’ developmental stage and nation-building agenda.
In his book – Kicking Away the Ladder – Ha-Joon Chang concluded that developed countries are attempting to 'kick away the ladder' with which they climbed to the top, to prevent developing counties from adopting policies and institutions that they themselves have use to progress and prosper tremendously.
Bantah TPPA hopes that unlike the previous government, the Pakatan Harapan government will not be easily duped by the made-up benefits of the CPTPP promoted by some quarters. We will pay heavily for this major error of judgement and will betray our children and grandchildren greatly.