Bloomberg BNA's weekly International Trade Reporter provides rapid, reliable notification of the most significant developments affecting U.S. trade and international business policy and the...
By Lien Hoang
Jan. 5 — The Malaysian parliament will take up debate Jan. 26-27 on whether to join the Trans-Pacific Partnership (TPP), a trade deal that has polarized different groups but is likely to pass.
Abdul Rashid Omar, public relations officer at the Ministry of International Trade and Industry, a key domestic driver of the TPP, told Bloomberg BNA Jan. 5 that lawmakers have the trade pact on their agenda.
Parliamentary backing would be mostly symbolic, though, because the authority to sign foreign agreements sits with the executive branch, according to James Chin, a senior fellow at the Jeffrey Cheah Institute at Malaysia's Sunway University. After talking with officials, Chin said he's “very confident” Malaysia will approve the TPP. But it is holding a legislative debate in response to public opposition, he said.
Critics warn the TPP could raise drug prices, handicap the state's power in labor and corporate disputes, ignore human rights abuses and threaten an affirmative action program. Malaysia is unique among the TPP's 12 negotiators because it grants ethnic Malays preferential quotas, such as in state contracts. It's also one of the few Asian members to have a vigorous TPP debate.
“The business community, especially the big boys in town, they are for the TPP,” said Chin, who is also director of the University of Tasmania's Asia Institute. “They believe without it, Malaysia would be regarded as a second-class trading nation.”
Chin said by phone that some complaints about the TPP are purely partisan. In the past year, Prime Minister Najib Razak, a TPP proponent and ally of U.S. President Barack Obama, has fielded calls to step down amid accusations that $700 million in public money was siphoned to his personal accounts. Najib's United Malays National Organization party has ruled Malaysia for decades.
Along with lower revenues from oil and other commodities, Najib's corruption scandal has deepened investor pessimism and capital flight that helped weaken the ringgit, Asia's worst-performing currency in 2015. That has underlined the urgency of trade agreements that supporters believe will revive the once-robust economy in Malaysia, which is among Southeast Asia's most developed countries. They hope the TPP will boost market access for palm oil, rubber, electronics, clothing and other exports.
“I would think the net benefit would be marginal at best,” Weiwen Ng, an economist at the Australia and New Zealand Banking Group, told Bloomberg BNA. “Having said that, it is good for Malaysia to be part of this TPP for a couple of reasons.”
Those reasons include better international standards for investment and the environment, as well as increased foreign investment and trade with the TPP nations that haven't signed agreements with Malaysia: Canada, Mexico, Peru and the U.S. Other members of the proposed trade bloc are Australia, Brunei, Chile, Japan, New Zealand, Singapore and Vietnam.
Whether Malaysia meets TPP criteria is still being questioned. It used to hold the worst status in the U.S. Trafficking in Persons report, Tier 3, which would disqualify it from U.S. trade deals. But in 2015, it was upgraded to the Tier 2 watchlist, a change that Phil Robertson, deputy director of Human Rights Watch in Asia, denounced as “the realpolitik of trade policy trumping human rights.”
Robertson said Kuala Lumpur still fails to punish human traffickers and the police they bribe, while also placing victims in detention-like shelters.
“I think it's a fair contention that the U.S. consumers should not be forced to have, in their markets, products that are produced with forced labor and trafficked labor,” he said in an interview.
The trade ministry hired accounting firm PwC to write a TPP analysis, which was published in December. The report concluded that the trade deal would add 0.6 percent to 1.15 percent to Malaysia's economic growth from 2018 to 2027. Much of this would come from exports, such as vehicle components, plastics and wood, PwC said, whereas the construction, retail and oil and gas sectors would face more competition.
Malaysia has the lowest public support for the TPP, with 38 percent in favor, compared with 49 percent in the U.S. and 67 percent in Chile, according to the Pew Research Center.
Among its efforts to address this resistance, the trade ministry had a town hall meeting in April, where it argued that forgoing the TPP could mean redirecting foreign investment to neighbors Vietnam and Singapore, as well as losing the chance to write the global rules of trade. A presentation from the town hall acknowledged critics who equated the TPP with the displacement of rice farmers, an influx of foreign workers and the “former colonial powers trying to regain their wealth.”
The country is concerned about increased competition for state-owned enterprises but negotiated some exceptions in the TPP, which, for example, won't apply to the state-run fund manager Permodalan Nasional Berhad. The TPP also carves out allowances for Malaysia's ethnic affirmative action program, including preferential pricing for Malay businesses bidding on government projects.
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