The Cabinet’s decision to ratify and upcoming implementation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has been received with shock by the Consumers Association of Penang (CAP) as Parliament is ready to debate the matter.
CAP president Mohideen Abdul Kadir, in a statement, warned that the “overarching” agreement impacts every aspect of the economy and society.
He said a CAP study of the latest cost-benefit analysis (CBA) commissioned by the International Trade and Industry Ministry (Miti) to PriceWaterhouseCoopers (PwC) confirms the non-governmental organisation’s longstanding concerns that there are far more costs than benefits in the move.
“Miti had earlier promised Parliament that the CBA report would be open for parliamentary discussion, then backtracked to say the report will be posted on its website,” he said.
He also took the cabinet to task for making the move on the brink of the 15th general election, which is expected to be held soon.
Miti announced on October 5 that Putrajaya officially submitted the instrument of ratification to New Zealand, the CPTPP depositary, on September 30, following the cabinet’s approval.
Mohideen pointed to Miti’s statement on that day, which claimed that Malaysia’s exports are projected to reach US$354.7 billion (RM1.65 trillion). He stressed that it had failed to also reveal imports would rise by joining CPTPP, thus worsening the country’s goods trade balance.
“A study by a United Nations economist showed that we could import as much as US$2.4 billion a year more than exports,” Mohideen said.
“The PwC CBA also finds that joining the CPTPP would increase imports into Malaysia more than the increase in exports, even if China and the United Kingdom join the agreement.”
On top of that Malaysia agreed to reduce tariffs to zero on 100% of goods, he added. “This means a loss of tariff revenue of about US$1.6 billion a year,” he said.
“Job losses are expected with the increased imports, for example in the automotive and steel manufacturing sectors. In contrast, Japan agreed under CPTPP to remove tariffs on 95% of its imports, and Canada and Vietnam only have to remove tariffs on 97% of their imports.
“Those countries have protected their ‘sensitive’ products from import competition but Malaysia is throwing its door open.”
Mohideen said it is unbelievable that Miti relies on a “problematic” CBA. He said the burden ultimately falls on the people to pay the costs of the decision to ratify the CPTPP.
“CAP calls for a withdrawal from the CPTPP before it enters into force in 60 days,” he said.
International Trade and Industry Minister Datuk Seri Mohamed Azmin Ali has said that CPTPP will come into force for Malaysia on November 29 this year.
Restrictions on policy to purchase from domestic suppliers
Mohideen stressed that Malaysia already has free trade agreements with three top export destination countries – Japan, Singapore and Australia, which together account for 84% of Malaysia’s exports to CPTPP countries.
But with CPTPP, Japan’s car exports to Malaysia will increase, outstripping any increase in Malaysian exports to Japan, he said.
Mohideen also warned that there will be severe restrictions on any government policy to purchase from domestic manufacturers and suppliers. This runs counter to the economic recovery plan to “Buy Malaysia” to boost local production and create more jobs.
Thus, government procurement and state-owned enterprises (including government-linked companies) will have to be liberalised extensively, he said.
“The extent that national laws, policies and directives have to be changed to open up the Malaysian economy to other CPTPP parties is not even acknowledged by Miti,” he said.
“A few acts of Parliament have been amended, mainly labour laws, which could have been done without CPTPP if the government is committed to workers’ rights.
“CPTPP imposes legal obligations beyond laws – policies, directives, guidelines, etc have to be aligned to allow foreign businesses to operate more freely in Malaysia and take a bigger share of the economy.
“As far as CAP knows the government does not have a list of all that will need to be changed,” he added.
Foreign companies can sue over profit interests
Mohideen lamented that Miti has consistently downplayed a major intrusion into national sovereignty in accepting the right for foreign investors to sue the government directly if their profit interests are affected by government actions, even those that are legitimate actions.
Past bilateral investment treaties with this Investor-State Dispute Settlement (ISDS) provision had a much narrower scope compared to CPTPP.
Other countries trapped in recent ISDS cases have had to pay compensation in the billions in private arbitration proceedings that are untransparent, by-passing national courts and public accountability, he warned.
“The US government no longer accepts ISDS in their trade agreements, even though they were the leader in pushing for ISDS in the Trans-Pacific Partnership Agreement, the precursor to the CPTPP,” he said. “There is a shift among many governments on ISDS making the CPTPP out of date.”
Mohideen pointed out that PwC CBA states the following: “Cost to the government due to possible ISDS claims… in terms of downside risks, the government may have to prepare and allocate resources to respond to possible ISDS claims.”
“It is disgraceful for the government to take the country down this precarious path in these times of economic turbulence and high national debt, by exposing the country to ISDS claims,” Mohideen said.
He claimed that the CBA on many fronts underestimates negative impacts and does not reflect the actual CPTPP text, and is instead about a different “hypothetical free trade agreement” in its modelling exercise.
“In claiming that Malaysia’s GDP, investment, wages and tax revenue will increase, the CBA uses unrealistic assumptions such as full employment in Malaysia, and no change in government revenue even when tariff revenue is lost because the CPTPP requires Malaysia to remove all its tariffs on imports from other CPTPP countries,” he said.