Questions remain over CPTPP: The Star contributor

KUALA LUMPUR - It has been three months since Malaysia ratified the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP), but it looks far from being a done deal.

Civil society groups and other stakeholders remain unconvinced that the anticipated benefits of inclusion into the 11-member trade bloc would outweigh the cost of being left out.

They are still asking why the International Trade and Industry Ministry’s (Miti) cost-benefit analysis report by audit firm PriceWaterhouseCoopers (PwC) was not discussed in the Dewan Rakyat, as promised earlier. This significant question also remains unanswered: “Why did Miti endorse the deal stealthily, just before Parliament was dissolved for GE15?”

Malaysia officially submitted its notification of ratification on Oct 5 last year, becoming the ninth country after Australia, Canada, Japan, Mexico, New Zealand, Peru, Singapore and Vietnam. Brunei and Chile are yet to ratify the pact.

The CPTPP’s expansive scope includes traditional market access areas, on top of factors such as labour, environment, state-owned enterprises, government procurement, intellectual property, e-Commerce, as well as small and medium enterprises (SMEs).

Miti issued a statement on Dec 23, stating that inclusion into the pact would increase Malaysia’s total trade to US$656 million (S$882.8 million) by 2030, from the US$481 million (S$647.3 million) recorded in 2021.

It said the country would profit from the preferential duty rates for goods exported to and imported from the eight other CPTPP member countries.

Among the preferential rates it cited was the full duty-free status for all Malaysian exports entering Singapore and Australia and duty-free treatment on 96 per cent of exports and tariff lines (items listed in a tariff schedule) to New Zealand that is set to increase to 100 per cent by 2024.

Malaysian products across all sectors could also enter the New Zealand market at zero duty, except for textiles and processed wood, which would also become duty-free by 2024.

Miti said the CPTPP would allow Malaysian exporters to benefit from duty-free treatment for the majority of tariff lines to Canada, Mexico and Peru, countries which Malaysia did not have any prior FTAs (free trade agreements). While Miti’s assurances of assisting and supporting Malaysian industries have been welcomed by exporters, there is much unease among a wide range of NGOs involved with consumer rights, environment, public health, small- and medium-sized businesses, farmers and fishermen.

Civil society groups, including the Consumers Association of Penang (CAP), have highlighted issues such as loss of tariff revenue, requirements for farmers to pay royalties for seeds for as long as 20 or 25 years and conditions barring them from sharing seeds.

Among the other problems raised were restrictions on subsidies to fisherfolk, inherent dangers to SMEs and risks to consumer protection in financial regulations through e-Commerce rules.

CAP has pointed out that although Miti has projected that our country’s exports will reach US$354.7 million, it has failed to disclose that imports would be even more by joining CPTPP, worsening the trade balance.

It noted a study by a UN economist that showed Malaysia could import as much as US$2.4 billion more a year, while the reduction of tariffs to zero on 100 per cent on goods meant a loss of revenue of about US$1.6 billion.

Last week, the Malaysia Food Sovereignty Forum (MFSF) handed a memorandum to Agriculture and Food Security Minister Mohamad Sabu, expressing concern over Malaysia’s ratification of the agreement.

MFSF head coordinator Nurfitri Amir Muhammad said participating in the deal would also have a huge negative impact on food security and sovereignty of Malaysians in the future.

The memorandum contains facts and references explaining the adverse effects of the agreement on the country’s agriculture sector, which the minister has agreed to raise with the Cabinet.

“Our voice is often portrayed by profiteering capitalists and open market advocates as baseless and unfounded. If the parties supporting the agreement claim that the CPTPP will allow them to export more goods and make greater profits, what right do they have to deny farmers the right to share and sell seeds freely and fishermen the right to fish freely? Does the government only care about the exporters and not local farmers and fishermen who work hard every day to ensure the country’s food security?” said Nurfitri.

Among the other key contentions of the agreement is that it opens the Malaysian government to investor-to-state dispute settlement (ISDS), under which the government could end up paying billions in compensation to foreign investors.

In retrospect, the CPTPP is in essence the controversial Trans-Pacific Partnership Agreement (TPPA), which activated nationwide protests in the country between 2014 and 2016 – minus 22 of the more than 1,000 prickly provisions.

The United States under then-president Donald Trump pulled out of the TPPA largely because of concerns over ISDS.

Former economics professor Dr Jomo Kwame Sundaram, who also served as a UN assistant secretary-general for economic development, raised the need to emphasise the high legal costs of ISDS even when governments win.

“The official US reason for withdrawing from the TTPA was the ISDS. They had never lost a case up to that point, yet considered it a big problem.

“But Miti does not consider the ISDS a problem since the ministry does not pay the legal bills, running into tens of millions, even when the government wins,” he wrote last week.

He cited lower corporate income tax rates in other jurisdictions of the CPTPP as another big problem.

“Why would any company want to be Malaysian-registered if it offers no advantage, but instead is more expensive in terms of tax liability?” he asked. THE STAR/ASIA NEWS NETWORK