Home 2006: 9 Malaysia-US FTA negotiations hit turbulence

Malaysia-US FTA negotiations hit turbulence

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The fourth round of negotiations for a US-Malaysia Free Trade Agreement is currently in progress in San Francisco, but Malaysians have no idea what they are getting themselves into, warns Anil Netto. 

Disagreements have surfaced in the third round of negotiations in November for a Free Trade Agreement (FTA) between Malaysia and the United States. This has provided a glimmer of hope for a civil society coalition that has been actively campaigning against the FTA for fear that it could be damaging to Malaysia’s economic sovereignty and to the interests of workers, the poor and the marginalised.

The third round of negotiations was held in Kuala Lumpur in early November while a fourth has been scheduled for December in Washington. US officials are reportedly hopeful that the agreement can be wrapped up by the end of March and sealed before the expiry on 1 July 2007 of a fast-track Trade Promotion Authority that gives President George Bush the power to negotiate trade deals with a simple congressional approval.

But the Democrat sweep of the US House of Representatives and the Senate in the November mid-term elections has thrown a small spanner in the works. The Democrats have traditionally not been terribly excited about free trade pacts and may be more protective of US domestic trade while a Democrat-controlled House may not be keen to renew the fast-track authority.

This in turn could add to US pressure on Malaysian negotiators to conclude a deal by the 1 July 2007 deadline – and before a careful analysis of the implications of the FTA can be carried out by the Malaysian side.
US Big Business comes to town

As expected, one of the main areas of contention has been government procurement. A US FTA with Malaysia may include provisions that could allow US firms to bid for Malaysian government contracts. This could undermine Malaysia’s affirmative action policy of favouring bumiputera-controlled enterprises.

Moreover, under the Ninth Malaysia Plan (2006-2010), the government is expected to spend a mouth-watering RM200 billion on various projects related to construction, education and essential infrastructure. And US negotiators could be eyeing a slice of the cake as well.

The issue of market access for US products and services in Malaysia is also likely to figure prominently in negotiations. The United States is especially interested in a bigger slice of the action in the protected Malaysian car industry and the financial services sector, where there are restrictions on foreign-owned banks.

US negotiators want not only market access but also laws that promote and protect their interests in this country in a legally binding manner. From the US perspective, these “free trade” negotiations are designed to promote the rights of US Big Business in Malaysia.

An FTA could thus severely limit the government’s economic policy options especially when it comes to infrastructure spending as a ‘pump-priming’ tool to boost economic growth. The government’s ability to manoeuvre the local economy in terms of policy space will be highly restricted.

But International Trade and Industry Minister Rafidah Aziz provided an assurance: “The agreement will not be signed if the US is found to have interfered in the country’s procurement and determining of policies.” She said sectors that could benefit were electronics and agriculture goods, textiles and clothing, rubber and wood products.

But even without the FTA, Malaysian national carmaker Proton has been gradually losing market share. Malaysian banks, for their part, have been consolidating and merging in anticipation of foreign competition – but some analysts believe they are still ill-equipped to go head-to-head with global banking giants in a free-for-all market. So how will they fare with an FTA in force?
Farmers and patients worried

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Indeed, the FTA will have serious ramifications for a whole range of sectors. About 116,000 farmers in the “rice bowl” in the north-western region of Malaysia could be especially vulnerable. Some of them have already expressed fears that their livelihoods could be jeopardised if Malaysia lowers import tariffs (currently around 40 per cent) and opens its domestic market to US agricultural producers.

The Kedah Farmers Action Committee says it hopes that the government will postpone the discussions until the FTA and its implications are made known to the farmers.

Other activists are worried that the United States could ask for “test data exclusivity” – the protection of clinical test data – to be enforced on cheaper generic drugs such as anti-HIV medication.

The big pharmaceutical firms argue that it is expensive to carry out clinical tests and it would be unfair to allow generic manufacturers to use such test data without their incurring the costs of clinical trials as well.

But critics counter that a data exclusivity provision would be an added restriction for generic manufacturers and thus make it more expensive for the poor and those with HIV/AIDS to buy essential drugs.
Obsession with patents

Of course, there is also the whole business of patenting. US negotiators are likely to push hard for stronger protection of intellectual property rights. US FTAs usually makes demands that are ‘TRIPS (Trade Related aspects of Intellectual Property Rights)-plus’, that is, they go beyond a country’s commitments to the World Trade Organisation.

The Americans seem obsessed with patents. And if we are not careful, we might find ourselves on the losing side of the patenting game, especially if foreign multinationals begin patenting our genetic resources including the natural heritage within our rainforests.

Nothing seems to be beyond the reach of these patents. There is a Norwegian company, for instance, that claims it has the exclusive patent right for a certain breed of “genetically improved” tilapia fish and it insists that no one else is allowed to breed this particular breed for commercial purposes. The same thing could happen to certain types of seeds used by our farmers. The Americans have the best patent lawyers in town. Are our Malaysian patent lawyers any match for them?

An FTA could also throw a spanner into the efforts of the Malaysian government to promote the use of open source software – rather than expensive proprietary software. It will also add pressure on the government to privatise or ‘liberalise’ more services.

How it all began

Malaysia is the United States’ 10th largest trading partner. Two-way trade between the two countries stood at US$44 billion (RM160 billion) in 2005.

Under a US Trade Promotion Authority (TPA) law, which was introduced in 2002, the United States has entered into similar free trade agreements with its other trading partners. Regionally, it entered into an FTA with Singapore in 2002 and was in negotiations with Thailand. The negotiations in Thailand were opposed by civil society groups and the subsequent military coup there added a further element of uncertainty.

Malaysia, for its part, entered into a trade and investment framework agreement (TIFA) with the United States in May 2004. On 8 March 2006, officials from both countries announced that they would be entering into FTA negotiations. A delegation of activists submitted a petition to Malaysian negotiators meeting at a beach hotel in Penang when the first round of negotiations kicked off in June this year.
Core labour standards? Yeah, right…

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I almost fell off my chair laughing when I heard the United States is interested in promoting “core labour standards”. They think we don’t know what happened in Latin America in the 1980s, when trade unionists and grassroots activists suffered at the hands of American-backed regimes  – many of them persecuted, tortured and killed by death squads.

The only reason the Americans are now advocating a minimum wage is to ramp up our cost of production so that local firms will lose their competitive advantage over foreign firms. Not because the Americans are interested in our workers’ welfare. (All the same, from an ethical and justice point of view, we must have a minimum wage to ensure our workers are able to live with dignity and to reduce income disparities.)

For the same reason, the Americans say they are interested in promoting the “right of association”. But I remember what happened when, many moons ago, our Human Resources Minister announced the government would allow the formation of a national union for electronic workers: within days, he was forced to reverse his decision due to pressure from the multinational corporations already in the country.
Fired for a funny expression

If anything, US firms would love it if the Malaysian government were to make it easier for employers here to fire local workers at their whims and fancies. Job security for Malaysians could be at stake as both Malaysian and US firms want to make it a lot easier to fire workers.

In its public submission for the FTA, the American Malaysian Chamber of Commerce (Amcham) and the US Chamber of Commerce observed: ‘‘Malaysia’s current employment laws are too restrictive and unbalanced against companies, thus making it very difficult for employers to terminate under-performing employees.’’

Imagine that, employers are still not happy with our already weak labour laws! Amcham obviously wants to make it a lot easier for employers to fire people. Perhaps they want Malaysia’s labour laws to be similar to those in the US?

And what is job security like in the United States?

Listen to what Barbara Ehren-reich, a foremost journalist, dissector of class and author of the classic book, Nickel and Dimed, had to say in a recent interview with publisher Tom Engelhardt:

“I was in England recently talking about (my book) Bait and Switch, my publisher told me: ‘You know, people aren’t quite understanding what you’re saying, how you could be laid off or fired without any procedure.’ They didn’t understand the concept of employment at will. So I had to explain that, in America, you have no rights: no right to your job, no right to a hearing. You could be fired for a funny expression on your face.”

It is this easy ability to fire workers that corporations, both Malaysian and foreign, crave for. But such a policy would have dire consequences for workers – especially in a country with no unemployment benefits like ours.
“Ask your government!”

The problem is while the Americans are going around and putting their “spin” on how Malaysia stands to “benefit” from this FTA (as if the US is doing us a big favour, when we know they are eyeing our financial services sector and government procurement), the Malaysian government has been largely silent. There has been no popular input or consultation with say, the rice farmers in Kedah, who are really worried about agriculture imports. Neither has there been much media coverage, public consultation or parliamentary scrutiny of the impact the FTA is likely to have on Malaysia.

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When an American speaker from a US think-tank was asked by a Malaysian activist about the lack of transparency in the FTA negotiations, he retorted, “You are asking the wrong person. You should ask your own government.”

So let’s ask again, where is the transparency?

People would like to know if the government has done a comprehensive cost-benefit analysis to ensure that Malaysia doesn’t lose out.
•    Will this FTA lead to higher pharmaceutical prices, for instance?
•    Will our farmers suffer as a result of the opening of our market to agricultural imports from the US?
•    What happens when US global financial and banking giants enter Malaysia in a big way?
•    Will the leeway given to US corporate giants in the local economy reduce the space for our government to plan the economy so that it benefits the ordinary person (rather than Big Business)?
•    Will Malaysian firms simply be overpowered by the might and muscle of the MNCs?

Activists believe transparency in negotiations is key. If there is transparency, then the pressure will be on the Malaysian and US governments to come up with a fair deal. But if the negotiations are kept secret, the Malaysian negotiators will have to horse trade (during the negotiations) and give up certain things because they have no public support.
The carrot and the missing sling-shot

In a hurry to conclude the deal by the end of 2006, US officials have dangled a carrot in front of Malaysian negotiators. They claim that the lack of an FTA has barred Malaysian firms from bidding for US$250 billion worth of US government procurement contracts.

But is that really the case?  Isn’t it true that, in 2005, US firms accounted for 94 per cent of total US government procurement while the remaining 6 per cent was split among firms based in 170 countries and territories?

So, realistically, how much can Malaysian firms get out of this 6 per cent of US government procurement?

The unequal negotiating strength between the US negotiators and their Malaysian counterparts remains a major source of concern. The United States is a global economic powerhouse while Malaysia is only an emerging economy. Moreover, the United States, Malaysia’s largest trading partner, has plenty of experience in negotiating FTAs while Malaysia, an emerging economy, has relatively little.

You can be sure that whatever agreement that is concluded will prove to be far more beneficial to the United States and their multinational corporations than to us.

One visiting Canadian professor – and Canadians should know, as they are part of the North American Free Trade Agreement (NAFTA) – had this warning for Malaysians: “You have no idea what you are getting into. It’s like Malaysia is David and you are up against Goliath (the US) and you have forgotten to bring your sling-shot.”

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The views expressed in Aliran's media statements and the NGO statements we have endorsed reflect Aliran's official stand. Views and opinions expressed in other pieces published here do not necessarily reflect Aliran's official position.

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