By Jomo Kwame Sundaram
We need to emphasise the high legal costs of investor-state dispute settlement (ISDS), even when governments win.
The official US reason for withdrawing from the Trans-Pacific Partnership (TPP) trade deal was the ISDS. They had never lost a case to that point but considered it a big problem.
But the Ministry of International Trade and Industry (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.
Lower corporate income tax rates in other jurisdictions of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are a 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.
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While everyone may concede on some increased exports, typically exaggerated, there is little attention given in most economic (‘global trade analysis project’ ‘computable general equilibrium’ or GTAP CGE) modelling to increased imports – probably Japanese cars and plastic waste, thanks to former Prime Minister Najib Razak’s earlier waste processing initiative, with over 85% of plastic waste dumped in landfills after being deemed unrecyclable.
The Peterson Institute for International Economics (not really World Bank) projections claim more gains without the US – which comprised two-thirds of the TPP – than with the US! As the PIIE TPP projections pointed out, 85% of the gains were from non-trade measures. So let us stop pretending that it is a free trade agreement.
Of course, even the US International Trade Council rubbished its projections, considering our (Jere Capaldo, et al) modest efforts more credible and robust. The 2016 ITC report forced Hillary Clinton to do a U-turn and reject the TPP in the presidential campaign.
As the IDEAS [non?] study, financed by the Taiwan office in Kuala Lumpur, implicitly acknowledges, it was and is about containing China.
So, the views of Ministry of Finance and Wisma Putra are really more important.
Finally, why did the Miti ratify the CPTPP without parliamentary – let alone public – discussion despite the earlier ministerial promise to do so?
Is this Azmin’s poisoned chalice for the new government?
Jomo Kwame Sundaram, a former economics professor, was a UN assistant secretary general for economic development