TPPA: No use crying over spilt milk!

Ordinary Malaysians should take the Trans Pacific Partnership Agreeent seriously – and before it is signed, warns Jeyakumar Devaraj.

Malaysians from all walks of life should really take a close look at the TPPA (Trans Pacific Partnership Agreement) that is now close to completion.

The final round of multilateral negotiations is slated for 20 August in Brunei, and the word is out that it will be signed early next year.

The TPPA is a wide-reaching Trade and Investment agreement that touches almost the whole spectrum of economic life in the participating countries – 12 at the latest count, including the United States, Canada, Mexico, Australia, New Zealand, Chile, Japan, Brunei and Vietnam.

Let me point out some of the problems that would arise if we sign on to this Agreement.

Loss of food security

The US is pushing for the abolition of all import tariffs. At present we have import tariffs on certain foodstuffs – for example, under the WTO regime, we have the right to impose a 40 per cent tax on rice imports. This is important to us as US rice can be sold at below the price of production of rice in Malaysia because the US gives generous subsidies to all its farmers including rice farmers. If cheap US rice floods the Malaysian market, many of the 300,000 rice farmers will go bust.

What is even more serious is that their paddy fields may be converted to housing projects and perhaps golf courses! We now produce 70 per cent of the rice we consume. This may go down if US rice imports are allowed in without tariffs. But when there is a shortage in the world supply of rice as occurred in 2007, then we will be in serious problems. This is why the US heavily subsidises its food producers – to maintain food security.

Price of medicines

FTAs between the US and other countries (there have been 21 signed so far) have driven up the price of medicines in these countries through a combination of measures including:

• lengthening the patent period from the present 20 years to 25 or even 30 years
• “evergreening”, whereby a second patent for 20 years is granted to a medicine because a new use of that medicine has been documented. If this second patent is issued on the 15th year of the first, then the effective patent period would go onto 35 years. As you know, the importation of a generic version of that medicine is illegal until the period of the patent expires.
• Measures to make the registration of generic medicine more difficult. The firms importing generic medicines are prohibited (by the TPPA) from using any information regarding that drug that has been published by the maker of the patented product. All that information is deemed to be the “property” of the patent holder. The term used is “data exclusivity”. That information can be only used if the patent holder gives permission – i.e. on payment of a huge royalty.
• Measures to limit the practice of “compulsory licensing” and “parallel imports”, which are measures allowed under the GATT Agreement to bring in patented drugs cheaply if there is an emergency need for those medicines in the country.

Loss of regulatory powers and the right of companies to sue governments

The US is also pushing for “investor rights”, specifically something called the “expropriation clause”. The basic argument is that if the host country (Malaysia) expropriates the property of the foreign investor, the latter should have a right to receive reasonable compensation. This sounds fair doesn’t it? The problem is that what actually constitutes “expropriation” is very loosely defined – even regulations that might reduce future profits can be termed “expropriation” and the government concerned can be sued.

There are provisions in the investments chapter that create the right for foreign companies to take the host government to an international court for “expropriating” them – Investor State Dispute Settlement (ISDS).

When Uruguay asked all the cigarette firms in the country to put pictures of cancers on their cigarette boxes, Philip Morris used an FTA provision to sue the government for hurting its cigarette sales and thus profits! Now Australia is being sued for a similar regulation regarding cigarette packs. There are several such cases in a number of countries. The argument that the regulation was passed to protect the health of the population does not seem to be strong enough!

Several countries have had to pay compensation of millions of dollars for passing regulations that have affected the profits of companies that were having an adverse effect on the health of the people or on the environment of the host nation.

Liberalisation of the service sectors

The US is asking for 100 per cent liberalisation of all the services sub-sectors including health care, retail trade, accounting and education.

The US proposal, and one that they are lobbying hard for, is that any economic activities permitted for Malaysian companies should be allowed of US companies. This is termed “national treatment”.

This would mean, for example, that since Malaysia allows Managed Care Organisations (MCOs) to operate, US MCOs should be allowed to set up branches or even chains here. Since Malaysia allows privately owned supermarkets to operate, there should be no barriers for Walmart to come and set up branches here. There is specifically a provision that states that there should be no restriction on the volume of business permitted for the foreign service provider.

Sure, Walmart might be able to provide certain goods at a 10–20 per cent lower price. But that benefit would be greatly outweighed by damage done to small retail shops and to the pasar malam vendors. Many of them will suffer a loss in volume of sales and they might close up and join the under-employed.

The other negative impact is the amount of money in circulation in our local communities would be reduced by firms such as Walmart. The small grocery shop owner and the pasar malam vendors live in the same community in which they sell their products. Most of the profit they make is ploughed back into the local economy through their consumption and their investment in their businesses. Not so with Walmart! Walmart’s profits will be siphoned out of that locality, thus reducing the money circulating in that locality.

Up till now, all negotiations have been kept top secret. Even parliamentarians do not have a clue of the actual deals being made on our behalf. The US knows that the people would kick up a fuss if the details were known; so they have insisted on complete secrecy.

But given that the deal has almost been made isn’t it time we the people start asking how these issues are being handled, what compromises have been made and exactly which of our rights have been traded away?

The TPPA has 29 chapters and there are several other issues that aren’t quite beneficial to Malaysians. As Idris Jala said in his piece in The Star on 7 August 2013, in a negotiation you have to give in on certain issues. Are we prepared to be the group whose interests had to be sacrificed so that the interest of a more politically important group is preserved?

Ordinary Malaysians should take the TPPA seriously – and before it is signed. No use crying over spilt milk!

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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