TWN Info Service on Free Trade Agreements

12 June 2007


US Wants Rice to be Included in FTA with Malaysia

The US has indicated that it wants Malaysia to open up its rice market to US rice, an issue which has been a sticking point in the FTA negotiations between the two countries. (Item 1)

This is suggestive of US confidence in competing in the Malaysian rice market where currently a 40% tariff is imposed on imported rice in order to protect the local rice producers and to achieve some level of self-sufficiency. If the tariff is reduced to zero, US rice would be highly competitive as local rice retails at around RM1.70 to RM2 a kg while US long-grain rice is around RM1.40 at the prevailing export price (Item 2)

This means the local market risks being inundated with US rice imports and hence, the Minister of Agriculture’s concern, which is shared by NGOs, farmers’ organizations and others that local rice producers will suffer is justified.

Rice is currently included in Malaysia’s ‘exclusion list’ but it remains to be seen if Malaysia will give in to the US given that certain quarters among the government have brushed aside concerns that US rice will flood Malaysia and put local farmers out of business.



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Item 1

(http://www.btimes.com.my/Current_News/BT/Saturday/Nation/BT626553.txt/Article/)

Business Times, Malaysia

Washington wants rice included in FTA talks with KL

9 June 2007

The US Government said Malaysia must open its rice market to reach a free trade agreement, opposing the protectionist stance of the South-East Asian nation.

"Rice needs to be included in the talks," US Assistant Trade Representative Barbara Weisel said in an e-mailed reply yesterday to questions. "We do not believe that inclusion of rice in the FTA would pose a threat to Malaysian farmers."

Freer access would threaten padi farmers’ livelihoods and may lose the Government votes, Agriculture Minister Tan Sri Muhyiddin Yassin said in an interview. More than two million people, including 500,000 growers, depend on the industry and rice is on "the exclusion list" for the talks, he said.

Weisel and Malaysian counterparts are seeking to bolster US$49 billion (RM169.05 billion) of two-way trade that includes electronics, clothes and textiles.

Neither side has said it will compromise on the rice market, creating a sticking point in the negotiations even after the US missed a March 31 deadline to conclude talks.

The US had sought to reach an agreement with Malaysia before April in order to push a deal through Congress before President George W. Bush’s trade promotion authority expires in July. The US still seeks "a comprehensive agreement" with Malaysia, Weisel said in her e-mail.

While Malaysia wants sales to the US to increase, the Government has a responsibility to its citizens, Muhyiddin said in the May 31 interview in Putrajaya, near Kuala Lumpur.

"We have to strike a balance," he said. "What is the role of government if not to protect your people? At the end of the day, they are the ones who are going to vote you in."

Malaysian Prime Minister Datuk Seri Abdullah Ahmad Badawi, more than half-way through his first term in office, must call an election before early 2009.

Newspapers have speculated he may go to the polls as early as this year, after he handed one million civil servants a pay increase of as much as 42 per cent.

The US is Malaysia’s single biggest overseas market, accounting for almost a fifth of total exports.

The world’s biggest economy bought RM86 billion of Malaysia’s electrical and electronics goods last year, according to the Trade Ministry.

Removing the Malaysian Government’s 40 per cent tariff on US rice could "seriously undermine" local production, according to the FTA Malaysia Web site of the Third World Network, a Penang-based non-profit organisation. Some local analysts agree.

"Without any protection at all, of course we cannot survive," said Mad Nasir Shamsudin, professor of agricultural and resource economics at Universiti Putra Malaysia in Selangor.

Still, Muhyiddin’s opposition to the inclusion of rice in the negotiations clashes with the position of the Minister of International Trade and Indystry, Datuk Seri Rafidah Aziz.

In April, Rafidah criticised Malaysian lobby groups for arguing against a trade pact after the March deadline passed without a deal. Concern that US rice will flood Malaysia and put local farmers out of business is unfounded, she said.

Malaysia imports less than 400 tonnes of rice from the US each year, compared with more than 400,000 tonnes from Vietnam and 380,000 tonnes from Thailand, she said on April 6.

The US long grain rice that is imported is expensive and will never be grown locally, she added. - Bloomberg

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Item 2

JAWATANKUASA BERTINDAK MEMBANTAH US FTA
(WILAYAH UTARA)
ACTION COMMITTEE AGAINST THE US FTA (NORTHERN REGION)
d/a 21, Lintang Delima 15, 11700 P.Pinang
Tel ; (6) 04 6596930 Fax ; (6) 04 6596 931 Email ; zamashari@yahoo.com

(ENGLISH VERSION)

PRESS RELEASE 25 FEBRUARI 2007


CABINET MINISTERS URGED NOT TO RUSH TO CONCLUDE US FTA WITHOUT PUBLIC DISCLOSURE AND CONSULTATION


We are a group representing farmers, fisherfolk, rural citizens and NGOs from Kedah and Penang.

We are extremely concerned by government moves to conclude the Malaysia US Free Trade Agreement (MUFTA) without any public disclosure and consultation as to how contentious issues will be treated in the agreement.

We understand that Cabinet ministers have been asked to give their feedback within one week from last week on 58 contentious issues which are holding back the government from concluding the FTA.

We cannot understand why the Malaysian government is rushing into a deal dictated by the US government when a thorough and proper evaluation and consideration of the contentious issues is needed.

We have in the past raised the issue of ‘rice’ not being part of the FTA. We have been given assurances by both the Minister of Agriculture and the Minister of International Trade that ‘rice’ will not be negotiated.

However, we have learnt that the US has yet to agree to this, and in fact, in relation to other FTAs such as that with Columbia and Central America, the US has insisted that ‘rice’ be part of the FTA.

Hence, mere assurances by the Ministers are not enough as we are concerned that the government may trade away the ‘rice’ issue so as to conclude the FTA with the US.

If this happens, the livelihood of rice farmers in Malaysia will be ruined and the government target to achieve 90% self-sufficiency in rice under the 9th Malaysia plan impossible.

The US is asking for zero tariffs on rice. In Malaysia currently, there is a tariff of 40% on rice and BERNAS is the sole importer of rice into the country, with definite quotas as to how much foreign rice can be brought in.

If the tariff on rice goes to zero, US rice can easily come into the country and compete with our local rice. Presently, local rice is sold in the market from around RM1.70 to RM2 a kilo, depending on the grade.

Our research shows that prevailing export prices for US long grain rice is around RM1.40 per kilo and can even go down further. This is lower than the price of local rice, and consumers may opt for US rice instead of our local rice since it is cheaper.

US rice is highly subsidized. For instance, on average, between 2000 and 2003, it cost US$415 (RM1, 452) to grow and mill one tonne of white rice in the US. However, the export price of that rice was just US$ 274 (RM959) per tonne, which means there was dumping on developing country markets at a price 34% below its true cost.

This is most unfair to developing countries such as ours.

Further, we also understand that the US is also insisting that Malaysia’s proposed laws on labelling of genetically modified foods and products are withdrawn as part of the FTA deal.

This push is coming from the US biotech companies who want to sell us genetically modified foods and seeds without consumers and farmers knowing if the products are genetically modified.

Consumers and farmers have a basic right to such information so they can make an informed choice of whether they want to eat or plant GM products.

If the Malaysian government is going to rush into a deal, how will it ensure that the interests of the public, farmers and consumers are not compromised?

Mere assurances by the Ministers will not do. There must be efforts on the part of the government to make public the Malaysian government intentions.

Until today, despite all our requests and demands, the government has not disclosed the detailed costs and benefits of such an FTA.

The Government must make public its evaluation of the costs and benefits of such an FTA and hold stakeholder consultations, including with civil society groups before concluding the FTA.

There is no need to rush the conclusion of FTA when many questions remain unanswered and are unclear.

At stake is the interest of farmers, the general public and national sovereignty.

We are celebrating 50 years of independence this year. We should be very cautious in not becoming a nation dependent on the US and its companies.

As the Malay saying goes, “Biar lambat, asalkan selamat”. (Better to be slow than be sorry).