Global Trends by Martin Khor

Monday 11 May 2015

TPPA talks face final crunch time

The TPPA negotiations has to conclude in the next few weeks, or be suspended, but it still faces many unsettled issues


Is the Trans Pacific Partnership Agreement about to be concluded, or will it be put into deep freeze instead?

The answer may be known in the next few days or weeks as the controversial TPPA

negotiations face another crunch time.

Last week the United States top negotiator, Michael Froman was in Kuala Lumpur for a series of meetings.

He told the public that Malaysia’s concerns, especially on the Bumiputra policy, would be taken into account, and that by joining the TPP, Malaysia’s economy and exports would grow significantly.  

Froman also said there is no rush to conclude the TPPA although the negotiations are nearing an end.

In fact, there is a great urgency for the talks to conclude within a few weeks, because of the US political calendar.

Chief negotiators are scheduled to meet in Guam later this week to iron out outstanding issues so that a meeting of Trade Ministers of the 12 countries can conclude the deal in the Philippines at the end of this month, following the APEC Summit.

Why the hurry?  The final TPPA has to be approved by the US Congress latest by December, to avoid the preoccupation with next year’s US presidential elections.

And half a year is needed for legal checking and other US procedures.  So agreement has to be reached by the Ministers by May or June, or else the deadline may be missed and the TPPA may have to await a new President and Congress, and thus be put into a mode of long suspension.

Other countries won’t negotiate their ‘bottom line’ (or final positions) until the US administration obtains ‘fast track authority’ from the Congress, meaning that the Congress can only vote yes or no to the whole TPPA, but cannot amend the agreement.

The Congress’ current sitting ends on 18 May, and it has to adopt the bills on fast track by then, or else the negotiators and the Ministers are most unlikely to achieve a breakthrough in their meetings this month.

This is one of the many hurdles to cross if the TPPA talks are to succeed.

First is the US politics itself.  Obama’s trade policy is unpopular with the public and with the Democrats.  There is doubt whether the fast-track bills (known as Trade Promotion Authority) can be passed by both the Senate and the House of Representatives.

If even one of these do not accept the bill, then the TPPA talks will be in trouble, as the United States’ partners will have no confidence that what its negotiators agree to will be approved by Congress, which has the power over trade deals. 

Second are contentious issues in the negotiations which are difficult to resolve. 

Most of the countries are opposed to the US demands on intellectual property.  These will jack up the prices of medicines to be even more out of reach for  ordinary people, and make it difficult for generic producers to operate; affect access to information and educational materials and farmers’ rights to save and exchange seeds.

Another issue is the TPPA’s investor-state dispute settlement system (ISDS) gives power to foreign companies to challenge government policies in a foreign tribunal and to obtain compensation (up to billions of dollars) for loss of future profits.

In April, a group of renowned legal experts, including Obama’s old Harvard University law mentor Laurence Tribe, sent a letter to Congress leaders pronouncing that the ISDS is contrary to America’s legal traditions and principles and undermines its democratic norms.

They are the latest to add their voice and weight to opinion among scholars, lawmakers and civil society in TPPA countries to object to the ISDS.

Malaysia and some other countries find serious difficulty in the proposed TPPA rules to curb the operations of state owned enterprises or even private companies that the government has a stake in. 

This may affect big companies such as Petronas and the many enterprises under Khazanah and possibly PNB and EPF.   Negotiations on whether some companies can be exempted are underway; future enterprises are almost certain to be affected and this will curb the ability to create new enterprises.

Government procurement will be opened to foreign goods and companies, above a certain threshold value of the projects, which will affect the opportunities and market share of locals which now enjoy preferential treatment.

The Bumiputra preferences, a cornerstone of Malaysian political economy, will be affected (though the extent and nature of the effects is still being negotiated).

And this is within the larger issue of loss of preferences and other advantages for local companies and goods (Bumiputra and non Bumiputra) through the chapters on investment, procurement, competition and services.

Third is the question of benefits.  Malaysia’s exports can be expected to increase due to better market access to the other TPPA countries.  However imports will also increase as Malaysia tariffs are eliminated.

Since our tariffs are generally higher than those of the US, the most important partner, Malaysia would have to make more concessions, and it can be expected that the trade balance would be negatively affected.

Fourth is the additional conditions that the US may impose on other TPP countries. After the Congress passes the TPPA, the US can still demand changes in Malaysian laws to implement the TPPA through a ‘certification’ process, as it has done in previous FTAs with Peru, Guatemala and Australia.

Many Congress members also demand that TPPA countries that are ‘currency manipulators’ (Malaysia has been mentioned as a candidate country) be punished, and there is a separate demand that countries involved in human trafficking (Malaysia has been mentioned) be excluded from agreements that enjoy the fast-track treatment.  

All these issues are already being hotly debated, even if the texts are still not officially available to the public.

If the TPPA negotiations conclude, the texts will at some stage be made public, and the debate can be expected to intensify.

But there are many hurdles to cross before that happens, and whether the political deadline can be met is still a big question, which will be answered in the next few weeks.