TPP – The Sticking Points

 26 June 2013

In the third part of our series we continue our interview with the Ministry of International Trade and Industry (MITI) and look at some of the sticking points that keep coming up in discussions on the Trans-Pacific Partnership (TPP) agreement. We ask the MITI representatives to answer or explain some of these issues, as we continue to try and separate genuine facts from misinformation. Also present at the discussion is an external consultant of the World Trade Institute, Suffian Jusoh who offers explanations of some of the more controversial areas of negotiation.

 One of the broader implications of the secrecy surrounding the Trans-Pacific Partnership (TPP) negotiations, is a lack of access to verifiable details and the scope of what is actually being negotiated and discussed.

This has caused many to rely on past agreements and leaked documents to come up with some idea of what is in fact on the table. As a result there is a wide range of conclusions and information out there, that may or may not be accurate.

We talk to representatives from the Ministry of International Trade (MITI) and Industry to try and get a better idea of Malaysia’s position on some of the more hot button issues. These include suggestions that the investor state dispute settlement (ISDS) system is a threat to Malaysia’s sovereignty and that America may be strong-arming its counterparts into a lopsided agreement.

Below are MITI’s responses to some of the issues that are extremely relevant to Malaysia’s position and which need to be carefully negotiated to ensure that the country is adequately protected, to ensure that businesses and the government will not be at a disadvantageous position at the conclusion of the TPP.

Will the investor-state dispute settlement impede the ability of the Malaysian government to make laws and policy?

There are grave concerns over the investor-state dispute settlement (ISDS) system and that it might be used by big business to circumvent laws or that after it is signed impede the ability of the government to make laws for fear of being sued. Many critics especially fear that it could be used to get by laws put in place to protect the environment and health.

KiniBiz asks MITI if the ISDS system might jeopardise Malaysia’s sovereignty in any way at all or restrict the government’s capability to enact laws in the best interest of its citizens.

Rebecca Sta Maria (secretary-general MITI): We have had investment guarantee agreements, and the first one was with the United States way back in 1959 and then reviewed in 1965. So it is there, with a host of other countries, it is not like it is something new.

There have been four cases over the years, two taken by Malaysian corporations against foreign governments and two brought against us (the Malaysian government). Malaysian corporations won one in Chile and there was an out of court settlement between another and the government of Ghana.

Then there have been two against us (the Malaysian government), out of which one has been dismissed and the other is currently stalled.

Suffian Jusoh (External Consultant, World Trade Institute): I have been involved with other companies…a few other Malaysian companies that had an intent to take suits against foreign governments.

So it works both ways, there are cases where Malaysian investors are facing problems overseas. It is not just someone coming over here and making trouble against us. It is also protecting Malaysian companies.

KiniBiz: So it will not impede the government’s ability to make laws?

Sta Maria: Absolutely not

J Jayasiri (Malaysia’s chief negotiator on the TPP): Actually the ISDS does not say anything about rules or disciplines, it is a procedural agreement of how to arbitrate. The actual substance in the agreement, which allows governments to regulate for a host of reasons, such as health, security, morals and etc.

These are all made as exceptions to the agreements, and these are the areas in which the governments usually want to regulate.

Are SMEs and Bumiputera businesses at risk?

A genuine concern with the TPP, is how much it is going to impact the protections and privileges given to small and medium enterprises (SME) and other protected groups. With the vast majority of local companies being SME’s, the fear is that by opening market access there will be an influx of multinational corporations coming into Malaysia which will ultimately lead to shutting out of the local players.

Furthermore, certain groups fear that the privileged or preferential access afforded to them, to help them grow their businesses may also be removed as a consequence of enhanced competition laws.

A main area where SMEs and privileged companies might be severely affected is in the area of government procurement.

KiniBiz asks MITI if SME’s and other protected groups have anything to fear and if they are going to be shut out of the key lucrative market that is government procurement.

Jayasiri: This is the first time we are negotiating government procurement. It has never gone into any of the previous FTAs before. It is in this one, and it will go into the European Union one as well because it is the scope that has been decided.

We knew that going into the TPP, with procurement included that we needed certain safeguards. We are negotiating safeguards, not just Malaysia, but other countries as well. Even the Americans have certain safeguards on government procurements. Some areas are carved out for various groups.

So we are also going in, asking for certain flexibilities. In each area of negotiations there are two parts, one is the text that has the rules and disciplines. The other one is the market access component, and this is the area of concern for us.

People don’t want us to open up the SME suppliers sector or the Bumiputera sector, so we have not offered this as our commitments. We are only making an offer for entities that procure and would not impeach on small suppliers and bumiputera suppliers. So that is the safeguard that we have.

Now this is our position, and it will not necessarily be accepted fully by the others, as the negotiations are going on. But that is our position and we are working on a carve out (sections that are exempt) to safeguard the Bumiputera and the SME interests.

Sta Maria: And this is being led by the Ministry of Finance (MOF). MOF is the custodian that leads this working group.

Also,if you look at our procurement now, it is already fairly open. There is substantial international procurement already, so perhaps again there is this fear of fear. There is this fear that suddenly we will be swamped by all these Americans, who will come in and take over.

But there is also another factor, and that is that because we are not members of the World Trade Organisation’s Government Procurement Agreement (GPA) our companies do not have access to some of the entities (areas of government procurement) in the other negotiating countries that members of GPA have. So we cannot supply to certain areas, and for example say we cannot supply to schools in GPA member countries. That is a huge market lost.

So we have some groups coming to us saying they are very keen on joining this agreement. Because for them it is opening up, but not just opening up our market but opening up Malaysia’s opportunities as well.

So this gives us opportunities we do not have because we are not members of some other agreements.

Jayasiri: And there has always been this thing about equity, they are saying that we can’t go into (compete in) government procurement markets of other countries. But this has been proven wrong…we have discovered that there are actually SMEs that have bid and won government procurement contracts to supply other countries.

KiniBiz: Currently for government procurement, you have to do it with a local company if there is a foreign partner. Therefore after TPP, there might be a push to allow foreign companies to go straight for the contract. This might be seen as a positive, as it cuts out the middleman and brings the cost down. But one assumes that this will be another area opposed by the local companies?

Sta Maria: But even in those, there are carve outs and thresholds being negotiated. So nothing has been agreed upon yet.

Jayasiri: So whatever we offer, for instance we name the entities in our offer and only procurements for these are subject to discipline (open to increased market access). The rest can continue with the current practice.

Suffian: When it comes to government procurement, there are three annexes, central, sub-central and local level. So you name the entities at each level that you want to open.

So you can carve out a lot of things. For example in the United States-Bahrain FTA, they totally carved out all the states. So all the states are not in the list at all and Bahrain suppliers cannot supply to those not in the list.

Sta Maria: So you see, its not open to everything, and I think one of our problems is that we have not been able to explain this. Therefore people think, we are opening everything up to everybody.

Will pharmaceuticals be adversely affected?

The biggest fear for the man on the street is the concern that the price of medicine is going to shoot up following Malaysia signing on to the TPP agreement. It has been implied that the increase might range from a two-fold jump to prices rising a hundred times.

While talk of such a significant rise is more obviously flawed, the fear that any extension to patents affecting access to affordable medicine is not. Furthermore, while there is the obvious need to make innovation worthwhile for the drug companies, it is equally important to ensure that nobody is shut out in battle between innovation versus access.

KiniBiz asks MITI what exactly is being proposed by the countries asking for more protection of the intellectual property rights of the pharmaceuticals and what that would mean for prices in Malaysia.

Jayasiri: To understand the issue better, there is a proposal basically asking for an extension of the protection that the drug companies are getting. People fear that when you prolong the protection then generic drug production will be delayed. As a result of this delay, people who are using innovative drugs will have to keep paying the high prices.

But if you don’t give sufficient protection to innovators and drug companies, then you will forever be having the same type of drugs. There has to be some inducement for them to innovate. So that is the real challenge, how do you find that balance between the two needs.

So our negotiating position, is that there needs to be a balance. If you are going to give protection, then you must also give some opportunity for the masses to access affordable healthcare.

Sta Maria: This is being led by the Ministry of Health and they are discussing this with their constituents. And there are two folks at the table here. One is the Malaysian Organisation of Pharmaceutical Industries (MOPI) and the other are the pharmaceutical companies…which are the international and multinational pharma agencies.

The Ministry of Health does the balancing between the different wants of these two parties, and will come to decision that takes into account the positions of both.

KiniBiz: So is it more of a delay in the prices going down, rather than existing prices going up?

Jayasiri: Yes,rather than prices going up.

Suffian: Let me explain how it works in other FTAs. If we look at the US-Singapore FTA, as they have this particular provision, the maximum extension period is three years. And the company can file for this at any time after the drug enters the market.

So you can assume that the patent will run for an extra three years from the very start, you will know in advance and it will not come as a surprise.

Is America unfairly imposing its will on the negotiations?

One of the biggest concerns is that Malaysia and others around the negotiating table are being pressured into agreeing to a final document that is lopsided in America’s favour.

KiniBiz asks MITI if it is true that the Americans are using their considerable might to get the other nations around the table to sign an unfair proposal. We also address concerns that this may be a geopolitical struggle between the US and China, with the former trying to limit China’s sphere of influence in the region.

Jayasiri: Everyone is free to table proposals, so on the table today we have proposals from all the parties, not just the US. There are positions taken by the US against other proposals and there are positions taken by others against the US proposals. They are all on the table – 17 rounds have gone by, if everybody agreed to the US proposals, the rounds would have finished long ago.

The difficult issues are attributed to the US, for instance pharmaceutical related IPR (intellectual property rights) issues, environment and labour (although these are not solely from the US). There are other countries which are also concerned.

Even Malaysia has proposals on the table, which are not resolved yet. So I think it is important to stress these are not negotiations about the US. I read somewhere that China is also its doing own internal (studies into TPP).

Sta Maria: China and Taiwan, are among those doing their own internal studies to see (if they want to join the TPP). The TPP is a step to FTAs for Asia Pacific, so whoever is a member of APEC (Asia Pacific Economic Cooperation) can opt in. So other nations in the area are also looking into it.

Is the opposition’s request for a parliamentary select committee possible?

Following an engagement meeting with MITI, opposition MPs Nurul Izzah, Wong Chen, Charles Santiago and Dzulkefly Ahmad called for a bipartisan parliamentary select committee to be setup, to allow for the parliamentarians to keep an eye on progress of the negotiations.

In a joint statement, they said “in the interest of the public at large, we would urge a bipartisan parliamentary select committee on the TPP to be set up.”

During a discussion with KiniBiz, Wong Chen reiterated their position saying “on the Malaysian side the transparency is sorely lacking even to the point that parliamentarians are being kept in the dark.” The parliamentarians have a role to play, that is to look at the parameters and the broader context of what is being negotiated and the lack of information has impeded our ability to do so, he added.

KiniBiz asks MITI to respond to accusations that it has not been forthcoming in providing information to the parliament and on requests for a bipartisan parliamentary select committee.

Jayasiri: Since we announced the TPP, we have answered all questions asked of us in parliament, so to say that it has not been discussed in parliament is not true.

Sta Maria: With the select committee, that has to be a government decision. Nurul Izzah raised it with us, and I said that if it is bipartisan I would like to see it.

Because we have had Parliamentary Select Committees that were not bipartisan and it has not worked (in easing the concerns). But that is not our call.

Source : http://www.kinibiz.com/story/quotes/31530/is-the-secrecy-really-necessary.html