Consumers Association of Penang

Giving voice to the little people...since 1970

Put a hold on FTAs with the US and EU

altThe Malaysian Government last week has been negotiating free trade agreements  (FTAs) with the United States of America (via the Trans-Pacific Partnership Agreement or TPP) and with the European Union (EU). These negotiations were taking place, simultaneously in Auckland, New Zealand (from Dec 6 to 10) and in Brussels, Belgium (Dec 6 to 9).

The Consumers Association of Penang is deeply concerned about the implications of these FTAs on the various aspects of Malaysia’s development.
The highly problematic bilateral Malaysia-US FTA negotiations were stalled before, but the US is very likely to demand the same things in the TPP in the current round of negotiations.
Since the bilateral Malaysia-US FTA negotiations began, the world has experienced its most severe financial and economic crisis since the Great Depression of the 1930s, a food crisis that appears to be set to recur as a result of food prices rising again, and with the need for action on climate change becoming more urgent.

Based on their past FTAs, in addition to opening Malaysia’s economy to foreign companies (including for government procurement – which will mean the government is less able to assist the Orang Asli and other disadvantaged communities), the EU and TPP FTAs will worsen all of these crises and make it more difficult for Malaysia to implement the measures needed to prevent such crises from recurring.

Locking the nation and people into repeating the mistakes of the past is not what a 21st century agreement should do!

For example, the Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System, which included Bank  Negara Governor Tan Sri Dr Zeti Akhtar Aziz, recommended a series of regulatory measures to be taken to prevent another financial crisis, similar to the current one, from recurring, and to make it easier to deal with a crisis once it occurs.

Many of these measures, such as the Glass-Steagall type firewalls and capital controls for long enough periods on inflows and outflows, are unlikely to be permitted, let alone accepted, by the EU and US in these FTA negotiations.

In addition, the recent food crisis has shown the importance of food self-sufficiency. However, Malaysia’s rice and other farmers will not be able to compete with imported food from the US and EU if they force Malaysia to remove its agriculture tariffs – while they keep their huge subsidies – in these FTA negotiations.

Malaysian farmers are also likely to find it more expensive to produce food crops because of the stronger intellectual property protection on seeds and other agricultural inputs that the EU and US are likely to demand in these negotiations.

These FTAs are also expected to increase medicine prices in Malaysia because of the stronger intellectual property (IP) protection demanded by the US and EU.

When Guatemala implemented its FTA with the US, the data exclusivity type of IP that the US demanded in the FTA caused a medicine to be 845600%  more expensive. (The generic version was available for $0.01 and the version protected by data exclusivity cost $84.56).

The higher prices predicted for just five medicines in Australia due to IP monopolies being extended for two years under its FTA with the US were more than 28 times greater than the gains estimated by the Australian Parliament’s Senate Committee for the whole Australia-US FTA.

In the case of the TPP, the US is very likely to demand a five-year monopoly from Malaysia.

Last week, the New Zealand government’s position on the IP chapter in the TPP was leaked.

Since New Zealand is a net IP importer, like Malaysia, it recognises that it does not really benefit from greater IP protection and it is also concerned about the impact of increased IP protection on medicine prices in the country, where the government subsidises medicines. Therefore, New Zealand has basically said that it is not willing to agree to a stronger IP in the TPP.

Moreover, the US and EU are also likely to demand stronger rights for their investors. These rights would make it more difficult to regulate companies, for example to reduce emissions that cause climate change, or to take measures to reduce the risk of financial crises. In one case alone under these types of provisions, the investor claimed damages of more than $50billion.

Based on disputes brought by investors under equivalent investment chapters in other US-FTAs, these investor protections may also prevent Malaysia from implementing environmental and health regulations, such as banning toxic chemicals or implementing tobacco control measures. For example when the Canadian Government wanted to change its cigarette packaging to discourage people from smoking so much, Philip Morris threatened to sue the Canadian Government under the North American Free Trade Agreement (involving Canada, Mexico and the USA). After receiving this threat, the Canadian Government never implemented its proposed changes. 10,000 Malaysians a year are already estimated to die from smoking-related diseases according to our Ministry of Health which spends almost half of its budget on treating tobacco-related disease.  How will we be able to stop this tragedy if we sign such FTAs?

Given the dangers and risks involved in entering into these FTAs, we urge the government not to embark on FTAs that will be imbalanced and detrimental to the interests of Malaysia and the general public.

We also call on the government to conduct and make public all quantitative and qualitative studies on the implications and impact of any FTA it enters into.

Letter to Editor - 13 December 2010