Just International

UN: M’sia will lose big under TTPA

By Nizam Mahshar

A new paper by a United Nations senior economist has shown damning evidence that should Malaysia join the Trans-Pacific Partnership Agreement (TPPA), it will not be overtly beneficial for the country’s domestic value-added trade, and may in fact prove detrimental to certain industries.

In her report, Rashmi Banga of the Unit of Economic Cooperation and Integration among Developing Countries (ECIDC) showed that Malaysia will have an unfavourable balance of trade (BOT, defined as exports minus imports) of negative US$300 million per annum, roughly RM900 million per annum specifically to the United States.

This means that while our government insists that the TPPA promises that “benefits outweigh costs”, it is only a half-truth.

According to the paper, under the TPPA, while Malaysia’s exports will increase to other TPPA countries, its imports from these countries will increase by even more, thereby resulting in a net loss in Malaysia’s trade balance.

In 2013, Malaysia exported US$93.7 billion worth of goods to 11 TPPA countries, and imported US$73.9 billion from them. Malaysia thus enjoyed a US$19.8 billion surplus in trade.

The new paper showed that once the TPPA was implemented, Malaysia’s exports to these 11 countries would increase by US$1.5 billion (from US$93.7 billion to US$95.2 billion) while its imports would rise by more than US$2.9 billion (from US$73.9 billion to US $76.8 billion).

Therefore, the BOT for Malaysia will worsen by US$1.465 billion (or RM4.79 billion) causing its trade surplus to fall from US$19.84 billion to US$18.37 billion.

This worsening trade balance for Malaysia may even be more simply because the paper assumed that Malaysia would be able to export more textiles and clothing to the United States, at zero tariffs and without other impediments.

In actual fact, the US is insisting on a “yarn forward rule”, where TPPA countries like Malaysia can only use yarn from other TPPA countries when producing textiles and apparel. Thus, the cost of production of some of Malaysia’s textiles and clothing will be more costly as it will not be able to continue to use yarn from lower cost countries like China or even Indonesia.

Thus the estimated increase in Malaysian exports of textiles and apparel to the United States by about RM454 million (US$139 million) may exaggerate the gains for Malaysia. If the increase of textile exports is less than this RM454 million, then the loss in trade balance for Malaysia will be more than RM4.79 billion per annum. The loss could be even more than RM5 billion per annum.

While it is true that this amount may be small, it will have a big impact on Malaysians as a whole in terms of employment.

In addition to this, Rashmi added that if the TPPA was signed, Malaysia would be seeing an increase in imports of as high as 61% in terms of electrical machinery from the United States and an increase of as much as 97% in the import of vehicles and 90% in iron and steel from Japan.

The steel industry, electrical machinery and automotive sector already exists in Malaysia and will face stiff competition once the TPPA is implemented. We all know that these sectors employ tens of thousands of local Malaysians, are ailing, very dependent on government funds and policies and will now have to compete on a global level.

The economist also said that the gross exports of our business services – which Prime Minister Najib Razak said was getting support for further growth in Budget 2015 – contributed a domestic value-added (DVA) export of only 3.8%.

There were also intangible negatives in terms of intellectual property rights which would affect the price of medicines. Also affected will be investor state dispute settlements, proving that this agreement will not be beneficial to Malaysia from any perspective whatsoever.

So yet again, our Prime Minister is guilty of painting us a rosy picture that is factually untrue. Bantah TPPA calls on the Minister of International Trade and Industry, Mustapa Mohamed, and also Najib to clarify their stance.

Where are these facts that support the argument of “benefits outweigh costs”? Where is the cost benefit analysis report that was due out in May 2014?

Until all these questions are answered with facts, figures and direct engagement with civil society and stakeholders, Bantah TPPA will continue to call on everyone to protest against this deal.

It is not beneficial to us and we have economists from the United Nations such as Rashmi, Nobel Peace Prize winners like Joseph Stiglitz and even local economists here who say that the agreement is a bad idea.

In fact, we even had Jean Pierre Lehmann from the International Institute of Management Studies based in Switzerland (which offers the world’s best MBA programme) tell the Global Economic Symposium (GES), that the TTPA was a “stupid idea”.

The ball is now in Najib’s court – please counter the arguments of these brilliant people.

Nizam Mahshar is Chairman of Bantah TPPA

22 October 2014