| This year, we are confronted with a serious test to | | | | alone looks limited. |
| our sovereignty. And the most worrying part is that | | | | In fact, US exporters will benefit from the FTA since |
| most Malaysians are not aware of what's going on. | | | | average tariffs for industrial goods are higher in |
| I was traveling in the northern regions recently and | | | | Malaysia. The US position estimates that with an |
| casually asked Pak Haji, a padi farmer and Umno | | | | FTA, US exports to Malaysia will double by 2010. It |
| stalwart in his late 50s, if he had heard of the | | | | can be safely assumed that a significant portion of |
| Malaysia-United States Free Trade Agreement (FTA) | | | | that increase will be at the expense of locally |
| which is currently being negotiated. He said he had | | | | produced goods which would directly result in job |
| read about it in the Malay newspapers but really | | | | losses and a downward pressure on wages in the |
| didn't understand what it was all about. | | | | private sector. |
| I explained to him that the FTA was a legally binding | | | | Although investments from the US may increase on |
| document between our country and the US which | | | | the back of the FTA, there are many strings |
| would abolish nearly all tariffs and non-tariff trade | | | | attached to this. Top of the list of concerns would |
| barriers, and provide each other preferential access | | | | be the expropriation clause used in previous US |
| to each other's market. I was met with a blank | | | | bilateral trade agreements which basically means that |
| expression on his face. He then asked me, "What's in | | | | investors can take up cases against the host |
| it for me?" | | | | government should a change in government policy |
| Good question. I told him that currently we have a | | | | result in losses for the company concerned. |
| 40 per cent tariff on rice imports to protect people | | | | This effectively means that formulation of |
| like him and to enable us to become almost | | | | government policy must take into account the |
| self-sufficient in rice over the next few years. I | | | | bottom line of US companies above the welfare of |
| explained that was part of the reason why he saw | | | | citizens which directly undermines the sovereignty of |
| people smuggling rice during his shopping trips to | | | | any country. |
| Padang Besar at the Thai border. | | | | The FTA also promises market access for US firms |
| He wanted to know what would happen if the US | | | | into our services industry. The principle of reciprocity |
| could freely export their rice into Malaysia. I had to | | | | would suggest that the US market will also be open |
| tell him that the US and other developed countries | | | | to our corporations, but in reality it will lead to US |
| had extremely high subsidies on farming and that in | | | | companies dominating service sectors like |
| some cases it was better to be a cow in Europe | | | | telecommunications, banking and retail in Malaysia. |
| than a farmer in sub-Saharan Africa (the average | | | | Our service industry is not export-oriented, so the |
| Euro cow gets US$2 -- RM7 -- a day of subsidy | | | | benefit of opening up would accrue to the US firms |
| which is more than what half the people in the | | | | that are already global in their reach with more capital |
| developing world live on). | | | | and know-how. |
| His laughter trailed off quickly when I told him that | | | | In more graphic terms, would it be more likely to see |
| US rice farmers were so heavily subsidized that they | | | | CIMB branches mushroom out all over the US or for |
| are able to sell at 25 per cent below production cost | | | | Bank of America to exponentially expand its network |
| which means that US rice could flood our market and | | | | here? |
| force Pak Haji and 116,000 other padi farmers out of | | | | Any US FTA is also demanding on intellectual |
| work. | | | | property protection. This goes beyond the relatively |
| He said surely the government wasn't going to | | | | trivial concern of many Malaysians that there will be a |
| commit to such an absurd agreement. I couldn't give | | | | shortage of bootlegged Hollywood movies. |
| him a reply. Although I knew the government doesn't | | | | In fact, the real danger is that stringent patent |
| want to include rice in the market access list for the | | | | protection required by the FTA (which is more |
| FTA, the US was pushing hard for its inclusion. It may | | | | onerous than what is stipulated by the World Trade |
| well be one of the 58 contentious issues which the | | | | Organization) will mean that patents for medicine will |
| Minister of International Trade and Industry alluded to | | | | be secured for a longer period, thereby denying |
| when she was asked recently about the status of | | | | patients cheaper, generic options that can be |
| the talks without actually saying what they were. | | | | produced by local companies. |
| That's just rice. The litany of concerns surrounding | | | | The patent provisions will also mean that US drug |
| this FTA is considerably long. Apart from rice, the | | | | companies will be able to establish property |
| agricultural sector as a whole has cause for worry. | | | | ownership on plants indigenous to Malaysia that we |
| Currently our applied tariff for food items range from | | | | have used in alternative medicine. This may eventually |
| 10-40 per cent, all of which will be effectively | | | | mean that our farmers have to pay a US drug firm |
| removed under the FTA. This will have a profound | | | | for even the right to cultivate these plants or the |
| effect on the agricultural sector which is experiencing | | | | equally disturbing prospect of Mawi promoting Pfizer |
| a new lease of life under the Prime Minister's green | | | | Ali Cafe proclaiming that the US-owned blend is now |
| revolution. | | | | "my choice". |
| After Mexico inked the North American Free Trade | | | | As far as government policy is concerned, apart from |
| Agreement (NAFTA) with the US and Canada, at | | | | the expropriation clause and the obvious loss in tariff |
| least a third of their farmers were impoverished due | | | | revenue, the FTA is set to introduce new policies to |
| to the subsidized US corn that flooded into their | | | | regulate competition which not only tilt the playing |
| market. | | | | field towards US companies but actually take away |
| The US is notorious for protecting their farmers, and | | | | the option for the government to direct |
| even then not all American farmers benefit since only | | | | government-linked companies from undertaking |
| one per cent of farms (usually the rich, corporate | | | | unprofitable but socially responsible investments. |
| farms) receive almost 25 per cent of subsidies. | | | | It will also introduce other "Singapore Issues" such as |
| And while the whole point of the FTA is reciprocity, | | | | transparency in government procurement which is |
| in other words what you give me I give you equally, | | | | used as a policy tool to develop local, especially |
| market access for our agricultural products to the US | | | | Bumiputera companies, and open this up to US |
| may continue to be stymied notwithstanding the | | | | corporations. The FTA will effectively take that policy |
| agreement. | | | | option away from the government and curtail its |
| Tariffs are not the only way to block imports, and | | | | ability to develop local businesses. |
| our agro-exporters will continue to confront arbitrary | | | | The concerns listed above are well documented and |
| health standards and photon-sanitary conditions | | | | the ministry tasked with negotiating the FTA has |
| designed to protect the American consumer from | | | | been bombarded with memoranda with similarly |
| disease. | | | | expressed arguments against the agreement. |
| The issue here is that sometimes these technical | | | | The government has repeatedly stated that any |
| standards are not the product of scientific evaluation | | | | FTA signed will not cede economic sovereignty to |
| but rather the dictates of the domestic food lobby in | | | | the US, including the many points that have been |
| the US. | | | | highlighted in this article. |
| There is also the issue of tariff escalation. We may | | | | Which naturally then begs the question, if all of these |
| be hoodwinked into thinking that tariffs for our | | | | concerns are off the table, what's there left to |
| agricultural produce will be eliminated. This may be | | | | discuss? There is no way the US, with other bilateral |
| true for raw materials that meet US health | | | | agreements under its belt, will agree to anything |
| requirements, but if the food items are processed in | | | | watered down. As far as most trade analysts are |
| Malaysia and the higher-value added items exported, | | | | concerned, the US will not sign an FTA if it doesn't |
| it will be met with higher tariffs. These barriers are | | | | get its way on all of these "sensitive" issues. |
| designed to preserve higher value-added economic | | | | I hope that the minister with all her experience, |
| activity within the US and effectively consigning | | | | wisdom and resolve will stand her ground. Don't rush |
| developing countries at the basic (and less lucrative) | | | | in to anything. It doesn't matter to Malaysians if we |
| stage of the supply chain. | | | | cannot conclude an agreement before July to take |
| In manufacturing, pro-FTA advocates assure us that | | | | advantage of US Congressional approval for the |
| the agreement will create profits and jobs by opening | | | | president to fast-track an agreement. |
| up the US market for our exports and also by | | | | What matters more is that any agreement on trade, |
| increasing the flow of US direct investment into | | | | whether it is a multilateral or bilateral variety, is one |
| factories and plants in Malaysia. | | | | that promotes fair trade and not free trade. |
| As far as our exports to the US are concerned, 80 | | | | In this auspicious year when we celebrate 50 years |
| per cent are currently subjected to zero import duty | | | | of nationhood, let us demonstrate that we will not |
| and a further 15 per cent pay 0-5 per cent, so the | | | | sign away our freedom and dignity. |
| scope for further increase based on tariff reduction | | | | |