My Say: Will Parliament stop the CPTPP Frankenstein?

This article first appeared in Forum, The Edge Malaysia Weekly, on January 29, 2018 - February 04, 2018.
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Trade growth claims in government-commissioned pro-Trans-Pacific Partnership (TPP) agreement reports were premised on access to the US market, which is no longer on offer with the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP).

However, the most onerous aspects — such as enhanced intellectual property rights (IPRs)and investor-state dispute settlement (ISDS) — remain, continuing to threaten the national and public interest. Under normal circumstances, the TPP would be dead and buried by now after

US President Donald Trump announced America’s withdrawal immediately after his inauguration in January last year. After all, all major US presidential candidates in 2016 had opposed it before the election.

Ostensible trade gains from the TPP were derived using dubious techniques and assumptions. Supposed gains were miniscule, especially over the long term. Even pro-TPP economists conceded that it offered little growth due to trade liberalisation, contrary to the political and media hype.

For example, strengthening intellectual property monopolies for powerful transnational corporations (TNCs), especially major pharmaceutical firms, would undoubtedly raise the value of trade through higher prices, not more goods and services.

Even the TPP’s main US cheerleader, the private Peterson Institute of International Economics conceded that most (about 85%) purported gains would supposedly come from “non-trade issues” such as additional foreign direct investment due to enhanced investor rights.

To be clear, the original TPP too had little to do with trade liberalisation. Claims of gains from trade liberalisation were disputed by most analysts, including two US government studies by the Department of Agriculture’s Economic Research Service in 2014 and the International Trade Commission in 2016.

With the US’ withdrawal, even those modest supposed gains from trade liberalisation would come to next to nothing. Incredibly, there is not a single official report or serious paper that has offered any rationale for the CPTPP, let alone in terms of gains from trade liberalisation.

 

Hamlet without the prince

There is also no legal basis for proceeding with the CPTPP as the TPP agreement’s terms killed it if either the US or Japan pulled out. However, since January, the Japanese and Australian governments have aggressively pushed for the CPTPP, mainly to upstage China.

The Japanese and Australian roles in stalling the Regional Comprehensive Economic Partnership negotiations have already exposed their hand in frustrating the desire of others for more inclusive, less corporate-oriented regional economic agreements.

Various CPTPP governments have remained engaged for reasons of their own. Pressure from Japan and last-minute agreements to modify various onerous provisions have kept the other parties on board.

Most major TPP provisions are believed to remain despite their changed significance without the US as a party. But renegotiating the deal would open many cans of worms, which the

CPTPP boosters want to avoid to rush a deal.

The result is worse than a bad compromise as what remains is a construct with the chief architect, the US, out and the carcass modified piecemeal with no coherence or plausible rationale. Thus, CPTPP is a Frankensteinian creation with alarming implications for our future.

 

Higher prices for medicines

Contrary to the claim that strengthened IPRs are needed to enhance R&D, research on new medicines has not increased in recent decades despite greatly enhanced IPRs. Hence, Médecins Sans Frontières argued that the TPP would go down in history as the worst “cause of needless suffering and death” in developing countries.

The Malaysian Ministry of Health recently announced that it has contracted to provide a

12-week Egyptian generic treatment for Hepatitis C for the nearly half-million people infected in the country. The TPP would have disallowed this, requiring Malaysians, including the government, to pay about RM360,000, the price of the US patented treatment, instead of the ministry’s announced price of around RM1,300.

In 2015, Martin Shkreli raised the price of a drug he had bought the rights to by 6,000% or sixtyfold, from US$12.50 to US$750 per dose. As there is no US law against such price-gouging practices, he was only convicted last year of financial fraud for running a Ponzi scheme.

Clearly, relying on US laws would not have protected the interests of Malaysians. It is not clear if a US or European pharmaceutical firm can register in a TPP country to take advantage of its enhanced IPR protection.

 

Easing foreign takeover

FDI was also supposed to go up, thanks to the TPP agreement’s ISDS provisions. Foreign companies would then be able to sue TPP governments for alleged losses — including of potential future profits — ascribed to policy changes, even if in the national or public interest.

Under ISDS, regulations that already favour powerful TNCs, would be arbitered by supposedly “independent” tribunals. This extrajudicial system would supersede national laws and judicia­ries with secret rulings not bound by precedent or subject to appeal.

Thus, rather than trade promotion, the main purpose of the TPP appears to be more corporate-friendly rules for foreign investors. After all, the 6,350-page deal was negotiated by various working groups where representatives of major US TNCs could officially participate as advisers to advance their interests.

 

No more rationale

The pro-TPP reports commissioned by the Malaysian government were mainly premised on access to the US market, which is no longer on offer. Instead, onerous aspects, such as enhanced IPRs and ISDS, remain features of the CPTPP.

Thus, with nothing to gain in terms of market access to the US, the CPTPP will mainly strengthen Japanese TNCs and other CPTPP foreign investors. With greater rights for foreign investors than their domestic counterparts, investors will be induced to relocate abroad to gain such privileges and pay less taxes.

The growth of foreign ownership of the Malaysian economy over the last decade is thus likely to continue, if not accelerate with the CPTPP, further undermining prospects for economic progress under national auspices.

 

CPTPP a step backwards

Malaysian policymakers are under the illusion that CPTPP provisions will become the new standard for future trade agreements. In fact, the converse is likely to be true, with mounting criticism of the naïve earlier advocacy of economic liberalisation and strengthened property rights.

Some economic reformers defended the TPP as means to secure domestic economic reforms in Malaysia, but they should carefully reconsider what is now likely to happen instead. In any case, reform by subterfuge is never a good proposition.

With the earlier government-commissioned studies used to justify the TPP now irrelevant, there is absolutely no reason for Malaysia to join the CPTPP. Before Parliament is dissolved for the 14th general election, parliamentarians on all sides should save their compatriots from our likely fate under the CPTPP.

Although parliamentary approval is not legally required, Malaysian legislators from all parties should unite in the national and public interest to reject the CPTPP and save us all from its likely damaging effects. Malaysians deserve better and rejecting the CPTPP would be a good place to start a new politics in the national interest.


Jomo Kwame Sundaram was an economics professor and assistant secretary-general for Economic Development at the United Nations

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