This article first appeared in The Edge Financial Daily, on January 21, 2016.

KUALA LUMPUR: Trade organisations vociferously supported the Trans-Pacific Partnership (TPP) agreement yesterday, ahead of Parliament’s debate on the wide-sweeping free trade agreement next week and an anti-TPP protest this Saturday.

The vociferous support comes on the heels of recent critical analysis against the free trade agreement from former premier Tun Dr Mahathir Mohamad, academicians and small and medium enterprises (SMEs).

Seven trade organisations as well as textile and apparel industry players reiterated their support for the implementation of the TPP agreement yesterday.

Federation of Malaysian Manufacturers (FMM) Datuk Seri Saw Choo Boon said yesterday criticism levelled against the TPP needs to be based on facts and data.

“This is a free country and anybody can protest. But I think those who protest must behave responsibly, must give facts, don’t make accusations [and] don’t give general statements,” he told reporters when asked to comment on the protest against the TPP scheduled to take place this Saturday at Dataran Merdeka here.

“Don’t spread untruths and cause unnecessary alarm,” he said after a press conference on the TPP yesterday.

“We are just businessmen. We think the TPP provides a good opportunity for business but at the same time, businessmen don’t only just look at business and forget about everything else.

“We want to do business but in the correct way, in a way that benefits the country and rakyat,” he added.

Dr Mahathir said yesterday in a blog post that Malaysia will sign away its freedom as the government had inadvertently admitted that the TPP would limit the freedom to make laws deemed suitable and necessary, citing International Trade and Industry Minister Datuk Seri Mustapa Mohamed’s announcement that there is a need to amend 26 laws to meet the TPP’s requirements.

On Jan 11, former senior United Nations (UN) official Prof Dr Jomo Kwame Sundaram told a forum on the TPP that the UN global policy model — which incorporates the impact of the agreement on employment — had posited that the TPP will lead to employment losses in all countries, totalling 771,000 lost jobs as well as greater inequality with a lower labour share of national income.

Jomo said these projections rest upon two changes, namely that production for exports will partly replace production for domestic markets, with negative consequences, as exports are less labour-intensive and use more imported inputs than production for domestic markets.

The other change is that businesses in participating countries will strive to become more competitive by cutting labour costs, negatively affecting income distribution, thus further weakening domestic demand, he said.

He also said TPP will generate net gross domestic product losses in some countries, but not Malaysia, and that economic gains will be negligible for other participating countries, with developed countries to see less than 1% extra growth over 10 years, while developing countries will see less than 3% additional economic growth.

The Malaysia Small and Medium Enterprises Association president Michael Kang also reportedly said yesterday that about 30% of SMEs risk closing their business once the TPP pact is implemented as they struggle to meet higher labour and environmental standards under the agreement, if the government does not step in to shore up SMEs.

The FMM’s Saw, however, said the TPP agreement will see the elimination of import duties, which will save Malaysian industries about US$1.2 billion (RM5.24 billion) in import duties.

He said the agreement will also expand the government procurement market, with the TPP countries estimated to cumulatively present about RM700 billion worth of opportunities to foreign businesses.

US companies investing in Malaysia will be able to supply to the US government, with several key electrical and electronic companies projecting an increase in annual revenue by about RM165 million to RM655 million each, he added.

He also said the TPP will attract more foreign direct investment (FDI) as the free trade agreement will enhance transparency and corporate governance.

This is largely due in part to Malaysian businesses and the supporting system, as they are compelled to comply with standards practised in international markets.

“Our share of FDI over the years has been declining. The TPP agreement will address that,” he said.

He said Malaysia will be able to diversify its import sources and exports, especially in the automotive industry, where over 80% of Malaysian exports of automotive parts, particularly rubber components, are expected to enjoy duty-free access immediately.

Textile and apparel industry players also said upon implementation of the TPP agreement, Malaysian export-based manufacturers will see a tariff reduction of between 70% and 90% from member countries.

Malaysian Knitting Manufacturers Association (MKMA) president Tang Chong Chin said textile and apparel manufacturers enjoyed very thin margins. As such, any tariff reduction would mean a lot to them.

The United States, which is Malaysia’s largest trading partner in the TPP market, would reduce 73.7% of tariffs at entry once the TPP comes into force.

In addition, a total of 1,178 lines or 72.9% of tariff lines will be eliminated under the TPP. This accounted for 36.7% of total exports to the US.

Without the TPP, only 11% of tariffs or 0.9% of total exports are duty-free.

As such, Tang said the MKMA is confident that the sector would be able to grow at least 30% immediately upon the implementation of the TPP and is expected to double the business in a five-year period.

“As a player in the market, with that kind of elimination of duty given the Yarn Forward Rule and Short Supply List, we are quite positive to achieve this given the sufficient labour force to support our industry,” he told reporters after attending a dialogue on potential economic impact of the TPP pact on the textile and apparel industry in Malaysia.

Malaysian Textile Manufacturers Association (MTMA) president Datuk Seri Tan Thian Poh also said the projected growth could be more than the projection in the cost-benefit analysis conducted by PricewaterhouseCoopers.

“Our capacity utilisation is already very high, so once we build up our capacity, getting orders is not a problem. Pricing is not a problem right now, but it will be much better when the TPP is signed,” MTMA’s Tan said at the dialogue.

However, trade organisations also acknowledged that the TPP could pose unforeseen challenges to businesses in Malaysia and proposed the establishment of a high-level committee comprising various representatives from the government and the private sector to monitor the implementation.

The FMM’s Saw said a public-private partnership will be best suited to monitor the implementation of the TPP agreement.

“There may be new problems that come up [from the TPP], so we have to devise ways and means to overcome these problems,” he said.

“It is a very important agreement and we need to extract maximum value from it,” he added.

He said representatives from various ministries, such as the international trade and industry ministry, health ministry and human resources ministry, should be part of the committee with industry players that are exposed to the effects of the TPP.

“The committee should have about 20 representatives, 10 on each side,” he added.

Associated Chinese Chambers of Commerce and Industry Malaysia deputy secretary-general II Michael Chai said SMEs are resilient despite the many free trade agreements signed in the past.

According to Saw, 62% of Malaysia’s trade is already covered by free trade agreements.

“It is a natural process. With increased competition, some SMEs will have to close down for reasons such as being in the wrong industry,” Chai said at the press conference with the FMM.

“But there will also be new ones [to take the place of the old ones that have closed down] to cater to new industries,” he added.