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Why is Malaysia still committed to the CPTPP fraud?

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Malaysiakini | 7 August 2020

Why is Malaysia still committed to the CPTPP fraud?

by Jomo KS

COMMENT | In more normal circumstances, the Trans-Pacific Partnership (TPP) Agreement would be dead and buried by now after President Trump announced US withdrawal immediately after his inauguration in January 2017. All major US presidential candidates in the last election, even Hillary Clinton, had opposed the TPP.

However, the Japanese, Australian and Singapore governments have kept the TPP alive, first by mooting TPP11, i.e., minus the US, later relabelled the Comprehensive and Progressive TPP (CPTPP). Other governments have remained ‘on board’ for reasons of their own, mainly due to foreign policy considerations, rather than with serious expectations of economic benefits.

The CPTPP did not even get rid of the most onerous TPP provisions, but only suspended some intellectual property (IP) and other provisions, mainly of interest to the US. These can easily be reincluded to bring the US back in after the November election.

However, other onerous aspects, such as investor-state dispute settlement (ISDS) provisions, remain. Already lawyers are offering foreign investors advice on how to use extraordinary Covid-19 measures to sue governments under ISDS which will be costly even if they do not lose.

But as the TPP was intended to isolate and weaken China, the ISDS chapter can easily be removed to bring the next US government back in, if the Trump administration continues to oppose ISDS. If Trump loses, Biden will probably revive a TPP avatar, having advocated it before, as Obama’s loyal vice-president.

But repackaging and reselling the TPP avatar in the US will not be easy. Already, many US manufacturing jobs have been lost to corporations automating and relocating abroad. Trump’s presidency has changed US public discourse so much that most Americans now blame globalisation, including immigration, China and foreigners for many of the problems they face.

Much ado about nothing

Various studies have shown that supposed trade gains from the TPP claimed by its advocates were greatly exaggerated and misleading. This should come as no surprise.

The US already has free trade agreements with six of the other 11 TPP countries. Trade barriers with the remaining five countries were already low in most cases, so there was little scope for further trade liberalisation, except for Vietnam due to the war.

All 12 also belong to the World Trade Organization (WTO) which concluded the ‘single largest trade agreement ever’ over a quarter-century ago. Bilateral and plurilateral, including regional FTAs, undermine trade multilateralism, as noted by trade liberalisation advocate, Jagdish Bhagwati.

Even the Peterson Institute of International Economics (PIIE), the greatest TPP advocate, claimed gains would mainly come from ‘non-trade issues’, especially additional foreign direct investment (FDI), due to enhanced investor rights, implying greater concessions from host economies.

But the official US International Trade Commission criticised their claims of significant growth benefits, even before Trump’s presidency. Supposed gains were actually paltry, given the long-term horizon involved.

Thus, rather than trade promotion, the TPP mainly promoted more TNC-friendly rules. After all, the 6,350-page deal was negotiated by various working groups including hundreds of representatives of major US transnational corporations (TNCs) advancing their interests.

Enabling foreign corporate bullying

Strengthening intellectual property (IP) monopolies for powerful TNCs, such as major pharmaceutical firms, would certainly raise the value of trade through higher prices, not more goods and services. But there is no evidence that stronger IP rights (IPRs) have increased innovation, research and development.

The TPP would have extended patent and other IP protections, raising the prices of protected items, such as pharmaceutical drugs, including ‘biologics’, which would significantly raise the cost of health, even survival, in Covid-19 times. Medecins Sans Frontieres argued that the TPP will go down in history as the worst “cause of needless suffering and death” in developing countries.

In 2015, Martin Shkreli raised the price of a drug whose patent he had bought by 6,000%, from US$12.50 to US$750! As ‘price-gouging’ is not unlawful in the US, he could only be convicted for unrelated financial fraud. Clearly, US laws will not protect consumers anywhere.

FDI was expected to go up due to the TPP’s ISDS provisions. Foreign companies could then sue TPP governments, e.g., for ostensible loss of profits, including future profits, due to policy changes, even if in the national or public interest, e.g., for Covid-19 contagion containment.

Regulations, already favouring foreign investors, are arbitered by private tribunals. This extrajudicial system supersedes national laws and judiciaries, with often secret rulings not bound by precedent or subject to appeal.

All who have seriously studied TPP impacts concede that it offered little additional growth to Malaysia. Even the modest trade growth claims in Malaysian government-commissioned pro-TPP reports were premised on US market access, no longer on offer with the CPTPP. However, onerous aspects of the TPP, such as ISDS, remain, threatening the national and public interest.

With the US out, the CPTPP will mainly strengthen Japanese and other TNCs. With greater rights for foreign investors, investments – foreign and Malaysian – may be induced to relocate abroad, e.g., in Singapore. Declining foreign direct and portfolio investments in Malaysia in recent years could well accelerate with the CPTPP.

Little gain, much risk

The Covid-19 pandemic has precipitated severe recessions as most governments failed to take adequate early precautionary measures to limit contagion and consequently had to impose nationwide ‘stay in shelter’ lockdowns with physical distancing and other preventive requirements disrupting economic life.

Transborder supply chains have been disrupted, sometimes deliberately in many instances, with the US and Japan demanding ‘onshoring’, urging TNCs to withdraw investments and outsourcing from China, also hurting China’s suppliers, largely from the region, including Malaysia.

It is now abundantly clear that the CPTPP has not only proved irrelevant in the face of such trade protectionism but would actually strengthen IPRs, raising the costs of Covid-19 tests, treatments and vaccines.

Powerful giant pharmaceutical TNCs are already making clear their intention to charge high prices for new vaccines, limiting access by the poor. Whereas vaccines for smallpox, polio, tuberculosis and other communicable diseases have been effective because they were freely available, enhanced IPRs will impose a heavier health burden than need be the case.

JOMO KS was an economics professor and Assistant Secretary General for Economic Development at the United Nations.


 source: Malaysiakini