‘Free trade’ in trouble in the United States

 

  The United States

  Current Bilateral/Multilateral FTA's

  Proposed/Suspended Bilateral/Multilateral FTA's

https://en.wikipedia.org/wiki/United_States_free_trade_agreements

As free trade reaches a crossroads in the US, developing countries have to rethink their own trade realities for their own development interests.

“FREE trade” seems to be in deep trouble in the United States, with serious implications for the rest of the world.

Opposition to free trade or trade agreements emerged as a big theme among the leading American presidential candidates.

Donald Trump attacked cheap imports especially from China and threatened to raise tariffs. Hillary Clinton criticised the Trans-Pacific Partnership Agreement (TPPA) which she once championed, and Bernie Sanders’ opposition to free trade agreements (FTAs) helped him win in many states before the New York primary.

That trade became such a hot topic in the campaigns reflects a strong anti-free trade sentiment on the ground.

Almost six million jobs were lost in the US manufacturing sector from 1999 to 2011.

Wages have remained stagnant while the incomes of the top one per cent of Americans have shot up.

Rightly or wrongly, many Americans blame these problems on US trade policy and FTAs.

The downside of trade agreements have been highlighted by economists like Joseph Stiglitz and by unions and NGOs. But the benefits of “free trade” have been touted by almost all mainstream economists and journalists.

Recently, however, the establishment media have published many articles on the collapse of popular support for free trade in the US:

> Lawrence Summers, former Treasury secretary, noted that “a revolt against global integration is under way in the West”. The main reason is a sense “that it is a project carried out by elites for elites with little consideration for the interests of ordinary people”.

> The Economist, with a cover sub-titled “America turns against free trade”, lamented how mainstream politicians are pouring fuel on the anti-free trade fire. While maintaining that free trade still deserves full support, it cites studies showing that the losses from free trade are more concentrated and longer-lasting than had been assumed.

> Financial Times columnist Phillip Steven’s article “US politics is closing the door on free trade” quotes Washington observers saying that there is no chance of the next president or Congress, of whatever colour, backing the TPPA. The backlash against free trade is deep as the middle classes have seen scant evidence of the gains once promised for past trade deals.

> In a blog on the Wall Street Journal, Greg Ip’s article The Case for Free Trade is Weaker Than You Think concludes that if workers lose their jobs to imports and central banks can’t bolster domestic spending enough to re-employ them, a country may be worse off and keeping imports out can make it better off.

Orthodox economists argue that free trade is beneficial because consumers enjoy cheaper goods. They recognise that companies that can’t compete with imports close and workers get retrenched. But they assume that there will be new businesses generated by exports and the retrenched workers will shift there, so that overall there will be higher productivity and no net job loss.

However, new research, some of which is cited by the articles above, shows that this positive adjustment can take longer than anticipated or may not take place at all.

Thus, trade liberalisation can cause net losses under certain conditions. The gains from having cheaper goods and more exports could be more than offset by loss of local businesses, job retrenchments and stagnant wages.

There are serious implications of this shift against free trade in the US.

The TPPA may be threatened as Congress approval is required and this is now less likely to happen during Obama’s term.

Under a new president and Congress, it is not clear there will be enough support.

If the US does not ratify the TPPA, the whole deal may be off as the other countries do not see the point of joining without the US.

US scepticism on the benefits of free trade has also now affected the multilateral arena. At the World Trade Organisation, the US is now refusing attempts to complete the Doha Round.

More US protectionism is now likely. Trump has threatened to slap high tariffs on Chinese goods. Even if this crude method is not used, the US can increasingly use less direct methods such as anti-dumping actions. Affected countries will then retaliate, resulting in a spiral.

This turn of events is ironic.

For decades, the West has put high pressure on developing countries, even the poorest among them, to liberalise their trade.

A few countries, mainly Asian, staged their liberalisation carefully and benefited from industrialised exports which could pay for their increased imports.

However, countries with a weak capacity, especially in Africa, saw the collapse of their industries and farms as cheap imports replaced local products.

Many development-oriented economists and groups were right to caution poorer countries against sudden import liberalisation and pointed to the fallacy of the theory that free trade is always good, but the damage was already done.

Ironically, it is now the US establishment that is facing people’s opposition to the free trade logic.

It should be noted that the developed countries have not really practised free trade. Their high-cost agriculture sector is kept afloat by extremely high subsidies, which enable them to keep out imports and, worse, to sell their subsidised farm products to the rest of the world at artificially low prices.

Eliminating these subsidies or reducing them sharply was the top priority at the WTO’s Doha Agenda. But this is being jettisoned by the insistence of developed countries that the Doha Round is dead.

In the bilateral and plurilateral FTAs like the TPPA, the US and Europe have also kept the agriculture subsidy issue off the table.

Thus, the developed countries succeeded in maintaining trade rules that allow them to continue their protectionist practices.

Finally, if the US itself is having growing doubts about the benefits of “free trade”, less powerful countries should have a more realistic assessment of trade liberalisation.

As free trade and trade policy reaches a crossroads in the US and the rest of the West, developing countries have to rethink their own trade realities and make their own trade policies for their own development interests.


By Martin Khor

Martin Khor (director@southcentre.org) is executive director of the South Centre. The views expressed here are entirely his own.

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TPPA a bad deal for Malaysia, can't isolate China, only trade growth defines merits of TPP

KUALA LUMPUR: United Nations assistant director-general and coordinator for economic and social development, food and agriculture organisation, Dr Jomo Kwame Sundaram (pix) has called on the government not to join the Trans Pacific Partnership Agreement (TPPA) as it provides little benefit for Malaysia.



“I am extremely disappointed. I think it is going to affect, not only the Malaysian business community, but also Malaysian consumers and citizens adversely,” he told reporters on the sidelines of the Khazanah Megatrend Forum 2015 .

On Monday, the Ministry of International Trade and Industry (Miti) said the recently concluded TPPA negotiations had agreed to take into consideration almost all of Malaysia’s concerns and sensitivities such as government procurement, state-owned enterprises and bumiputra issues.

The TPP is a trade agreement initiative involving 12 countries namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam.

Miti said the TPPA will be presented to parliament once the complete and official text of the agreement is prepared.

Bloomberg reported that Malaysia’s state-owned enterprises may suffer from the deal, which calls for equal access to government procurement even though electronics, chemical products, palm oil and rubber exporters benefit from it.

Jomo said that the TPPA is politically motivated, in that it is an attempt by the US to try and isolate China, with minimum trade advantages for Malaysia.

“For example, if Malaysia produces solar panels it can’t be sold in the US and elsewhere. These are all contravening the bilateral agreements. You cannot expect the TPPA to overcome that,” he explained.

On intellectual property rights, Jomo said that the most significant implication is the cost of medication.

“They have exclusive rights and have been depriving people from the benefits of this. This is scandalous and inhumane, it cannot explain why Malaysia agreed to this,” he said.

In a statement late on Monday however, Miti had reiterated that the TPPA should not hinder the public’s access to affordable drugs and healthcare, while ensuring the necessary incentives for pharmaceutical innovators to produce new drugs and medicines.

Even though there will be “small” benefits, Jomo said the government should look at it as a whole, especially from the cost perspective.

He also said foreign complainants will have more legal resources for dispute settlement through new arbitration panels compared with those from developing countries.

“Even in the negotiations, they (developing countries) are not very well prepared, and everyone knows most of the developing countries just accepted what was given to them. It was the developed countries such as Australia, New Zealand and Japan that were insisting on it and the US compromised to them,” he added.

Meanwhile, Miti secretary-general Tan Sri Rebecca Fatima Sta Maria stressed that the full text of the TPPA will be made available to the public soon.

“We’ve nothing to hide, at the end of the day, the important thing is we want to be sure this works for Malaysia,” she said.

She does not foresee the TPPA taking effect in the next two years considering it has to be approved by every participating country

“ It will be a long process, maybe two years or more, I don’t know,” she added.

A cost benefit analysis commissioned by Miti to determine the attractiveness of the deal is yet to be completed.

TPPA cost benefit analysis still pending

Should have been finalised earlier for the sake of public understanding



PETALING JAYA: The cost benefit analysis on the Trans-Pacific Partnership Agreement (TPPA) should have been finalised and released earlier for the sake of public understanding, Bantah TPPA group chairman Mohd Nizam Mahshar said in a statement yesterday.

Commenting on the conclusion of the TPPA negotiations, he said the cost benefit analysis should have been finalised and released earlier, to provide the public and interested parties with a greater understanding of the TPPA and its implications.

The release of the cost benefit analysis has been delayed for months.

“Until now, it has not been released and we only have three months from the official date of the negotiation’s conclusion to the date that it has to be signed,” he added.

International Trade and Industry Minister, Datuk Seri Mustapa Mohamed said in a Facebook posting yesterday that the contents of the TPPA deal will be made public next month and presented to parliament for debate within the next two months.

The minister said it would also include the completed cost benefit analysis.

“This does not mean a thing. Even though debated by parliamentarians, the agreement cannot be amended,” Mohd Nizam said. “From this day to the next 90 days Malaysia has only two choices, either to take the TPPA agreement as a whole or to reject it completely. We still have a say if we choose to speak up,” he added.

Nizam said despite the conclusion of the negotiations, the group is maintaining its position that the TPPA deal will not benefit the country’s trade or economic health.

He said the possible impact includes restrictions of policy space, intrusions on legal and political sovereignty, huge impact to small and medium enterprises and infant industry, access to affordable medicine, as well as intellectual property effects to knowledge and information institutions and industries.

Meanwhile, the recently formed coalition party Parti Amanah Negara said it hoped all comments from the public will be considered seriously.

“We also hope all necessary action will be taken and the debate will not merely be an exercise in ‘public relations’,” its communication director Khalid Abd Samad said in a statement.

He added that the minister previously had acknowledged that there were several concerns regarding the TPPA, saying among the concerns in the agreement is that it seeks to ensure free competition with minimal government control or intervention.

“This will only result in stronger companies overcoming all others and dominating the market,” Khalid said, explaining that local companies, which are much smaller than the United States multinational companies and other member countries will not be able to compete and therefore become sidelined.

Commenting on the intellectual property rights issue, Khalid said it would have a direct impact specifically on the price of medicine, and enforcement of intellectual property rights would cause higher prices of medicine.

“Even though this may be good for the pharmaceutical companies, it will certainly have a negative effect on the population as a whole,” Khalid added, saying that the party is worried that the deal will only bring short-term benefits, while increasing the country’s dependency on specific sources of revenue.

Meanwhile, Asian Strategy and Leadership Institute’s Centre for public policy studies chairman Tan Sri Ramon Navaratnam said the Ministry of International Trade and Industry should hold several town hall meetings to explain the TPPA deal to the public.

“We cannot afford to leave important national agreements and treaties only to politicians to decide, as they may have their own political deals to settle. We all have to actively participate in the debate outside parliament as well,” he added. - The Sunbiz

TPP cannot ‘isolate China’ - Chinese economy increasingly open, inclusive: economist

The US-led Trans-Pacific Partnership (TPP) trade agreement will not isolate China or seriously hurt the Chinese economy, experts said Wednesday, adding it could lead the world's second-largest economy to reach similar deals with other nations, after a deal was reached on the TPP earlier this week.

Amid widespread online pessimism over the trade pact among 12 Pacific Rim nations that some believe deliberately excluded China, Chinese economists said such anxieties have been overblown.

Huang Wei, director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, said the TPP will affect China, but will have a "minimal negative impact" on the Chinese economy in the long run because of the economy's size and its irreplaceable role in regional and global markets.

Huang believes the TPP creates more of a "psychological effect" on China that the country has been left out by its neighbors and trading partners from such a significant trade agreement. "But don't turn pale just at the mention of a tiger," she told the Global Times on Wednesday.

She said, if anything, the trade accord will push China to further engage with regional and global economies and pursue more trade agreements with countries in Asia and around the world, which will help the Chinese economy grow and better compete globally.

Chen Fengying, an expert at the Institute of World Economics Studies under the China Institute of Contemporary International Relations, also believes that the TPP will not isolate China from the regional economy and could even be beneficial.

"Given the important role China plays in regional and global economics, a single agreement won't isolate China," Chen told the Global Times Wednesday. She added that if the TPP can help build a more open and prosperous Asia, it will be conducive for the Chinese economy.

Both Huang and Chen's comments come after trade ministers from the US, Canada, Mexico, Chile, Peru, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, and New Zealand reached a deal.

After days of negotiations on the details of the deal in Atlanta, US officials announced Monday that an agreement had been reached, ending years of talks, though the deal still needs to go through the legislative process of each country before it can be signed and implemented.

Prevailing issues

Some posts on popular social media platforms in China suggested Wednesday that China's own issues in areas such as intellectual property protection, environmental standards and currency policies prevented it from being included in the deal, while others said the US is trying to single out China and counter China because the US feels its economic and political dominance is being threatened.

Experts said understanding the TPP's impact should not only be based on the "US conspiracy theory" or the "China-deserves-it" angle.

Zhang Jianping, a foreign trade expert at the National Development and Reform Commission, told the Economic Daily that China lags behind in meeting the TPP's requirements, such as environmental, finance and labor standards. It will take a long time for China to reach those standards, and that is why China held back in joining the TPP, he said.

Chen also said that intellectual property protection, environmental standards and other factors might have been reasons why China did not sit at the negotiating table, but such a move has pushed China to improve in such areas, as it holds numerous trade talks with countries in Asia and beyond, including TPP member-nations.

China engages world

China has reached separate free trade agreements with Australia, New Zealand, Chile, Peru, and Singapore, who are also involved in the TPP, while continuing talks with the US, Japan and other countries on free-trade deals.

China is also engaged in regional multilateral trade talks, such as the Free-Trade Area of the Asia-Pacific (FTAAP) with Asia-Pacific Economic Cooperation (APEC) economies, and the Regional Comprehensive Economic Partnership (RCEP) with the Association of Southeast Asian Nations (ASEAN) and Japan, South Korea, Australia, New Zealand and Indonesia.

All these efforts and other projects such as the "Belt and Road" initiative and the Asia Infrastructure Investment Bank (AIIB) show the Chinese economy is moving toward being more open and inclusive, Chen said. It will help the country to maintain its increasing influence over regional and global trade, she added.

Chen also said she believes these trade deals are not mutually exclusive, saying they can complement each other by building a more open and fair regional economy in the Asia-Pacific.

China's Ministry of Commerce said Tuesday that China is open to any trade agreement "compatible" with rules established by the World Trade Organization, and that is conducive to the regional economic integration of the Asia-Pacific region.- Global Times

Only trade growth will define merits of TPP


Labourers work at a garment factory in Sai Dong, outside Hanoi, Vietnam. [Photo/Agencies]

At a critical moment when trade is set to grow less than the global economy for the first time in the last four decades, there is no reason not to welcome the ambitious pact that 12 Pacific Rim countries reached on Monday to create the largest free trade area of the world.

That is why China's Ministry of Commerce said on Tuesday that the Trans-Pacific Partnership is one of the key free trade agreements for the region and China is open to any mechanism that follows the rules of the World Trade Organization and can boost the economic integration of the Asia-Pacific.

As a top global trading power that has hugely contributed to and benefited from the global trade growth for the last two decades, China sincerely hopes the TPP pact and other free trade arrangements in the region can strengthen each other and boost trade, investment and economic growth in the Asia-Pacific, to benefit not just the region but also the rest of the world.

It is also the common wish of the international community that, as a long-term driving force, the current slow pace of global trade growth should be revived through deeper and wider reforms of the international trade system to fuel a sustainable global recovery from the 2008 financial crisis.

The appealing promise that the TPP may reshape industries and liberalize commerce in 40 percent of the world's economy has understandably given rise to praise such as the "most ambitious trade pact in a generation".

Yet the real implications of the TPP deal are far from clear since it has been largely negotiated under a blanket of secrecy to facilitate give-and-take among the signatories.

The power of a successful trade deal is to maximize as much as possible each participant's comparative advantages in global trade while minimizing predictable political opposition from various domestic vested interests.

Nevertheless, even before the five-year marathon talks have secured a really workable arrangement, US President Barack Obama hastened to paint the pact as a way of stopping China from writing the rules of the global economy in an illusion that he may easily win over the domestic political support he expects.

However, if the deal is based on the political priority of one partner, rather than the shared benefit of all partners, it would be hard to believe that it can ensure free market trade as it is being touted.

The world needs a trade-boosting deal. The United States has a huge onus to prove the merits of the TPP.  - China Daily

US: an engine or a threat to the world economy? Unwise to write shortsighted rules!

Is the US an engine or a threat to the world economy?

According to the World Economic Outlook published by the World Bank, the international economy is forecast to grow by 3 percent in 2015 and 3.3 percent in 2016. The US and the UK will maintain their economy recovery while Japan and the eurozone will remain sluggish, with growth forecast at no more than 1.1 percent. The World Bank also predicted that the US economy will grow by 3.2 percent in 2015. Developing countries are facing lots of challenges in its economic development.

The US seems to be the only engine of the world economy. But the US Federal Reserve is likely to raise its interest rate from 0 to 0.25 percent. The World Bank worries that any such move will make it more difficult for emerging economies to raise money. The US has emerged from its financial crisis while other countries are still trapped in economic troubles. From this perspective it is hard to assess whether the US is an engine or a threat to the world economy.

There is still a worry that Greece will exit the eurozone. If this happens, the eurozone will be thrown into turmoil. In Japan, so-called "Abenomics" have failed to generate the anticipated results. Russia and Venezuela are each facing their own troubles and threats.

The US economy is closely linked to the whole. Only when other economies achieve sound development, can the US economy maintain sustainable development. The US can't just focus on its own development.

This article was edited and translated from 《美国是引擎还是威胁？》, source: People's Daily Overseas Edition, Author: Zhang Hong

It is unwise for the U.S. to write shortsighted rules

In the latest State of the Union Address, President Barack Obama mentioned China many times. He claimed that China wants to write the rules for the world's fastest-growing region (Asia-Pacific) but the U.S. should write those rules. He went on to urge Congress to give him the authority to promote trade with this region.

Obama is setting considerable store by the Trans-Pacific Strategic Economic Partnership (TPP) Agreement (TPP) and Transatlantic Trade and Investment Partnership (TTIP). These trans-regional trade and investment agreements are designed to increase America's competitiveness and encourage its exports. Although Obama's government has tried hard to promote these agreements and to make his mark on presidential history in the U.S., parts of the bills of the two agreements are opposed by some of the negotiation partners, and it is not clear whether Congress will support the agreements.

The U.S. is avoiding queries over its strategic rebalancing toward the Asia-Pacific. The American government cannot give a clear answer to whether TPP targets any specific country. However Obama has now made his position clear: "We should write those rules. We should level the playing field. That’s why I’m asking both parties to give me trade promotion authority to protect American workers, with strong new trade deals from Asia to Europe that aren’t just free, but fair."

It is readily apparent that America is not satisfied with international trade rules set by the World Trade Organization (WTO). Some countries are trying to break rules while China is attempting to set rules for the world's fastest-growing region. However, China's efforts could undermine American interests. Obama hold the view that China is taking advantages of existing free trade rules and it is not fair to the U.S.

It is not wrong for America to benefit from reform of international trade rules. But from a country good at promoting global rules in the past to one now busy promoting trans-regional rules between Asia and Europe, America's leadership in international system gradually fades out. The U.S. thinks that it has suffered losses from past world trade rules and therefore wants to establish new trans-regional institutions that exclude China and other counties.

America is no longer a country positively promoting global financial trade rules. It now seems to be focused on short-term rules to suit itself and a few allies. Although these agreements will co-exist with the WTO, world trade may become more fragmentized due to trans-regional agreements. A conflict of interests is slowly developing between a group of developed countries, including America, and the developing countries. Trade interests between developing countries might also be damaged. In view of this situation, it is hard to say that the world will be freer or fairer.

Are the trade rules established by WTO really unfair? The U.S. thinks that the standards involving environmental protection, intellectual property protection, and markets are too low. However, America should always bear in mind that it too encountered these problems during its industrialization. Progress was achieved only after a long period. If America remains reluctant to cooperate with other countries to define international rules, it might lose international respect and miss out on new opportunities for development.

The article is edited and translated from 《美国切莫制定短视规则（望海楼）》, source: People's Daily Overseas Edition, author: Shen Dingli, Vice Dean and professor of Institute of International Studies, Fudan University

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Asia Pacific Economic Leadership Shifting from the US to China for Free Trade framework

All together now: Apec leaders posing for a family picture at the International Convention Center at Yanqi Lake in Beijing. Front row from left, Indonesian President Joko Widodo, US President Barack Obama, Xi, Russian President Vladimir Putin, Philippine President Benigno Aquino III, (backrow from left) Japanese Prime Minister Shinzo Abe, Australian Prime Minister Tony Abbott, Najib and New Zealand Prime Minister John Key. — EPA

The Asia-Pacific Economic Cooperation (APEC) Summit that just concluded in Beijing was no doubt China’s show. Beijing came out looking very much what it is touted to be — the world’s second-largest economy now leading the charge towards a free-trade region known as the Free Trade Area of the Asia-Pacific (FTAAP). For a once-closed economy that was not even part of the global trading system, this is one giant leap. In doing so, China overshadowed and reduced a rival initiative by the United States — the Trans-Pacific Partnership (TPP), which excludes Beijing — to what is a subsidiary platform

Chinese President Xi Jinping has shown that the agenda of liberalising trade in the Asia-Pacific region cannot but take China into account; indeed, this agenda will be dictated by China from now on. To show how serious it is, the Beijing APEC Declaration came complete with a road map towards the realisation of the FTAAP, though a clear deadline was shelved for now.

With the US outmanoeuvred, the economic power game entered a second stage in Myanmar this week, where the Association of South-east Asian Nations (Asean) hosted the East Asia Summit, in which both China and the US are members (with Beijing represented by Prime Minister Li Keqiang).

Interestingly, Beijing saw the revival of APEC as a major platform for regional economic integration — led by China. APEC has actually been the vehicle for trade liberalisation in the Asia-Pacific region since it was formed in 1989. Indeed, the FTAAP is not a Chinese idea, as Singapore Prime Minister Lee Hsien Loong made clear, but an APEC vision conceived in 2004 with its end-goal being a huge Asia-Pacific free-trade area.

But APEC lost its shine over time when no clear big-power champion emerged with the visionary leadership and commitment of then US President Bill Clinton, who hosted the first summit in Seattle in 1993.

During APEC’s downtime years, ASEAN fell back on its own trade liberalisation process, the Asean Free Trade Area (AFTA), and preached the message of trade liberalisation to the wider region. Two major platforms then emerged: One was the TPP, for which the US took leadership, with the exclusion of China. The other was the Regional Comprehensive Economic Partnership (RCEP), an outgrowth of the Asean Plus Three Summit comprising the association’s three North-east Asian trading partners, China, Japan and South Korea, as well as Australia, India and New Zealand.

China easily dominates the RCEP and insists that it be an East Asian platform — meaning it has no room for the US. This is partly the reason the US is eager to have the TPP as the key pathway to reach the FTAAP.

While the RCEP and the TPP evolve as competing platforms, both China and the US have, of late, downplayed this rivalry. This is just as well for Asean, whose members are divided between support for the RCEP and for the TPP. Only four of the 10 Asean members — Brunei, Malaysia, Singapore and Vietnam — are currently involved in the TPP negotiations, which demand a higher standard of trade liberalisation. The RCEP, on the other hand, sits better with many Asean members, virtually all of which benefit from huge trade with China.

The Asean dilemma

But while Asean as a whole values China as a close economic partner, the group is also wary about Beijing as a security threat. This has resulted in a two-dimensional relationship — a duality, as some have called it — that Asean has with China: A growing economic relationship paradoxically matched by increasing political tension caused by Beijing’s aggressive claims to parts of the South China Sea.

How this two-dimensional relationship could be managed provided the backdrop for the Asean Summit this week in Myanmar and the East Asia Summit.

By stepping on the accelerator towards the FTAAP, China has virtually also quickened the pace of Asean’s own economic and political integration. The goal of an Asean Community — including a fully-integrated Asean Economic Community by December 31 next year — cannot be further delayed. At the moment, 80 per cent of its integration targets have been realised, with the remaining “hard part” set to be tackled after 2015.

But surely, the next lap cannot be only about tackling the unfinished business. If Asean Community 2015 is yet another pathway to the FTAAP, what is the vision of Asean after next year? This is where the group’s leaders must put on their thinking caps and collectively forge a road map to a new Asean that is a global player firmly situated in the 21st century.

This new vision must take into account the rapidly evolving economic and security architecture in the Asia-Pacific region. As displayed in Beijing this week, it will be a future in which China will not be shy to assert its economic leadership — in the same way it has staked its political dominance in the region.

As Asean leaders were convening for their summit in Naypyidaw, US President Barack Obama and Mr Xi in Beijing attempted to reforge the strategic relationship between the US and China, probing each other for a new calculus. Their major bilateral agreement on climate change was achieved in this context. But Mr Obama is a lame-duck President on his way out, while Mr Xi, who is only two years in office, will be around for a full decade to lead a rising superpower.

Asean’s dilemma is this: It appreciates the increasingly prosperous relationship that is blossoming with China under Mr Xi. Yet, Asean knows it is also entering a potentially tense future with Beijing under a leader who is prepared to flex China’s muscles — as seen in the resulting volatility regarding the South China Sea. Curiously, the tensions over the territorial disputes cooled down somewhat during the busy summit period.

Will Asean remain a mere bystander, watching from the wings as the power game continues to unfold between the two giants? Or will Asean do something to secure its pivotal position so it can shape the future regional balance in its favour? This key question must have preoccupied Asean leaders in Naypyidaw. ― Today

By Yang Razali Kassim, a senior fellow at the S Rajaratnam School of International Studies at Nanyang Technological University.

Apec leaders all for free trade framework

BEIJING: The Asia-Pacific Economic Cooperation Economic Leaders’ Meeting hosted by China endorsed the Beijing Roadmap for Apec to promote and realise the Free Trade Area of the Asia-Pacific (FTAAP).

The roadmap details actions to be taken to achieve FTAAP – a trade liberalisation framework that China had pushed for – and includes undertaking a collective strategic study with results to be reported by 2016.

Prime Minister Datuk Seri Najib Tun Razak, during the summit held by the Yanqi Lake in the Huairou district, expressed Malaysia’s support on the roadmap.

“Malaysia sees the FTAAP as a natural progression for an overall trade arrangement across all economies in the region.

“What we have on the table now, such as the Trans-Pacific Partnership, Regional Comprehensive Economic Partnership and Pacific Alliance, are building blocks towards the larger FTAAP,” he said.

Najib also called on Apec members to find a way out of the World Trade Organisation (WTO) impasse and place the Bali decisions back on track.

It was reported that an impasse over a global pact hammered out in Bali last December to streamline Customs procedures had paralysed all negotiations in the WTO.

“If we do not find a way out of the impasse, it means that the WTO can no longer hold sway as a rule-making entity,” said Najib yesterday.

The Apec summit, attended by heads of states from 21 Pacific Rim economies, also adopted a Connec­tivity Blueprint to promote integration through physical, institutional and people-to-people connectivity.

Najib told Malaysian reporters here that Malaysia could play a role in enhancing connectivity in the Asia-Pacific region, citing bilateral projects such as the Malaysia-Singapore high-speed rail project as an example.

Chinese Premier Li Keqiang had reportedly expressed China’s interest to help build the rail link during his meeting with Najib on Monday.

Commenting on this, Najib said it was a bilateral project between Malaysia and Singapore and both countries would call for international tenders.

Najib also said Malaysia welcomed the blueprint on connectivity and commended China for initiating the Asian Infrastructure Investment Bank.

He left Beijing yesterday evening.

Commenting on the visit, Tan Sri Ong Ka Ting, who is the Prime Minister’s Special Envoy to China, said mutual trust between China and Malaysia was growing stronger, judging from Najib’s bilateral meetings with Chinese President Xi Jinping and Li in the Chinese capital.

“Najib was given special treatment. At China’s initiatives, he met both Xi and Li on the sidelines of the Apec summit,” Ong noted. He added that Xi called for mutual support as China strived to realise the Chinese Dream and Malaysia the goal of becoming a high-income nation by 2020.

By Tho Xin Yin The Star/Asia News Network

ASEAN SUMMIT: China pushes for code at South China Sea

Standing united: Najib (fifth from right) posing for photographs with Thein Sein (centre) and other Asean leaders during the closing of the 25th Asean Summit at the Myanmar International Convention Centre.

Beijing pledges US$20b in loans to boost Southeast Asian connectivity

China will push for the implementation of a code of conduct for the South China Sea - a document that will lessen the risk of escalating tensions in the area-but experts said such an agreement faces obstacles, at least in the short term.

Chinese Premier Li Keqiang reaffirmed China's resolve to safeguard territorial sovereignty at a series of three regional meetings in Nay Pyi Taw, Myanmar, on Thursday, saying the country is willing to adhere to the code, which has been under discussion for more than a decade.

Leaders from the Philippines and Vietnam, countries that have seen maritime tensions with China rise, also attended the meetings.

"China and Southeast Asian countries are close neighbours with common interests and diversified concerns. It is inevitable-not strange at all-that differences emerge among us, but those differences will not affect the general stability in the South China Sea," Li said at the East Asia summit.

"I believe that as long as we treat each other with sincerity and seek common ground while acknowledging differences, there will be no insurmountable obstacles that will stand in our way," Li said.

Li said China's policy of building partnerships with its neighbours is sincere and consistent, and the situation in the South China Sea has been stable as freedom and safety of navigation is ensured.

Foreign Minister Wang Yi said last year that the code should reflect "consensus through negotiations" and "elimination of interference", indicating that maritime issues should be left to the parties directly involved to sort out through dialogue.

The declaration on the Conduct of Parties in the South China Sea was signed in 2002, in which all signatories agreed to work out a code of conduct to guide future activities in the region. But limited progress has been made in drafting the code since then.

In a bid to reach long-lasting peace in the region, Li pledged to speed up negotiations on a cooperation treaty.

China also agreed to establish a hotline for joint search and rescue efforts at sea as well as a hotline for senior officials.

Wu Shicun, president of the National Institute for South China Sea Studies, said the negotiation of the code has gone on for more than 10 years because of different opinions regarding how the document will be drafted and whether it will allow third-party intervention.

Lu Jianren, the chief researcher of Sino-Asean relations at Guangxi University, said the importance of the code lies in the fact that it rules out the use of military force as a means to resolve issues and that no party is allowed to take further action to escalate tension.

Economic ties

Also at Thursday's summit, China promised more loans and economic aid to Southeast Asia.

China will provide $10 billion in preferential loans to Asean countries and another development loan of $10 billion specifically for infrastructure.

China also started on projects for the second phase of the China-Asean Investment Cooperation Fund, which totals $3 billion.

Engineers have begun preliminary work on a rail network, which will start in Kunming, Yunnan province, and connect Laos, Vietnam, Cambodia, Myanmar, Thailand, Malaysia and Singapore.

Kavi Chongkittavorn, senior fellow at the Institute of Security and International Study in Thailand, said China and Asean were forging ever closer ties and despite differences there are areas of growing cooperation.

"Economic opportunities exist for each party," he said.

By Zhao Yinan and Zhao Yanron, China Daily/Asia News Network

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Punish "currency manipulators", among TPPA issues in Obama's trips to Asia?

The United States President visit to Malaysia is an opportunity to review TPPA issues, including a Congress proposal to punish countries that are 'currency manipulators.

UNITED States President Barack Obama will be in Malaysia soon. Among the issues on his agenda will be the current status of the Trans Pacific Partnership Agreement (TPPA).

It is an opportunity to clarify with the President himself what the chances are that the TPPA will be approved by Congress, once a deal is reached.

Of concern is that the Congress will only pass the TPPA if it has a clause disciplining countries that are “currency manipulators”.

This concern is especially serious since a recent influential report cited Malaysia as one of the two TPPA countries that qualified as “currency manipulators.”

As Obama will be coming from Tokyo, he will presumably share the latest news on the US-Japan negotiations, which have been a major blockage to the TPPA’s progress.

Japan does not want to fully open up five “sacred” farm products (rice, wheat, sugar, beef and pork and dairy products) under the TPPA, but could reach a private deal allowing the US to sell more to Japan by enabling a certain volume of American products to enter at zero or lower tariffs.

Whether such a bilateral deal (reported last week in a Japanese newspaper) will be at the expense of other TPPA members should of course be analysed and be part of the negotiations.

If the US and Japan reach an agreement, the TPPA talks are expected to be “unblocked” and countries will be under pressure to quickly reach an overall deal on all issues.

Obama can then be expected to nudge Malaysia to go forward. But Malaysia has found that there are several problems to a quick deal.

Last week, International Trade and Industry Minister Datuk Seri Mustapa Mohamed briefed civil society groups, reportedly telling them that Malaysia is standing firm in its position on tobacco control, intellectual property and medicines, disciplines on state-owned enterprises and government procurement, investor-state dispute, bumiputra rights, and that the TPPA should not affect the Constitution nor federal-state relations.

There is another important matter. What if the US agrees to a final TPPA deal. Can it stand by such a deal, since it is Congress that has jurisdiction over trade policy?

Obama is trying to get “fast track authority” from Congress, but many members of the House and Senate do not want to give that to him.

This means the Congress can decide to alter parts of the TPPA, and what was agreed to after years of painful negotiation will then unravel.

Why then should the other countries table their “bottom line” in the TPPA when what is agreed to can be opened up again by Congress? Senior officials in some countries have said they won’t agree to sign the TPPA unless the US President obtains fast-track authority.

Powerful Congress members have also proposed that as part of the TPPA, the US be allowed to punish countries that manipulate their currency — to give themselves a trade advantage.

Claiming to be backed by a clear majority, they are insisting that the TPPA contain disciplinary actions against currency manipulators, including that tariffs can be raised against the offending countries’ products.

Inside US Trade reported that Republican Senator Lindsey Graham and Democrat House Member Sander Levin warned they would vote against the TPPA when it comes before them unless it contains enforceable provisions to combat currency manipulation by foreign governments.

A major problem with this Congress’ proposal is how “currency manipulators” are defined. Many developing countries consider the US itself to be a manipulator because the trillions of dollars it has placed in the banking system through its easy-money policy has depressed the value of the dollar to remain at low levels and raised the country’s export competitiveness.

But that’s not how the Americans define manipulation. Fred Bergsten of the Peterson Institute, a main intellectual force behind the Congress move, proposes three tests to determine a currency manipulator: the country possess excessive official foreign currency assets (more than six months of import value); it has acquired significant additional amounts of official foreign assets, implying substantial intervention, over a recent period of six months; and it has a substantial current account surplus.

Based on these criteria, Bergsten concludes, in a Financial Times article, that: “Only two countries now involved in the trade pact negotiations – Malaysia and Singapore – have been recent manipulators.”

He proposes that those who fail these tests should face stiff penalties: They should lose the wider market access obtained via the TPPA; countervailing duties should be permitted against their exports subsidised by deliberate undervaluation; and “sweeping import surcharges” could also be authorised.

On top of this, the trade pact should also authorise “countervailing currency intervention”, through which it could offset the manipulators’ purchases of its currency by buying equal amounts of theirs.

Bergsten’s ideas are extreme, but they have been cited by Congressman Levin when he made his proposal.

Can the TPPA countries agree to having a currency manipulation chapter in the agreement? If so, the TPPA will contain a very dangerous element and it will also set a dangerous precedent for other future agreements.

In any case, it is worthwhile for Malaysia to pay close attention to this issue, and bring it up with Obama, since it is one of the two countries fingered by Bergsten as being “currency manipulators.”

Bergsten’s astounding charge that Malaysia is a currency manipulator should also be answered.

Contributed by Global Trends by Martin Khor

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An eventful week on the TPPA

Last week saw a series of important events on the hot topic of Trans-Pacific Partnership Agreement, with the official round in Brunei and a round table in Kuala Lumpur, leading to the question: What next?

LAST week saw many important developments on the Trans-Pacific Partnership Agreement (TPPA).

The 19th round of the negotiations concluded in Brunei after an intense week. It emerged that many issues are still controversial and that the target of signing the treaty by year end cannot be met.

Malaysia’s tone at the negotiations has also changed, with Inter-national Trade and Industry Minister Datuk Seri Mustapa Mohamed informing his counter parts of the domestic opposition to the TPPA and various issues which Malaysia has problems with.

Malaysia’s negotiators earned bouquets from NGOs for tabling a new proposal that tobacco control measures should be excluded altogether from TPPA disciplines.

Meanwhile in Kuala Lumpur, a roundtable workshop on the TPPA brought together 200 people. Keynote speaker Tun Dr Mahathir Mohamad reaffirmed his opposition to the TPPA and urged the Government not to join it.

The Aug 26-27 round table was organised by the MTEM (Malay Economic Action Council) and the Perdana Leadership Foundation.

The participants came up with 75 “red lines”, or positions that are non-negotiatble, that they would like the Government to adopt.

Prime Minister Datuk Seri Najib Tun Razak received the “red lines” document from the MTEM leadership at the group’s Hari Raya open house on Aug 28.

Mustapa also announced that the Government was going ahead with organising two cost benefit studies on the TPPA’s impacts on national interests and on SMEs and the bumiputra economy. Only if there are net benefits will the country sign the treaty.

It looks like the strong views voiced by various groups and politicians have influenced the Government’s thinking.

A strong sign of this was at the ministerial meeting of TPPA countries in Brunei on Aug 22-23. Chaired by the American Trade Represen-tative, the meeting was supposed to give ministers the chance to clear the contentious issues that the technical negotiators could not settle, and thus pave the way to a quick conclusion.

Instead, the ministerial meeting turned into an anti-climax as some ministers did not attend, and some others who attended did not stay for the press conference that lasted only 20 minutes.

And instead of clearing hard issues, the ministerial meeting gave a chance to some ministers to highlight contentious issues themselves.

Mustapa was one of those who took that opportunity. “I drew attention to the growing discomfort domestically arising from Malaysia’s participation in the TPP negotiations, the outreach activities that had been undertaken and the concerns raised by the various stakeholders, specifically on the issue of lack of transparency and disclosure of information on the texts being negotiated,” said the minister in a statement.

He also highlighted the difficulties Malaysia has on government procurement, the need for exclusions of SMEs and preferences for bumiputra which are required for the Malaysian government to continue with its socio-economic development goals and affirmative action policy.

He also underscored that Malaysia had serious difficulties with the current proposal on state-owned enterprises, which is seen to go beyond the stated objective of creating a level playing field as it had serious implications for Malaysian SOEs.

And on intellectual property, he reiterated Malaysia’s strong position on access to affordable medicines while on environment, that there was a need to safeguard the state governments’ jurisdictions.

The following day, Malaysia also caused quite a stir by putting forward a new proposal to totally exclude tobacco control measures from the disciplines of the whole TPPA.

This was warmly welcomed by public health groups, which then called on the US and other countries to agree to the Malaysian position.

At the MTEM round table in Kuala Lumpur, Dr Mahathir gave a 40-minute critique of the TPPA, the problems it would create for domestic policy and why Malaysia can expand its trade even without such agreements. He ended with a strong call to the Government not to sign the treaty.

For two days, the participants discussed specific TPPA issues in six breakout groups and at the closing plenary they adopted 75 “red lines” which they called on the Government to take on as part of its negotiating positions.

The “red lines” include a rejection of the investor-state dispute settlement system, the exclusion of the chapters or sections on government procurement and state-owned enterprises, and demands that the intellectual property chapter does not require obligations that are stronger than the World Trade Organisation’s rules, especially with regard to patents and medicines, and copyright issues.

It should be noted that some of these civil society “red lines” correspond to the concerns that Mustapa had taken up at the TPPA ministerial meeting.

It looks as though the Govern-ment’s position has been affected by the voices of civil society, business and experts.

A key question, of course, is whether in taking up these issues, the minister and the negotiators will make their own “red lines” out of the concerns.

The next question is whether the other TPPA participants will accommodate themselves to Malaysia’s positions. And if not, then what happens next.

In any case, it has been a very interesting week or 10 days, full of events and developments, on the hot issue of TPPA, both at the official meeting and on the home front.

  Contributed by Martin Khor Global Trends:

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China's peaceful rise is not forever

China’s dilemmas in domestic and foreign policy

CHINA is already the second biggest economy in the world, on the cusp of becoming the largest in the not too distant future. With the world’s largest population and formidable military capability, it is more powerful than the Soviet Union ever was against the United States.

Yet, China is reticent about its success at home and role in the world. It would rather be left alone to continue with its “peaceful rise” to attend to many domestic challenges and to develop relations abroad without undue disturbance. But no power and economy its size can hope just to carry on the way it has these past three decades.

Although millions have been brought out of a-dollar-a-day poverty, over 100 million of its people still live on less than that. China’s per capita income is still less than those of nine African countries, according to LSE economist Danny Quah.

Its Gini coefficient, the measure of income inequality, has for the past decade been consistently above 0.4, the UN determined danger point for social stability (A score of one spells absolute inequality, so the lower the number the better it is). Development with equitable distribution is not taking place efficiently, whether among individuals or regions, the western parts of the country being still far behind the east and coastal areas.

Corruption is extensive which the high profile Bo Xilai trial only highlights. The ills of economic growth with disproportionate gain for some are becoming a plague on China. To add to this, environmental degradation has become a serious problem. The pollution level in 74 Chinese cities, including the capital Beijing, is over three times above the danger point set by WHO. It has been estimated life expectancy at birth in China is shortened by between seven and 12 years because of environmental deterioration.

And, against all these challenges of economic success, economic growth is slowing, a conundrum Chinese authorities have to further manage. Western authorities and economists now seem to move from fear of China to fear for China. Paul Krugman sees a crash into the Great Wall of the Chinese model of development. Having over-extended credit, the economy’s debt-fuelled asset bubble is about to burst, exposing large non-performing loans. Yet others see what economist Arthur Lewis described as the inexhaustible supply of cheap labour drying up which he claimed was behind the economic miracle of China and other emerging economies. Of course there is the usual call for China to restructure its economy, to switch from an investment-driven growth to a consumption-driven one, from export-led to domestically-charged expansion – if China is to avoid being caught in the middle income trap.

Ageing population

To boot, the population is ageing as a result of the one-child policy; so China will not reap the demographic dividend, a virile young population driving further growth and not a dependent, unproductive old one. All the time it is intoned that China’s underlying socio-political stability will be undermined if economic reforms are not put in place, together with reform of the political system.

The advice is not disinterested, even if China’s domestic challenges are truly huge. China must find a way out for itself and not be in denial because some the criticisms and cures offered by the West are not honest or consistent. If China is ageing, then the mantra of having to have at least 8% annual economic growth to absorb the work force coming onto the market does not hold true. Then, at least on this count, China’s slowing economy is not a catastrophe.

Those that will be hurt are other emerging and even Western economies as China has become an engine of global growth. Indeed many Western economies themselves are ageing. Then again, if China is to divert resources away from investment to consumption, how about those in the far west still on less than one-dollar-a-day who need to be linked to become part of a larger consumer base? What about bridging the wealth and income gap by providing the investment essentials to them of a better quality of life?

Thus, there is more than meets the eye on the advice proffered. But, there is also truth in some of them which should not be denied. China must make the balancing choices, an essential part of the management of any political economy. The new leadership is struggling to come up with a new national ethic. This is nowadays a difficult process in the globally democratised age of the IT revolution. Every netizen seems to have an opinion. It is not going to be as straightforward as Deng Xiaoping’s Four Modernisations or the Central Party School’s Peaceful Development, then to Rise and now back to Development, I think.

No.2 and growing

Even as China grapples with these momentous issues, the impact of its size on the world is not something that can be, shall we say, postponed. China is No.2 and growing. It could become Sparta to America’s Athens, rising Germany to stable old Europe, a challenging Japan denied status in the Pacific world, or a hostile Soviet Union seeking to overturn the established world order.

While most, not everything depends on the United States. China has a global role to play. How it is played will define how China is perceived as well as the outlines of the new global and regional order.

China cannot any longer avoid the role it must play by seeking to be left alone in its peaceful rise. Or by being insular and petulant in its foreign policy. Self-righteousness will be a defeatist strategy. It certainly cannot be a policy. Already, its nationalistic impulses have had negative ramifications, as can be seen from its territorial sea disputes in East and South-East Asia. China cannot be seen as attempting to assuage domestic pressures and challenges with international assertion and adventure.

China is not always in the wrong of course, but the way it conducts its foreign policy makes it appear not to be in the right. In South-East Asia, the benefits of its policy of economic cooperation since the 1997-98 financial crisis are not sufficiently underlined as the positive plank of foreign policy. Rather China retreats in hurt pride and spurned affection – and then comes out in anger. Beijing does not quite know how to turn swords into ploughshares. There is too much angst and emotion. This could be observed in the Scarborough Shoals stand-off with the Philippines last year, when the Philippines was not exactly innocent, but China came out as the bullying party. It could be seen even in the failure of Asean foreign ministers to issue a joint communiqué in July last year, widely observed as a consequence of Chinese mischief in tandem with their Cambodian ally.

But, what would have happened to Asean-China relations if an anti-Chinese communiqué had been issued? This is a point that has not been sufficiently advertised, with every commentator tearing his hair out about this first ever Asean failure because of Chinese machination.

Communication issue

It is often said China lacks soft power communication skills. Actually, soft power should be left out as an analytical tool here. China simply has to understand it has to communicate effectively, not intone. It has to develop the skills of subtle diplomacy as well as the ability to make foreign policy with a strategy to achieve its end. With that clarity and ability, China can avoid being wrong-footed, as in the South China Sea disputes, and being undermined after having invested so much economic goodwill.

The American pivot or rebalance to Asia-Pacific drew China into the purely political-security aspect of the US reassertion. China began to act as of it had some kind of Monroe Doctrine right over South-East Asia, just as the Americans claimed in Latin America. This was great power stuff, whereas China has always contended it does not have any such pretensions. President Xi Jinping had discussed with Barack Obama last June in Sunnylands about a “new type of great power relations.” Since then there has been much speculation on what that is all about. It is just G2? What about other relationships in any new world order?

The genius, perhaps unintended, of the US pivot and subsequent American initiatives is in their economic content while highlighting political and security matters in Asia-Pacific relations. In the sweep, previous Chinese economic advantages could be contained. After announcement of the pivot, former US Secretary of State Hillary Clinton led or participated in a number of business meetings in the region involving senior American corporate leaders, an association not often the case in US diplomacy. More senior American corporate leaders are actually represented in visits of the US-Asean Business Council to the region than previously.

Very importantly, American initiatives such as the Trans Pacific Partnership (TPP) and also, on the other side of the world, the Trans Atlantic Trade and Investment Partnership (TATIP), underline the basis of economic relations in significant and dominant blocs of the world. They represent the strengthening of the Washington consensus, if one examines the trade and investment rules being espoused.

Indeed they also seek to repair rules that have been violated to protect interests such as intellectual property, investment rights and financial flows. Fundamentally, these initiatives have significant geopolitical consequence. As I have written previously, the Americans are not about to roll over and die against a rising China. Their palms are still wrapped around the globe.

When I asked a senior Chinese official during a visit to Beijing earlier this month why China has chosen not to participate in the TPP, the answer was: It would only benefit the big countries and their big companies. When I suggested it would be better to participate to shape the rules that will govern trade and investment relations of the future, the answer was China’s Free Trade Agreements had worked well to the benefit of the member countries. The proposed Regional Comprehensive Economic Partnership (RCEP), which is a massive multilateral expression of such free trade agreements, is of course China’s preferred route.

Wrong turns

It would appear therefore that in terms of strategy in international politics, China would rather let the Americans make the running. Let the United States expend its “American exceptionalism” while China has the absorptive capacity of the Middle Kingdom. However, time may not always be on China’s side as it had been in the past. China has serious domestic problems with a discerning and demanding populace linked to the global democratic marketplace.

China has made a number of wrong turns in the conduct of its foreign policy which may make the Americans a more attractive strategic proposition. This is not the world where China will be left alone to get on with it. Better that China participates more actively in the making of that world even if it does not wish to upset it.

COMMENT BY TAN SRI DR MUNIR MAJID

TPP affecting health policies?

The present debate on the TPPA in Malaysia is part of the global discussion on how trade and investment treaties are affecting health, including access to medicines and tobacco control.

ARE big companies making use of trade and investment agreements to challenge health policies? Evidence is building up that they do so, with medicine prices going up and tobacco control measures being suppressed.

This issue came up in Parliament last week when International Trade and Industry Minister Datuk Seri Mustapha Mohamed said the Government would not allow the Trans-Pacific Partnership Agreement (TPPA) to cause the prices of generic medicines to go up.

He added he would defend existing policies on patents and medicines and if we don’t agree with some of the terms, we can choose not to sign it.

Trade agreements and health concerns are linked because some companies selling tobacco, medicines and food are using these agreements to sue governments that introduce new regulations to safeguard public health.

Malaysia will host the next round of the TPPA negotiations this month, so the debate on these issues can be expected to continue.

The World Health Organisation’s Director-General Dr Margaret Chan recently noted that corporate interests are preventing health measures.

The cost of non-communicable diseases are shooting up. The costs for advanced cancer care are unsustainable, even in rich nations and some countries spend 15% of the health budget on diabetes.

“In the developing world, the cost of these diseases can easily cancel out the benefits of economic gain,” she said. It is harder to get people to adopt healthy lifestyles because of opposition by “unfriendly forces”.

“Efforts to prevent non-communicable diseases go against business interests. These are powerful economic operators. It is not just Big Tobacco anymore. Public health must also contend with Big Food, Big Soda and Big Alcohol. All of these industries fear regulation and protect themselves by using the same tactics,” said Dr Chan.

Those tactics include “front groups, lobbies, promises of self-regulation, lawsuits and industry funded research that confuses the evidence and keeps the public in doubt”.

Many studies show how trade agreements with the United States or Europe have raised the prices of medicines because of the constraints placed by the FTA’s strict patent rules on the sale of cheaper generic medicines. Patients have had to switch to costlier branded medicines.

One study estimated that Colombia would need to spend an extra US$1.5bil (RM4.74bil) a year on medicines by 2030 or people would have to reduce medicine consumption by 44% by that year.

“Data exclusivity”, one of the features of the FTA, has delayed the introduction of cheaper generic versions of 79% of medicines launched by 21 multinational companies between 2002 and mid-2006 and, ultimately, the higher medicine prices are threatening the financial sustainability of government health programmes.

The tobacco industry is also making use of trade and investment agreements to challenge governments’ tobacco control measures.

According to an article by Prof Mathew Porterfield of Georgetown University Law Centre, the company Philip Morris has asked the US government to use the TPPA to limit restrictions on tobacco marketing.

In comments submitted to the US trade representative (USTR) , Philip Morris argued that Australia’s plain packaging regulations would be “tantamount to expropriation” of its intellectual property rights, and complained of the broad authority delegated to Singapore’s Health Minister to restrict tobacco marketing.

In order to address these “excessive legislative proposals”, Philip Morris urged USTR to pursue both strong protections for intellectual property and inclusion of the investor-state dispute settlement mechanism in the TPPA.

The company has instituted legal cases against Uruguay and Australia for requiring that cigarette boxes have “plain packaging”, with the companies’ names and logos disallowed.

These cases are under bilateral investment agreements. The company claims that the packaging regulations violate its right to use its trademark, and also violate the agreement’s principle of “fair and equitable treatment”.

It claims that a change in government regulation that affects its profits and property is an “expropriation” for which it should be compensated.

Under such agreements, companies have sued governments for millions or even billions of dollars.

The provisions in the bilateral investment treaties are also present in trade agreements including the TPPA. Companies can directly sue the governments in an international court, under an investor-state dispute system.

Having been sued by the tobacco company for its health measure, the Australian government has decided not to enter any more agreements that have an investor-state dispute system.

In the TPPA negotiations, Australia has asked that it be granted an exemption from that agreement’s investor-state dispute system. So far, such an exemption has not been agreed to.

The controversies over how trade and investment agreements are threatening health policies will not go away, because the rules are still in place and new treaties like the TPPA are coming into being.

A “Google search” on this issue will yield hundreds, in fact, many thousands of documents. And the number will go up as long as the controversy continues.

Global Trends
By MARTIN KHOR

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