TPPA A Guessing Game, RECEP A Blessing, Malaysia Awaits
TPPA: Minister of International Trade and Industry Datuk Seri Mustapa Mohamed has said that Malaysia would wait for greater clarity from the US administrationBy Noor Soraya Mohd Jamal
KUALA LUMPUR, Dec 23 (Bernama) — The year 2016 has been an exhilarating ride for Malaysia in international trade pacts participation, especially revolving the ambitious Trans-Pacific Partnership Agreement (TPPA).
After five years and 19 rounds of intense negotiation process, the fate of the TPPA is now in limbo following the new United States (US) President-elect Donald Trump’s public vow to withdraw the country from the trade pact on the first day of him taking over the Oval Office come Jan 20.
The trade initiative is now in a pause mode, awaiting how much consistency the president-elect will instil from his election campaign into post-office life.
The TPPA was dubbed the largest, most comprehensive trade pact in history and hailed as a landmark trade deal, setting high standards in multilateral agreements.
Comprising 12 member countries – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam – the pact accounts for 40 per cent of global economy, with total population of close to 820 million people.
However, it can only come into force in 2018 if it is approved by six countries that accounts for at least 85 per cent of the group’s economic output – which means ratification by the US and Japan is needed due to the size of their economies.
The US alone constituted almost 60 per cent and its absence will definitely repudiate the deal.To date, only Japan had ratified the deal.
Minister of International Trade and Industry Datuk Seri Mustapa Mohamed has said that Malaysia would wait for greater clarity from the US administration when the new president takes office and would take the next course of action only when there is official confirmation that the US would not participate in the TPPA.
Looking back, it was not an easy path for Malaysia to finally agree to sign the TPPA on Feb 4, 2016 in Auckland, New Zealand.
Facing various criticisms, vehement protests and suspicions over the trade deal, Mustapa and his team invested a lot of time and resources during negotiations before finally securing a good and fair deal, without compromising the Bumiputera agenda.
Malaysia was also the only country among the 12 nations involved that brought the TPPA text to its Parliament for approval before it was signed. The TPPA was tabled in the Malaysian Parliament on Jan 26.
Certainly, the hardest part was not only getting into trade negotiations, but closing them proved much more elusive than ever.
The remaining member countries however can explore other options whether to move ahead with the TPPA without the US, among others, by amending the agreement and adding new members but this would mean another tedious rounds of consultations and negotiations.
Most economists also opined that the TPPA would not be completely off the table, and there was still a possibility of other similar trade pacts to be introduced.
As the fate of the TPPA remains equivocal, another mega multilateral free trade agreement, the Regional Comprehensive Economic Partnership (RCEP), has been gaining momentum and taking centre stage.
RCEP, mooted four years ago, is becoming increasingly important to fill in the potential vacuum left by the TPPA.
During the latest round of negotiations in Indonesia last October, RCEP members expect negotiations to be completed by end-2017, with its next talks to be held in Japan in February next year.
The RCEP involves all 10 members of ASEAN together with China, Japan, South Korea, India, Australia and New Zealand.
Seven of these countries are also in the TPPA but then both pacts are not perceived as competing initiatives. Rather, they are complementary to each other.
Like the TPPA, the market potential of RCEP is enormous, with a combined population of more than 3.0 billion, accumulative gross domestic product of almost RM100 trillion and a total of 40 per cent contribution to global trade.
Currently, Malaysia’s trade with RCEP countries accounts for more than 50 per cent of its overall international trade.
The ASEAN-centric trade pact can also be viewed as an extension of the ASEAN Economic Community (AEC) vision which targets to transform the region into a single market base, integrated with the global economy.
ASEAN Business Advisory Council Member Datuk Ramesh Kodammal in a recent interview with Bernama said the AEC could not have come at a better time, especially now with uncertainties over the TPPA.
Despite the gloomy scenario following a double whammy of Brexit and post-Trump effect, the AEC has all the potential to shine, provided a number of inherent challenges are addressed.
On top of this, more promotional and awareness programmes needed to take place as tough times often lead governments to opt for protectionism, Ramesh said.
Meanwhile, for next year, Malaysia will focus on ASEAN as the grouping celebrates its 50th year of establishment.
During his visit to Hanoi, Vietnam, early this month, Mustapa said ASEAN was making progress in reducing non-tariff barriers as threats to global trade rose.
Intra-ASEAN trade could also rise to 35 per cent over the next few years from the current 24 per cent despite the drag in global economic recovery.
So, what is next in Malaysia’s trade agenda?
With or without the TPPA, Malaysia needs to expand and diversify its trade with the world and given the current scenario, Mustapa said Malaysia would explore more bilateral trade opportunities.
Bilaterally, Malaysia has signed Free Trade Agreements (FTAs) with seven countries and is also eyeing FTAs with Canada, Peru and Mexico, while negotiations with Iran and Sri Lanka will start next year.
At the regional level, Malaysia and its ASEAN partners have established the ASEAN Free Trade Area (AFTA) with ASEAN having also concluded FTAs with its six dialogue partners, namely China, Japan, Korea, India, Australia and New Zealand.
Aside from that, the European Union-Malaysia FTA has resumed negotiations.
Mustapa said as a trading nation, Malaysia would continue to pursue preferential trading arrangements that were fair and which would benefit the country in terms of trade, investment, income and employment.