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TPPA: Malaysian Business Believes Malaysia’s Development Experience Should Hold Sway over Economic Models

Letter to the Editor, January 15, 2016

In recent weeks a number issues have been raised regarding the Trans-Pacific Partnership Agreement (TPPA). One of the issues that have received much media attention is that the TPPA will only achieve modest results and may lead to job losses.  The Federation of Malaysian Manufacturers would like to reiterate that based on the nation’s development experience and the experience of manufacturers, Free Trade Agreements have generated business and increased trade, investment and employment. We have benefited from the FTAs  signed thus far and there is ample evidence that liberalising economies like Chile, China, and Korea have consistently performed better than more inward-looking ones at comparable stages of development.

We, therefore, call for the ratification of TPPA because we believe that the nation’s future is inextricably tied to our ability to expand our markets to consumers who live beyond our borders. Malaysia has been and remains an open economy. Trade and investment is our lifeline and plays an important role in economic growth and transformation and our aspirations to move into the ranks of a medium-income nation. This is evident in the fact that Malaysia is the fourth most trade-dependent nation after Hong Kong, Singapore and Vietnam with total trade accounting for 1.5 times of Gross Domestic Product.  

The private sector, in particular manufacturers, service providers, investors, etc. who run businesses, employ workers and sell products and services strongly advocate for FTAs, including the TPPA. They enhance market access, accelerate export growth, generate employment and ultimately raise profits and incomes. We recognise the limits of the domestic market. We know that we can only generate new and additional sources of growth and investment by expanding our boundaries to the rest of the world – a promise that TPP and other FTAs hold. FTAs do not only generate business but offer a degree of transparency and predictability in investment and trade.  

As at 1 December 2015, WTO reported that 619 Free Trade Agreements had been signed worldwide and 413 have come into force.  

As more and more markets and trading blocs are carved out and concessionary trade and investment terms are accorded to participating nations, Malaysian business believes that it is strategic to be part of such important agreements – not just TPPA but other new FTAs in the pipeline particularly with the European Union and the Regional Comprehensive Economic Partnership (RCEP) that all require high levels of commitment.  

Although Malaysia has enforced seven bilateral FTAs (Japan, Pakistan, New Zealand, India, Chile, Australia and Turkey) and five regional FTAs through ASEAN (ASEAN and China, Korea, Japan, India and Australia-New Zealand) businesses call for the continued opening of markets. We need to be part of the TPPA as it provides access to a huge duty free market of 800 million people with a combined GDP of USD27.5 trillion.  

Under the TPPA, tariffs will be eliminated on 85% of Malaysia’s trade with its new FTA partners – Canada, Mexico, Peru and USA which will save USD$1.2 billion tariffs for Malaysian industry. Products that will benefit from duty free access to the TPPA countries include automotive products, machinery and equipment, electrical and electronics, textile and apparel and rubber products among others. Malaysia will eliminate import duties for several sensitive E&E products and petroleum & chemical products that will open up more opportunities for Malaysian manufacturers to procure better quality raw materials to produce high value-added products.  

We are confident that having a first mover advantage in the TPPA would yield positive results. Given the uncertainties in the global trading environment, especially in traditional export markets, can Malaysia afford not to sign important FTAs like the TPPA and later, other FTAs in the pipeline like the EU Malaysia FTA or RCEP? If we fail to conclude the TPPA, our ASEAN neighbours, Vietnam, Singapore and Brunei will move ahead strongly and we will be relegated to the side-lines. Relocation of our exporting industries to Vietnam cannot be ruled out. Our experience tells us that we will surely be better off with the TPPA. We also note that the Philippines, Thailand, Indonesia, South Korea and Taiwan have more recently expressed interest in TPPA.  

In making such an important decision, we call on all parties, especially the Government, to take the important step in becoming part of the TPPA. Being an open and competitive trading economy has served us well in the past and our development experience tells us that we should not be held back by the unfounded fears of a few. Economic models are based on assumptions and are as good as the assumptions made. We, who run businesses, rely much on our experience and believe that past trends and experiences should hold sway over such models. 

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