Malaysia is one of Asia's biggest employers of foreign labour. But recently, cases of deaths, abuse and forced labour have come to light. What is going on? Who is protecting these migrant workers?
While claiming that a balance in views is necessary,
it appears that his letter does not appear to be realistic about the possible
gains for Malaysia under a USFTA.
<P><B>Trade in Goods </B></P><P>He notes
the high tariffs currently imposed on some Malaysian products, such as textiles,
when they enter the US. In textiles and garments, it is not sure if the US will
eliminate its tariffs immediately or over many years. </P><P>In some FTAs, the
US did not agree to go to zero tariffs immediately but phased this over many years.
Moreover, Malaysia is asked to accept the so-called ‘yard forward rule’
(that requires the thread to be bought from Malaysia or the US to qualify for
any lower tariffs) and to have strict rules of origin. These conditions offset
the possible gains of reduced tariffs. </P><P>Singapore’s FTA with the US
contains a chapter on textiles, with the yard forward rule and rules of origin.
Singapore textile exports to the US actually fell after the FTA came into force
on Jan 1, 2004. </P><P>According to US Government statistics, the year before
the Singapore-USFTA started, Singapore was exporting US$233mil of knitted apparel
and US$37mil of non-knitted apparel to the US. In 2006, exports fell to US$139mil
(knit) and US$6.3mil (non-knitted). </P><P>In terms of overall trade balance,
data from the US government showed that Singapore had a trade deficit with the
US of US$1.4bil in 2003. This worsened after the FTA to US$4.3bil in 2004, US$5.5bil
in 2005 and US$6.9bil in 2006. </P><P>Further, in manufacturing, the US tariff
is much lower than Malaysia’s (3.7% against 14.5%). Thus, Malaysia will have to
make much higher concessions when both sides go to zero. </P><P>Datuk Yong also
fails to point out that without a USFTA, Malaysia currently has a US$23bil trade
surplus with the US that is rapidly rising according to US government statistics.
This shows that the US needs an FTA with Malaysia to try and decrease Malaysia’s
trade surplus. Malaysia is doing fine without a USFTA. </P><P><B>Investments</B>
</P><P>In relation to investments, Datuk Yong makes a general claim that investments
tend to increase after an FTA. What he does not however point out is how the US
template of an FTA grants overwhelming rights to the foreign investor at the expense
of the local. </P><P>For instance, the US wants to give its investors the right
to enter and establish business with minimum hindrance or screening; to own 100%
shares in its companies in Malaysia; be treated equal to or better than locals;
transfer funds freely into and out of the country; allow its investors to sue
the Malaysian Government in an international court for direct and indirect expropriation,
that includes any policies or regulations that the Government makes which reduces
the company’s future profits. If the US, and later other countries get 70%
or 100% of the shares, then locals will have to share only 30% or less among themselves.
</P><P><B>Padi farmers </B></P><P>Datuk Yong says that our rice farmers will not
suffer, as US prices for long-grained rice are much higher than that of their
competitors like Vietnam and Thailand. </P><P>He further suggests that it is better
to import cheaper rice rather than being self-sufficient. </P><P>Primarily, because
our farmers are not able to compete with cheaper rice of our neighbours, a tariff
of 40% is currently in place. If this were reduced to zero, US rice would be competitive
as local rice retails at around RM1.70 to RM2 a kg while US long-grain rice is
around RM1.43. </P><P><B>Drugs</B> </P><P>Datuk Yong’s claim that drugs,
which are already off patent, can continue to be produced generically and be available
once a USFTA is signed is wrong, because data exclusivity (i.e. generic companies
cannot make use of safety data of the original products) can apply even to non-patented
medicines. </P><P>Colombia carried out a study using the World Health Organisation’s
model of the economic impact of the stronger intellectual property provisions
of its USFTA. </P><P>Data exclusivity alone was found to require Colombia to spend
an additional US$675mil per year by 2020 and US$989mil per year by 2030. Data
exclusivity by itself was predicted to cause the Colombian medicine manufacturers
to lose 47% of their market share by 2020. </P><P><B>Government procurement </B></P><P>Datuk
Yong refers to the need for transparency in government procurement but misses
the fundamental point about the US wanting market access in the business of government
procurement. </P><P>The US is not asking merely for transparency. It wants Malaysia’s
government procurement to be opened to its companies, as it is a large business
(worth RM94bil in 2004). </P><P>Under the FTA, US companies which lose the bids
can complain against the government in court and this will severely affect government
projects. </P><P>Hence, Malaysia will lose the most important policy tool for
helping local businesses and for macro-economic management. Affirmative action
policies will be gravely undermined. </P><P><B>Competition policy </B></P><P>The
Malaysian Government is still formulating a competition law and policy for the
country, which aims to induce more competition and less monopoly. </P><P>But it
has to balance this with the risk of introducing a law that prevents local companies
from growing as this reduces their ability to compete with big foreign companies.
</P><P>The result of this would be that local companies would be at a great disadvantage,
as foreign firms that are already huge can easily take over the share of local
business and take over local firms. </P><P><B>Services sector</B></P><P>FMM advocates
a more vibrant and competitive domestic services sector. This is difficult to
achieve through an FTA. The US wants its companies to have total access to the
services sector. It wants a “negative list” approach where everything
is deemed to have liberalised unless exceptions are listed. </P><P>Malaysia may
want to develop certain sectors in future that have not been listed. This will
not be possible under the negative list. </P><P><B>Removal of mandatory GM labelling</B>
</P><P>Datuk Yong has omitted to mention that the USFTA will require the removal
of mandatory labelling of foods which are genetically modified, which is presently
required under two laws proposed by the Government. </P><P>Mandatory labelling
of GMOs is required in over 40 countries, including most of Europe, China, Japan
and Australia. Mandatory labelling should be a consumer right for reasons of health,
and dietary restrictions for religious reasons. The US wants this right taken
away. </P><P><B>Time pressure</B></P><P>FMM is concerned about the time pressure
as dictated by the situation in the US. The future of our country and its citizens
should not be shaped under such pressure. </P><P>There is need for a much deeper
assessment, given the details of the FTA and what is demanded. While the tangible
benefits are still unclear, the traps and dangers are clearer. </P><P>Many countries
that started FTA negotiations with the US also came to the conclusion that it
is better not to proceed. This includes Switzerland, SADC countries including
South Africa and Botswana, Free Trade of the Americas countries (including Brazil,
Argentina and Caribbean countries), Thailand etc. It will be prudent for Malaysia
to do the same. </P><P><B>S.M. MOHAMED IDRIS, </B></P><P><B>President, </B></P><P><B>Consumers
Association of Penang</B></P><P><I>Source: http://thestar.com.my/news/story.asp?file=/2007/3/23/focus/17227120&sec=focus</I>
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