Parliamentary Select Committee on FTAs should be informed to safeguard national interets

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Speech on 2006 Supplementary Estimates (5)
by Lim Kit Siang  
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(Parliament, Monday) : Malaysia is currently enjoying a trade in goods surplus with the US, and it is clear that the US as it becomes less competitive in a number of manufacturing sectors, wants to get more market access in developing countries including Malaysia.  We can see this in the statements of US industry associations and the US Trade Representative (USTR). 

During the second round in Washington in July, a  BERNAMA report from Washington dated July 15, 2006, said:  

Producers of rubber footwear, facing competition from Malaysian rubber footware, and the oleochemical producers, which produce biodiesel fuel, soap and detergent, face competition from palm oil and its products.

They are concerned that duty-free products of their competitors would flood the U.S. market and harm U.S. industries.

The U.S. Automotive Trade Policy Council (ATPC), which represents Daimler Chrsysler Corporation, Ford Motor Company and General Motors, has expressed skepticism for Malaysia's new National Automotive Policy.

"While some important changes have been announced, the new policy retains some of the major features of the prior system.

"It appears that the government is still committed to maintaining a national auto industry and some elements of its bumiputra policy both in the manufacturing, importing and retailing side of the business," the ATPC said in a statement.

[US chief negotiator Barbara] Weisel said, it was still too early to project how far Malaysia would go to open up its automotive market and dismantle its trade barriers, "we have not reached that stage yet."

Bilateral FTAs with the US are becoming more controversial, as seen by the debates in the US Congress on the ratification of each new FTA, the stalling of the US-Thailand negotiation and the widespread Korean protests against the US-Korea negotiations. In Malaysia many public interest groups and a number of domestic private sector organisations are raising their concerns even though their views are not publicised by most of the local media.

In the last session of Parliament, the Second Minister of Finance assured this House that Malaysia will not be held to a time-table determined by the US if it does not suit our national interests. The Minsiter of International Trade and Industry also gave that assurance and repeats it from newspaper reports.  But she also repeats that the US FTA will be targted for completion at the end of this year.

Why is there this continuous march when even the USTR herself has expressed doubts that she can bring home to Congress all the various FTAs before the “fast track” negotiation authority given by Congress to the USTR runs out?

The Government must provide Parliament with detailed reports of the status of the negotiations with the US and Australia.

Questions that have been raised about “Japan-Malaysia Economic Partnership Agreement”  (JMEPA) in the last session of Parliament remain unanswered.  Now that JMEPA has entered into force (July) the Government should provide Parliament with an assessment of what has been given away and what new obligations will be required of the country.  How is the Government dealing with the Most-Favoured Nation obligation under the JMEPA and that will be demanded in future FTAs with other countries such as the US and Australia?  If under the MFN obligation  every major concession given to one trading partner has to be equally given to the future partners and the new concessions also apply to the former partner, there will be a cumulative effect.  Will that effect be positive or negative for Malaysia? 

The major shift to put investment on a negative list basis in particular has opened a Pandora’s Box.  We see a long list of exceptions and reservations in the JMEPA Annex but JMEPA also requires continuing efforts to reduce and eliminate those reservations and exceptions (Article 80.9 of JMEPA).

I would like to know how this will affect ongoing negotiations with the US and Australia.  Are those countries asking for more?  How is MITI preparing for safeguards?  Even if these FTAs were to bring more investment, and that has yet to be proven over time, the Government has opened the door to more rights for foreign investors under these FTAs, especially the right for those investors to sue the Government and even trigger trade sanctions against Malaysia under certain circumstances.

US FTAs also demand a negative list for servcies sectors.  How is the Government dealing with this?  There are serious balance of payments implications from services liberalisation as US industry stands to benefit a great deal from entering Malaysia’s fianncial and telecommunications sectors while Malaysian companies have little chance of breaking in any significant manner into the US service sectors.

In the midst of these uncertainties and with Parliament continuously kept in the dark, the annoucement on 25 August of the signing of the US-ASEAN Trade and Investment Arrangement comes as a big surprise.

ASEAN ambitions to become an integrated regional economic entity can be threatened, and there may even be splits created among ASEAN Member Countries if bilateral trade deals with the US that are largely one-sided continue to be signed leading ASEAN countries into a race to the bottom. 

The growing trading relations between ASEAN Member Countries and China also seems to be a key driving force for the US to establish its stronghold on this region.  With weaker economies among the ASEAN members, Malaysia should not turn into a Trojan Horse for economic deals that would hurt those countries even more than Malaysia.

Last week, the Deputy  USTR Barbara Weisel met separately with Barisan Nasional and Opposition MPs for an exchange of views on the Malaysia-USAFTA.  DAP MPs expressed our concerns on a whole range of issues, such as market access, services, intellectual property, investment and government procurement.

If the US Deputy USTR can take the time to meet with Malaysian MPs on the Malaysia-USAFTA, why is the Minister for International Trade and Industry, Rafidah Aziz, not personally briefing Malaysian MPs on the same subject?

In Parliament in April, the Second Finance Minister Datuk Nor Mohamad had responded favourably and positively to my suggestion for the establishment of a Parliamentary Select Committee on FTAs to protect the national interest by ensuring greater parliamentary and civil society participation in these negotiations.

It would appear that this proposal had been torpedoed by Rafidah. I hope Parliament can be told why the government is not prepared to establish a Parliamentary Select Committee on FTAs during the winding-up of this debate, as I propose to pursue this matter during the debate on the 2007 Budget next week.

(28/08/2006)