Go for Fair Trade, Not Free Trade

LAST week, Malaysia began talks with the United States to establish a free trade agreement (FTA) between the two countries, with the idea of boosting bilateral trade by rolling back or dismantling tariffs and non-tariff barriers.

For most, this seems like too much information on a subject so arcane, complex and dry, especially with our attention consumed by the World Cup in Germany and political intrigues at home.

For a long time, external trade has been a subject best left to the Government. Many of us have little ability to think about it, when in fact we should. It could potentially affect all of us, for better or worse.

The main issue for any country embarking on an FTA is how much it is willing to offer in return for better access for its goods and services.

Market access at its most basic is akin to horse-trading, with each country deliberating the cost-benefit of any agreement in the interest of the economy and people.

Previously, trade talks were conducted solely at multilateral platforms like the General Agreement on Tariffs and Trade (GATT) and its successor the World Trade Organisation (WTO). But the need to deal with so many countries, and their many varied interests, led to such talks being protracted and contentious. The outcomes, in the opinion of many, were rather lame.

This prompted many developing nations especially to launch bilateral talks at the periphery of the WTO with the aim of speeding up liberalisation initiatives beyond the stifling and slow multilateral process.

Malaysia’s FTA talks with the US were born of the same idea. FTAs with others, including South Korea, India, Pakistan, Chile, Australia and New Zealand, are in the works.

Last December, Malaysia signed an FTA with Japan, called the Japan-Malaysia Economic Co-operation Partnership (JMEPA), which essentially allows Japanese manufactured goods, including cars, easier access into Malaysia in return for equal treatment for our vegetables and fruits.

Japan has been very protective about its food imports, and as Malaysia was pushing for higher value-added for its agriculture sector, getting Tokyo to agree on this matter is indeed an achievement. But many critics contend that the deal was not really apples to apples, and that

Japan had the upper hand.

Hence, it is reassuring that the Government is looking again at the JMPEA to ensure that we are not shortchanged. Deputy Prime Minister Datuk Seri Najib Razak said that Putrajaya will monitor the FTA’s

implementation as well as the nature of the economic partnership so that we benefit equally.

Talks on the Malaysia-US FTA began in Penang last week, and will be followed by four more rounds in July, September, October and December. They are to be completed by year end to take advantage of the US

president’s fast-track authority on trade deals which ends in the middle of next year.

In the talks with the US, reports suggested that Washington is seeking greater access to Malaysia's financial and automobile sectors, as well as to government contracts and purchases, while Malaysia would like greater access for its textile and leather goods. We should be concerned, as on the surface, the agenda looks rather less favourable to us.

Most of the arguments for a freer international trading environment have been put forth and understood. But over the years, Malaysia has expressed reservations over many areas, which I believe are valid even now.

Chief among them is the protection of domestic interests, be they jobs, businesses, industries or the people’s welfare. This is not shallow or

regressive thinking as many developed nations, the US and European nations included, jealously guard some of their domestic interests even as they ask others to open up markets.

The main question for me is how committed the foreigners are, post-FTA, to our country. Operating from boardrooms thousands of kilometres away, multinationals often move trade and funds where there is money to be made. It is never in their interest to support local economies.

We have seen multinationals close in Penang and elsewhere, only to relocate to places where costs are lower. This is to be expected since shareholders have to be satisfied.

A local company tends to be more circumspect in its dealings, with its roots and loyalty here. This may be a rather simplistic argument against globalisation and liberalisation, but I believe it still holds true.

For example, in the financial sector, the US says our