The Trans-Pacific Partnership Agreement (TPPA) is not just any free trade agreement (FTA) or comparable to the Asean Free Trade Area (AFTA) - where the negotiating and bargaining positions of the parties revolve around consensus. In such a situation, the FTAs are genuinely about removing tariff (barriers) and widening market access.

The TPPA, however, is a multilateral FTA in which the provisions have been negotiated in secrecy and therefore lacked transparency. Furthermore, there is suspicion that the positions of the interest (contracting) parties are subsumed to that a (of a third) non-contracting party(!)

More to the point, one of the prominent features of the TPPA is to grant exclusive intellectual property (IP) rights to the US corporations - in effect granting them the absolute and total control over the use of these rights. This in turn blurs the boundary between a sovereign and a private entity, i.e. through the TPPA, the big corporations are behaving like the former.

The PricewaterhouseCoopers (PwC) cost-benefit analysis report focussed only on the domestic sectorial impact of TPPA but neglected the other factors. This letter seeks to complement and supplement what has been highlighted and articulated in opposition to the TPPA. The other factors (which are not exhaustive) can be framed in the following questions.

1. Effects on inflation/cost of living

TPPA may result in GDP growth but at the expense of inflation. That is, the TPPA may (quantitatively) heighten or contribute to imported inflation. The same goods sold in one member country may be much higher than in Malaysia. And this may not be reflected in the purchasing power parity (PPP), i.e. the domestic price of the exporting country may exceed the exchange rate with the importing country.

2. Effects on income and wealth distribution

Can the government guarantee that our Gini co-efficient will be lower as a result of TPPA? Or will the income and socio-economic divide exacerbate?

3. Effects on wages

Will the country be forced to continue its heavy dependency on foreign migrant labour to keep wages down and thus maintain ‘competitiveness’ - and will this eventually intensity so that there is wage compression (for the locals)?

4. Effects on jobs

Is the TPPA a stepping stone towards a much more integrated and unified and cohesive structure where freedom of labour, capital and services extends now also to freedom of movement (as the ‘last’ frontier of national sovereignty, i.e. so-called ‘open borders’?) Since the TPPA is not an ordinary free trade agreement (FTA), this means that our borders will be open (in the future) to twelve or (even) more countries.

5. Effects on corporate taxable income - profit shifting, base erosion, transfer pricing

Will the regime under TPPA encourage multi-national corporations (MNCs) to divert and declare taxable profits in/ to other jurisdictions (other than Malaysia) especially in relation to economic activities that are related to intellectual property - at least in the short- to medium-term? This is in particular reference to the tech & IT, bio & agro-tech and pharmaceutical companies that maintain IP hegemony, dominance and monopoly.

Formally, the TPPA not only facilitates economies of scale but eminently well poised to provide the geographical ‘cover’ as an integrated economic area. Will there be private deals between the government of Malaysia and the aggressive tax avoiding corporations?

6. Effects on government revenue - compelled to rely even more on consumption tax - Goods and Services Tax (GST) to be increased to double-digit?

Under the TPPA regime, will the government be induced to drastically (instead of incrementally) lower the corporate tax rate (which at 25 percent is currently not as comparably competitive) so continually ensure a competitive base for foreign direct investment (FDI)? And correspondingly, will the government be ‘compelled’ to pursue the agenda of increasing its tax intake via GST?

7. Effects on the ringgit - exchange rate

Will Malaysia be forced to devalue the ringgit to maintain ‘competitiveness’ under the TPPA regime?

8. Effects on monetary policy - will there be policy and political pressure and/or constraints

Will Bank Negara (be pressured to) abandon its conventional practice of monetary stability - in favour of, e.g. nominal GDP targeting - in the event that economic growth is in the doldrums - in accordance to the dictates of the TPPA regime? That is, will there be the pressure to supposedly inflate the aggregate demand via loose monetary policy and boost credit creation vis-à-vis the TPPA?

This in turn would probably make Malaysia would more vulnerable and susceptible to the ‘sentiments’ of international bond traders. Unlike the US and UK, Malaysia has neither the experience in ‘money-printing’ (e.g. asset swapping) nor the self-declared flexibility to increase its deficit spending (because of self-imposed targets influenced by neo-liberalism).

9. Effects on free movement of labour?

Will the TPPA converge with the Asean Economic Community’s policy of free movement of labour (skilled and unskilled)? Again, this would impact on local employment and domestic jobs market.

10. Questions about national sovereignty - will TPPA laws in effect be the supremacy of the US laws (drafted at behest of the US corporations)

As it is, the TPPA provisions reflect the domestic laws of the US in varying degrees.

11. Will the TPPA lead to deeper integration in the form of dollarisation, i.e. a virtual ‘common or optimal currency area’ vis-à-vis the US dollar?

Will the TPPA increase or reduce transactional costs in terms of the use of the dollar?

12. Will it lead to the privatisation of national services such as healthcare; and the taking over of strategic assets such as utilities (water, electricity)?

Can the government guarantee that there will be no overt and backdoor privatisation of our healthcare and utilities sector?

13. Will the TPPA be a catalyst or contribute to Malaysia moving up the value chain?

Will the TPPA result in greater/deeper and an integrated network production with technology sharing and transfer amongst member countries?

14. Will the independence of Malaysia’s public policy also be compromised?

Will the corporations (be in a position to) dictate policy contents and directions to the Malaysian government - directly or indirectly through the TPPA or in connection thereof?

15. Will the ISDS represent the beginning of a covert/ subtle erosion of legal sovereignty of Malaysia?

The Investor-State Dispute Settlement (ISDS) remains a concern as implication from the scope and nature potential legal action means that corporations may be able/ can override the sovereignty of the state.

By its very nature, a dispute resolution mechanism which structures the settlement of legal disputes between a corporation and the member country concerned blurs the distinction between a private and public entity. It basically treats the member country as if it was a private entity on par with the corporation.

The (‘legal’) basis for the decision or settlement will take on a different nature than if a court of law was to be the arbitrator. This means jurisprudence is jettisoned in favour of purely commercial considerations.

Ultimately, the TPPA can only represent the resurgence of the Washington Consensus aka neo-liberalism that lost its prestige because of the financial and economic crises in the 1990s such as the Asian Financial Crisis (1997/98). The TPPA aims to ‘lock-in’ the economic policies of member countries on a predictable and permanent trajectory in what can only be termed as ‘groupthink’.

The ‘final’ question here now is whether we want a globalisation that appears to be based on free market capitalism but actually manipulated ‘from behind the scenes’ by the big corporations. Genuine free market capitalism requires governmental - and inter-governmental - action to provide the necessary (including legal) pre-conditions. In the case of the TPPA, the type of inter-governmental measures promulgated does not appear to meet the pre-conditions.

At the end of the day, the government must realise that they have 30 million Malaysians to account for. Malaysia can and will survive - without or outside the TPPA.