KUALA LUMPUR: The year 2018 saw a sea change in Malaysia’s political and economic landscapes, with a high-profile trade war and tit-for-tat action between the world’s two largest economies serving as a backdrop to what could be an eventful year for international trade pacts.
Apart from dealing with the game-changing double whammy, the rise of trade protectionism, resurgent nationalistic movements and inward-looking policies also slowly took place globally, even within Asean countries.
Consequently, getting a final nod for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Regional Comprehensive Economic Partnership (RCEP) deals – the two biggest trade pacts involving Malaysia – is proving elusive as different countries have different sensitive issues that they are defending or promoting, never mind coming to a collective agreement or concession.
Domestically, Pakatan Harapan (PH) which won the general election and came into power on May 9, helmed by Tun Dr Mahathir Mohamed, rode on the wave of public support and campaign to curtail foreign interference especially in terms of trade and economy in the country.
During the 2018 Asean Summit in Singapore, Mahathir pointed out that taking into account national priorities did not mean advocating the government to adopt inward economic policies but rather to work together and actively engage in finding amicable solutions and resolving trade issues through multilateral dialogues.
He also made Malaysia’s position very clear – Malaysia will not agree to lopsided trade deals and any trade deal must either be equitable for developing nations or there will not be any deal at all.
The deal must be mutually beneficial and no arm twisting or smaller economies cowing to powerful nations and engaging in populist narratives just so to please economic superpowers, he had stated.
And this, more often than not, refers to the mother of all trade deals, the CPTPP, which is a rebranded Trans-Pacific Partnership Agreement (TPPA) that collapsed after the United States withdrew in January 2017 under President Donald Trump.
The prime minister said Malaysia had to study very carefully the terms of the agreement on the CPTPP to see how it would affect Malaysia’s efforts to distribute wealth in the country in an equitable manner.
He said although there was a possibility that Malaysia would ratify the CPTPP, the country would ask for some exemptions.
As of October, more time was required to ratify the CPTPP, according to the Ministry of International Trade and Industry secretary-general Datuk Isham Ishak.
He said at least two additional Parliament sittings would be required to amend the laws and regulations.
“There are 18 laws and regulations that must be amended by Parliament before Cabinet approval is sought. As per the original schedule, we are supposed to get the CPTPP ratified by February 2019,“ he said.
Japan, Singapore, Mexico, Canada, Australia, New Zealand and Vietnam had ratified the deal, which met the minimum threshold – ratification by six signatories – for the CPTTP to take effect by year-end.
Aside from Malaysia, Brunei, Chile and Peru have yet to ratify the deal.
Reaction towards CPTPP in the country has been mixed with three PH members of parliament (MPs) calling for the government to withdraw from ratifying the CPTPP, stating that Malaysia would likely face devastating socio-economic consequences if it choose to ratify the pact.
Permatang Pauh MP Nurul Izzah Anwar, Subang MP Wong Chen and Klang MP Charles Santiago said the CPTPP would not bring any benefit to the poor, terminally-ill, women or even governments.
The Bantah TPPA/CPTPP movement said Malaysia should not ratify the trade deal as it may lose the flexibility of its essential policies, shaped by the multi-ethnic society.
Meanwhile, the Institute for Democracy and Economic Affairs (Ideas) opined that Malaysia should ratify CPTPP to ensure sustainable economic development in the future.
Ideas described the pact as a high-quality agreement that would benefit Malaysia because historically, the country’s economic growth was largely driven by trade openness rather than infrastructure developments.
Negotiations on the RCEP, another mega trade agreement, is still ongoing. At this point of time, its conclusion date is still vague, despite being negotiated since 2013.
Alluding to the world’s largest trade pact, covering nearly half the global economy, its negotiation is set to be completed by end of next year,
RCEP is often conflated as a Chinese-led initiative but in fact Asean is the main driver behind it with other members that also include Australia, China, India, Japan, New Zealand and South Korea.
Prevailing geopolitical tensions between member economies may lead to the continued stifling of progress with regard to RCEP negotiations but RCEP stands as the alternative for member countries, especially Asean to advance the trade liberalisation agenda.
Some 65% of Asean’s trade is with RCEP countries, therefore it must leverage on existing high-level trade linkages.
Mahathir said both the Asean Economic Community and RCEP can work in tandem to provide a good template for the rest of the world towards inclusive and dynamic integration among countries of varying level of development but with common aspirations for progress and economic engagement.
As for Asean, its intra-regional trade has been stagnant at between 25% and 30%, far below that of other economic groupings such as the European Union and The North American Free-Trade Agreement (Nafta) at 63% and 50%, respectively.
Achieving over 30% intra-trade in Asean is seemingly an ambitious target but still, all in, Asean must pursue and embrace this by opening up opportunities and explore new possibilities.
A global Hongkong and Shanghai Banking Corporation report divulged that Southeast Asian corporates had the most bullish trade outlook in the world, expecting more production and investment to swing in Asean’s path.
Going forward, Malaysia has developed a strong trade network and diversified sectors over the years, which would enable domestic companies to navigate disruptions and seek new opportunities and alternatives.
Besides, the country was committed to engage and pursue other trade initiatives through bilateral and multilateral agreements that would benefit Malaysian companies and entrepreneurs.
Among the free trade agreements (FTAs) in the pipeline include the Asean-Hong Kong FTA, Malaysia-European Free Trade Association Economic Partnership Agreement and Malaysia-Iran Preferential Trade Agreement.
Malaysia is still receiving FTA offers from several countries apart from requests for FTA reviews. — Bernama