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TWN Info Service on Free Trade Agreements

12 January 2007


Will We Lose Out on an FTA with the US?


Attached is an article in the SUN which questioned whether Malaysia will lose more than it will gain from signing an FTA with the US.

It cited research and highlighted some negative experiences from other countries which have entered into an FTA with the US and wonder if Malaysia will face a similar fate.


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US FTA: Will we lose out, too?
By: Jacqueline Ann Surin
(SUN, Jan 11, 2007)

By tomorrow, the fourth round of negotiations for the free trade agreement (FTA) between Malaysia and the US would have concluded in San Francisco.
While both governments have not set a specific deadline for the FTA to be signed, ongoing negotiations suggest that they remain interested in pursuing such an agreement.

What does an FTA do? FTAs are bilateral agreements that spell out the rules governing how trade between two nations are conducted.

They are unlike multilateral trade agreements such as those under the World Trade Organisation (WTO) where developing countries may have better bargaining power through groupings.

Malaysians have cause to worry about any FTA that will be signed by our government with the US. These FTAs usually require developing countries to commit to legal obligations that are more burdensome than those in the WTO. Indeed, these FTA obligations are commonly called "WTO-plus obligations".

Additionally, US FTAs are usually more than just about trade. They also encompass economic and social issues that will inevitably impact the lives of Malaysians, most of whom today may not even understand what an FTA is about.

Already there is evidence of how countries which have signed US FTAs have lost out from these agreements. According to Third World Network's research, Peru's Health Ministry forecasts that just one of the six provisions in US FTAs known as data exclusivity, that raises medicine prices, will more than double their medicine spending.

Canadian estimates, meanwhile, indicate that if the same provision had been enforced over the last five years, it would have cost an additional US$600 million (RM2.14 billion) for prescription medicines alone.
At the same time, Colombia has predicted that its generic medicine industry would lose up to 71% of its market share.

If that's not convincing enough, even the United Nations (UN) Special Rapporteur on the Right to Health is openly concerned that intellectual property and other provisions of US FTAs will result in unaffordable medicines.

A World Health Organisation commission on public health recommends avoiding such provisions. Health and trade ministers from 10 Latin American and African Union countries have already committed to doing this in their nations' interest.

One community that will suffer most from such provisions would be AIDS patients. See, patented AIDS medicines used to cost US$15,000 per patient per annum but generic competition impressively reduced it to US$132 instead.

US FTAs, however, will make medicines for all diseases more expensive again because of the stronger intellectual property protection provisions in them.
The Committee for Asian Women, representing 39 women worker groups from 14 countries, has also pointed out that FTAs usually result in less protection for workers, especially women who are less economically secure.

US FTA proponents have cited the benefits of, among others, greater market access and foreign direct investments, and a spurt in innovation, research and development.

But any gains may, in the end, either not materialise or be severely offset. For example, Australia failed to achieve significant additional market access for its main exports of beef and sugar in its US FTA.

And while Mexico was able to increase its vegetable exports to the US, the US gained much more market access for maize - Mexico's main crop - and other key agricultural products. In Malaysia's case, our country currently has higher tariffs than the US, so any tariff cuts under an FTA would demand a bigger Malaysian sacrifice.

US FTAs typically require zero tax on American exports. If our country is then swamped with cheap American agricultural imports - some of which are heavily subsidised - will our farmers be able to compete and survive?

UN studies and the World Bank have also found that stronger investor protection in an FTA has not led to increased foreign direct investments. Europe's experience has also shown that stronger intellectual property protection has not led to more innovation.

Neither is it clear that stronger intellectual property protection will result in the development of new, useful medicines since pharmaceutical companies have shown that their priority is to develop medicines for those who can afford it, not those who need it the most.

Undoubtedly, the issues arising from a US FTA are complex and manifold. Malaysia's International Trade and Industry Ministry is coordinating the FTA negotiations with the US, our single largest trading partner.

And while the ministry has the support of other ministries and agencies, the lack of public consultation and transparency thus far means that Malaysians remain cut off from what's really at stake.

While there is always a chance that Malaysia may benefit from a US FTA, the evidence that that will happen needs to be first provided before any agreement is signed. Thus far, though, other countries' experiences and international research have proven that signing a US FTA could be a raw deal.

Jacqueline Ann Surin believes that you cannot be neutral on a moving train. She is an assistant news editor at theSun. Comments: feedback@the sundaily.com

 


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