TWN Info Service on Free Trade Agreements

14 March 2006


MALAYSIA-US BILATERAL TRADE AGREEMENT

Last week, Malaysia and the US officially launched a bilateral trade agreement and negotiations on the agreement is likely to start soon. We have attached below two documents for your attention:

1. Challenges on road to FTA by Martin Khor (http://thestar.com.my/news/story.asp?file=/2006/3/13/focus/13644777&sec=focus)
This article discusses key concerns with regards to the Malaysia-US bilateral trade agreement and the challenges that lay ahead.

2. Open letter to the Prime Minister Abdullah Ahmad Badawi from the Positive Malaysian Treatment Access & Advocacy Group (MTAAG+) and PT Foundation.
The groups, which represent people living with HIV/AIDS, are concern that the life-saving medicines they need may become more unaffordable under the bilateral trade agreement between Malaysia and the US.


With best wishes,

Third World Network
131 Jalan Macalister
10400 Penang
Malaysia
Tel: +603-2300 2585
Fax: +603-2300 2595
email: twnet@po.jaring.my

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Item 1

Challenges on road to FTA

GLOBAL TRENDS BY MARTIN KHOR
The Star Online, Monday March 13, 2006
(http://thestar.com.my/news/story.asp?file=/2006/3/13/focus/13644777&sec=focus)

With the announcement last week of an intention to have a US-Malaysia free trade agreement, negotiations will start soon. The experience of other countries shows that the road to an FTA is lined with challenges, with many issues (including trade, services, intellectual property, investment and government procurement) to be sorted out. Can the dangers be avoided and the benefits emerge?

LAST week in Washington, Malaysia and the United States announced their intention to start negotiating a bilateral free trade agreement (FTA).

The event was attended by senior US officials including the US Trade Representative Rob Portman and Malaysia's delegation was led by International Trade and Industry Minister Datuk Seri Rafidah Aziz.

Now, there will be high-pressure negotiations in the next few months.

The experience of some other countries shows that the road to an FTA with the United States can be bumpy and many challenges lie ahead.

The last round of negotiations in the US-Thai FTA in Bangkok in January ended in some disarray as thousands of people stormed the venue, protesting against US demands on patents that would restrict the right of Thailand to provide cheap medicines.

Farmers also voiced concern that they would face competition from cheap imports and restrictions on their right to save and re-use seeds. Some of the key negotiators resigned, and the talks have been suspended until after the Thai general elections.

Talks between the United States and South American countries to establish a Free Trade Area of the Americas have also been stalled for many months due to disagreements on many issues. Similarly the talks between the United States and Southern African countries for an FTA have hit an impasse.

It can generally be predicted what an FTA with the United States will be like, judging by requests for common key features in all their FTAs.

Trade forms only a part of an FTA with the United States. Other aspects include services liberalisation, intellectual property (IP), investment, government procurement and competition, as well as labour and environment.

The FTA would significantly open up of the Malaysian economy in these areas to US goods, services and investment. Also, some domestic laws (for example on IP or competition) will have to change.

In its fact sheets on the FTA, the US Trade Representative (USTR) office expects the United States to do better on trade because Malaysia's industrial goods tariffs (average 9.1%) exceed those of the US (average 3.7%). It expects US manufacturing exports to Malaysia could more than double to US$22bil (RM81.1bil) by 2010.

In addition, the United States hopes to expand its agricultural exports beyond its present US$400mil (RM1.5bil) a year.

Malaysia on its side will also expect to increase its exports to the United States. Under a typical FTA, tariffs on both sides are expected to go down to zero, although there may be some exceptions.

Most Malaysian products and services already enter the United States duty-free, says the USTR fact sheet, so "an FTA will level the playing field." In other words, because Malaysian tariffs are higher than the US levels, eliminating tariffs on both sides (levelling the field) would benefit the United States.

The FTA will also require both sides to liberalise their services. As the US market is quite open, the main obstacle for Malaysian firms is not market access but the extent of capacity to enter and compete in the US market.

Malaysia on the other hand has restrictions on foreign equity and participation in many services sectors, to enable local enterprises the space to develop. The United States will seek to break down those barriers.

A US trade bulletin has predicted that financial services will be a difficult issue to resolve as Malaysia has limitations on foreign ownership in financial institutions and the number of branches of foreign banks, and many US institutions will press for more market openings during the FTA talks.

Intellectual property has been one of the most controversial aspects of FTAs. The United States has asked its FTA partners to grant higher patent and copyright protection to its firms and institutions than what they are obliged to do under the WTO.

This usually means longer periods for patent and copyright protection, restrictions on the grounds for compulsory licences, and exclusive rights over data (preventing a generic drug from getting safety approval by relying on test data of the original drug company).

The end result: it will be much more difficult for patients to have access to cheaper generic medicines.

Another challenge in the forthcoming FTA talks is the so-called Singapore Issues (investment, government procurement and competition policy). Its entry into the WTO was successfully opposed by Malaysia (with other countries) in 2003.

FTAs with the United States usually contain extreme versions of investment and procurement rules. These would give rights to US companies to establish in the partner countries with minimal regulation, and to be treated like national companies.

US companies claiming their property has been "expropriated" can sue the host government in an international court. Government measures (including on finance, economy, safety and environment) that affect the expected future profits of the companies have in previous FTAs been counted as constituting "expropriation" and thus the government is liable to pay compensation for the losses.

Under procurement, the usual FTA requires that US firms be given rights to bid for government contracts. This would erode the preferences and advantages that locals enjoy.

It can be expected that the United States will ask for similar rules in the FTA with Malaysia. Of course Malaysians can also take advantage and invest in the United States and bid for its procurement business.

But the US market is already relatively open. The main impediment to companies from developing countries is their lack of capacity to compete in the developed countries.

There are many challenges ahead in the FTA negotiations.

Agreeing to discuss a deal is one thing, and negotiating a good deal where the dangers are overcome and the benefits are evident is another thing.


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Item 2

OPEN LETTER TO PRIME MINISTER DATUK SERI ABDULLAH AHMAD BADAWI

Appeal for Malaysians to have access to affordable medicines

We understand that the Malaysian Government is about to begin negotiations with the USA for a free trade agreement (FTA). As a group representing people living with HIV/AIDS (PLWHAs) in our country, we are very concerned that the life-saving medicines we need may become even more unaffordable if a FTA is signed with the USA.

Excessive, high prices of antiretroviral drugs (ARVs) due to patents in the hands of some big global drug companies have led to world wide outcry in recent years. When there was competition from generic ARVs used to treat AIDS, the prices of patented drugs fell from US$11,000 per patient per year to US$150 per patient per year. Even then, this is too expensive for those who are poor and in deed of treatment. That is why generic drugs are so very important.

No generic drugs means no access to affordable life-saving AIDS drugs. This will translate to more deaths to PLWHAs. In Malaysia, figures in June 2005 show that there are 63,438 reported cases of HIV infection, and 10,044 AIDS cases in Malaysia. Between 1986 and June 2005, we have already lost 7,673 lives.

At the same time, we understand that the Ministry of Health (MOH) is looking at reaching out to 1,200 intravenous drug users as a target for their Harm Reduction program. With this program, MOH is also establishing a strong referrals system to hospitals, rehabilitation centres, substitution therapy, etc. This program is an entry point towards encouraging more voluntary testing and counseling. Therefore, there are more likely cases of HIV/AIDs to be detected amongst this invisible population. This in turn will lead to a bigger number of detected HIV/AIDS cases in Malaysia. The impact of the FTA will also be on this invisible population. The World Health Organization in June 2005 has already warned that an HIV epidemic is knocking on Malaysia’s door.

We were very encouraged when the Government issued a special compulsory licence in 2003 to import some generic ARVs from India for use by MOH. The monthly treatment cost by government hospitals and clinics fell by 81% from US$315 to US$58. MOH has targetted 4,000 people to be on ARVs therapy. But this is still below the more than 10,000 AIDS cases that need urgent treatment. The import licence has also come to an end. So we hope and trust that the Government has plans to ensure continuing access to affordable ARVs. Without ARVs, more PLWHAs will die.

That is why we are very worried about news reports on FTA negotiations with the USA. We do not know what is being proposed in the Malaysia-US FTA, but based on previous US FTAs and the US proposals in the controversial Thai-US FTA negotiations, there are a number of common provisions which are very alarming. We believe the US will demand that Malaysia also agree to similar provisions, and these will make all medicines more expensive.

For example, US FTAs usually force more medicines to be patented and the patents have to continue for more than 20 years, which is the length of time for patents to run. When a medicine is patented, it means there is a monopoly and so no other manufacturers can make that medicine. That means that the patent owner can charge as much as it likes because there is no competition.

We have learnt that US FTAs also impose monopolies for at least five years even when there is no patent, by blocking the use of test information by health authorities to register generic versions of the patented drugs.

We make a strong plea to Datuk Seri and the whole Malaysian Government to reassure us that public health will always be a top priority and that FTAs with Malaysia will not contain anything that goes against access to affordable medicines. We urge Datuk Seri to hold consultations so that we, the PLWHAs, and all Malaysians can learn more about FTAs that will be negotiated and how they will have an impact on public health and access to affordable medicines. We also urge Datuk Seri to continue with the Government’s promise of transparency by making public suggestions and proposals in the FTAs.

For PLWHAs, the treatment that we need is a life long treatment. For us, it is a matter of life and death. So we strongly appeal to you, Datuk Seri, to safeguard our human right to affordable medicines and treatment. Please do not allow an FTA with the USA or any country that will harm the health of Malaysians.

Thank you.

1) Positive Malaysian Treatment Access & Advocacy Group (MTAAG+)
[ A group of People Living with HIV/AIDS doing treatment literacy, treatment
advocacy and networking]

2) Positive Living, PT Foundation.
[ A program of Community Based Organization to provide drop in center,
outreach and peer counseling for People Living with HIV/AIDS.]