Date: 2/12/2010

YB Datuk Seri Mustapa Mohamed
Minister
Ministry of International Trade and Industry
Tingkat 14, Blok 10
Kompleks Pejabat  Kerajaan
Jalan Duta , 50622 Kuala Lumpur

Dear YB Datuk Seri,

We, concerned Malaysian organizations and citizens, wish to express our concerns over Malaysia’s recent decisions to negotiate free trade agreements (FTAs) with the European Union (EU) and United States via the Trans-Pacific Partnership (TPP) Agreement.

We demand that the negotiations be halted with immediate effect and the concern of the Malaysian people be taken into consideration before any negotiations are continued. 

During the now-defunct Malaysia-US FTA negotiations, we highlighted a number of concerns about the potential impacts of this type of comprehensive agreement on Malaysia’s development. This was expressed in a number of memoranda to the Malaysian Government which also apply to the current EU and TPP FTA negotiations. Furthermore, since the bilateral Malaysia-US FTA negotiations, the world has experienced a food crisis, its most severe financial and economic crisis since the Great Depression of the 1930s and new data has become available about the dire impact of climate change if we do not act quickly. Based on their past FTAs, the EU and TPP FTAs would exacerbate all of these crises and prevent Malaysia from implementing the measures recommended to prevent such crises re-occurring.

These FTAs try to open Malaysia’s economy and economic opportunities to foreign companies, including for government procurement. Some of our concerns about these provisions are listed below.

1. IMPACT ON FARMERS ANDFOOD SECURITY

The recent food crisis has emphasised the importance of Malaysia’s rice self-sufficiency goal. However the EU and USA will not cut their agricultural subsidies in any FTA, but they will insist on Malaysia cutting its agricultural tariffs in the goods chapter of these FTAs. This will expose Malaysia’s rice, chicken and many other farmers to subsidised imports from the EU and USA being sold at prices below Malaysia’s cost of production, discouraging them from farming.

This can be seen from the experience of other countries when they lowered their tariffs. For example Ghana’s chicken farmers went from 95% share of the domestic market to 11% when they cut their chicken tariffs and were flooded with subsidised EU chicken and dumped chicken parts (such as wings and drumsticks) that Europeans do not eat. 

If this happened in Malaysia, it would leave it more dependent on imported food and vulnerable to food shortages when such food imports dry up in times of shortage (as in the food crisis of the last few years). Even before this last food crisis, Malaysia’s food import bill already put a strain on its foreign exchange reserves and led to imported inflation.

Other likely FTA provisions are also likely to make it harder for Malaysian farmers to compete, for example by making inputs such as seeds more expensive due to stronger intellectual property protection (including via treaties such as International Convention for the Protection of New Varieties of Plants 1991) and preventing Malaysian farmers (via the EU FTA’s likely competition chapter) from doing activities such as cooperatives or joint marketing campaigns to try and fight the subsidised food imports. 

2. IMPACT ON MALAYSIA’S ABILITY TO MOVE UP THE VALUE CHAIN

Malaysia’s National Mission to become a developed nation by 2020 includes moving up the value chain as Thrust 1. However, the EU and USA’s likely demands for Malaysia to remove more than 80% of its tariffs on their products will make it harder for Malaysia to move up the value chain, because no country (except Hong Kong) has industrialised without providing infant industry tariff protection for new industries such as higher technology sectors.

Malaysia currently has export taxes on 515 tariff lines including timber, live animals, ash and residues, precious metals, copper, and ferrous waste and scrap which generated revenue of RM 2,296 billion a year. These export taxes are responsible for the survival and success of industries such as Malaysia’s furniture sector and have been successfully used by countries such as Indonesia to enable its plywood industry to go from 4% world market share to 80%. However the EU is likely to require Malaysia to limit its use of export taxes in an FTA (for example by preventing the increase of existing export taxes or the introduction of new export taxes). 

3. IMPACT ON HEALTH SERVICES

Based on their past FTAs, the EU and USA are likely to ask Malaysia to agree to an intellectual property chapter that goes beyond World Trade Organization (WTO) requirements and this was shown in the case of Guatemala to make a medicine 845600% more expensive when data exclusivity was introduced. The EU also asked ASEAN to agree to medicines being patented for 25 years, instead of the current WTO requirement of 20 years. This would be a 25% extension of the period during which prices of US$15,000 per patient per year can be charged, instead of below US$80 per patient per year. They are also likely to require Malaysia to seize imports and exports of generic medicines (through broader border measures) which would mean fewer generic medicines available to Malaysians.

As a Party to the Convention the Rights of the Child (CRC), the Malaysian Government must ensure the provision of health care to all children which includes an obligation to provide antiretroviral medicines to HIV+ mothers and children.Malaysia currently provides free antiretroviral therapy to HIV+ pregnant women and HIV+ children. However the sustainability of this assistance is already proving difficult and stronger intellectual property protection is likely to further threaten Malaysia’s ability to fulfill this human rights obligation. The Committee on the Rights of the Child has expressed concern over the way in which TRIPS+ provisions in other USFTAs may harm access to affordable medicines and has repeatedly urged countries negotiating such agreements to ensure they do not negatively affect the right of children to access affordable medicines. The Committee has already asked pointed questions as to how Malaysia will ensure that FTAs do not affect the provision of generic medicines, especially for HIV/AIDS.

During the bilateral Malaysia-USFTA negotiations, Attorney-General Tan Sri Abdul Gani said ‘that generic drugs should not be restricted in any manner,’ as generics are cheaper than patented medicines. He told the United Nations Committee on the Rights of the Child that Malaysia is not going to negotiate on this issue. We trust the Government’s position has not changed. 

4. IMPACT ON ENVIRONMENTAL, SOCIAL, FINANCIAL AND OTHER REGULATIONS

The EU and USA are likely to demand rights for their investors which could threaten the Malaysian Government’s ability to implement ordinary regulations because of expropriation provisions without sufficient safeguards and ‘fair and equitable treatment’ requirements. These investment chapters would allow investors to sue the Malaysian Government for millions of dollars in compensation for lost profits due to Malaysian Government regulations at international tribunals (investor-to-state dispute settlement). In one case alone under a USFTA, the investor asked for US$10.5 billion in compensation. Even when cases are not brought, a mere letter from an investor threatening to sue under these FTA investment provisions can be enough to stop governments from regulating, as occurred in Canada when Philip Morris threatened to challenge the Canadian Government’s proposed tobacco control measures.

Environmental measures (such as banning exports of toxic waste, refusing to allow a toxic waste dump and banning a neurotoxin) have already been successfully changed under these chapters in other USFTAs. Climate change measures and labour laws such as minimum wage and occupational health and safety requirements could also be successfully challenged.

The Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System, which included the Bank Negara Governor, Tan Sri Dato' Sri Dr Zeti Akhtar Aziz and was chaired by Nobel Prize winner Professor Joseph Stiglitz recommended a number of financial reregulation measures which should be taken to prevent another financial crisis similar to the current one from occurring and to make it easier to deal with one once it occurs. Many of these measures (such as Glass-Steagall type firewalls and capital controls for long enough on inflows and outflows) are unlikely to be permitted by the EU and USA in their FTA negotiations.

The Australian and New Zealand governments have already refused to agree to this investor-to-state dispute settlement in the TPP because of their fears about the way it could restrict their ability to regulate. If these developed countries think they will not be able to afford to defend their regulations against challenges by these investors and pay the compensation demanded, how can Malaysia?

BECAUSE OF THESE AND MANY OTHER CONCERNS, WE URGE THE GOVERNMENT TO STOP THE NEGOTIATIONS WITH THE EU ANDUSA (VIA THE TPP).

We also request the Malaysian Government to make public , studies done on the impact of such agreements, and to meet with us for a dialogue on these crucial issues of national interest.

Thank you.

Yours sincerely

1. Aliran Kesedaran Negara (ALIRAN)
2. All Women Action Society ( AWAM)
3. Ampang Socialist Arts Club (ASAC)
4. Bahagian Pemuda Persatuan Murid-murid Tua Sek. Serdang Bharu
5. Community Action Network
6. Community Development Centre
7. Consumer Association of Penang
8. Democratic Action Party (DAP)
9. Gerakan Mahasiswa Maju Universiti Putra Malaysia (GMM UPM)
10. Gerakan Menuntut Pendidikan Percuma(GMPP)
11. Health Equity Initiatives
12. Jaringan Rakyat Tertindas ( JERIT)
13. Jawatankuasa Bekas Pekerja CHG
14. Jawatankuasa Bertindak Projek Perumahan Terbengkalai, Taman Sri Raya Cheras.
15. Jawatankuasa Penduduk Taman LBK
16. Jawatankuasa Ladang Semenyih
17. Kesatuan Sekerja Dekor Panel Emas Sdn Bhd, Rawang.
18. Kesatuan Guppy Plastic Sdn Bhd
19.  Kumpulan Solidarity Wanita Kota Damansara
20. Majlis Perwakilan Penduduk Zon 18,Shah Alam , U5 Shah Alam
21. Malaysia Youth and students Democratic Movement (DEMA)
22. Monitoring Sustainability Globalisation
23. Parti Islam Semalaysia
24. Parti Sosialis Malaysia
25. Pejabat ADUN Kota Damansara
26. Pemuda Sosialis
27. Positive Malaysian Treatment Access & Advocacy Group (MTAAG+)
28. Sahabat Alam Malaysia
29. Suara Rakyat Malaysia (SUARAM)
30. Student Progressive Front Universiti Sains Malaysia  (SPF USM)
31. Student Progressive Front Universiti Utara Malaysia  (SPF UUM)
32. Student Progressive Front  New Era College  (SPF NEC)
33. Third World Network (TWN)

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