BRIEFING ON The TRANS-PACIFIC PARTNERSHIP AGREEMENT (TPPA) BY SYAHRIL SYAZLI GHAZALI Strategic Negotiation Division MITI 21 January 2016 1
BRIEF BACKGROUND 2005 (P4) - Brunei, Chile, Singapore & New Zealand. March 2010 USA Australia, Peru & Viet Nam. October 2010 - MALAYSIA 2012 Mexico & Canada 2013 Japan Access to 800 million people with a combined GDP of USD27.5 trillion Disclaimer: This Driving document Transformation, is information Powering Growth purposes only, and does not constitute legal 2
STATUS Negotiations concluded on 5 October 2015 in Atlanta. Signing scheduled in February 2016 special parliament debate on 26-28 January 2015. Membership is open to all APEC economies (21) but can consider non-apec countries. Current membership (12): Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and US. Interest shown by Korea, Taiwan, Indonesia, Thailand and Philippines. Widely expected to be a building block towards the wider Free Trade Area of the Asia Pacific. 3
30 Chapters in the TPPA Standard Legal Chapters Traditional Trade Issues New Issues 2- Market Access 1 Initial Provisions 3 ROOs 17 Competition (SOE) 27 Administrative & 4 Textiles and Apparel 19 Labour Institutional Provisions 5 Customs Administration 20 Environment 28 Dispute Settlement 6 Trade Remedies 23 Development 29 - Exceptions 7 Sanitary and Phytosanitary 24 SMEs 30 Final Provision 8 Technical Barriers to Trade 25 Regulatory Coherence 9 Investment 26 Transparency and Anti 10 Cross Border Services Corruption 11 Financial Services 12 Temporary Entry 13 Telecommunications 14 E-Commerce 15 Government Procurement 16 Competition Policy 18 Intellectual Property Rights 21 Cooperation and Capacity Building 22 Competitiveness / Business Facilitation 4
Flexibilities that we have obtained in TPP Longer transition periods Different thresholds e.g. GP Chapter Non-Conforming Measures - country specific list SOE country specific annex Bumiputera policy Total exclusion / Carve-out e.g. procurement by State Governments 5
Legal and Institutional Process Entry into Force 60 days after the date on which all original signatories have notified the Depositary in writing of the completion of their applicable domestic procedures (ratification); If not all signatories have ratified within 2 years of the date of signature, 60 days after the expiry of this period if at least six of the signatories, which together account for at least 85 per cent of the combined gross domestic product of the original signatories in 2013 have ratified; or If both do not take place, 60 days after the date on which at least six of the original signatories, which together account for at least 85 per cent of the combined gross domestic product of the original signatories in 2013, have ratified. TPP Commission Comprising representatives of all parties, responsible for the administration of the Agreement, including review of Agreement; supervise work of all Committees; resolve difference or disputes regarding interpretation or application of Agreement; and issue interpretation of the agreement. 6
Legal and Institutional Process (cont ) Accession Open to any State or separate customs territory that is a member of APEC, and such other State or separate customs territory as the Parties may agree. Parties to decide on accession procedures. Withdrawal Parties may withdraw from this Agreement by providing written notice of withdrawal to the Depositary and the other Parties. Withdrawal shall take effect six months after written notice. Exceptions general exceptions; security exceptions; temporary safeguard measures (capital controls); taxation measures; 7
Dispute Settlement Mechanism (DSM) The DSM establishes the procedures for the avoidance and settlement of disputes. The Chapter provides for the process of settlement of disputes, first through a process of consultations before reference to an independent Panel, established in accordance with agreed procedures. A Panel shall comprise three members, selected in accordance with the procedures set out in the Chapter. Panel findings and recommendations are binding on the Parties to the dispute. Parties must implement findings and bring the offending measure into compliance with the Agreement. If a Party fails to comply with the panel recommendations, the Parties to the dispute may agree to a mutually acceptable compensation. 8
Investment Key obligations of market access and protection through non-discriminatory treatment, minimum standard of treatment and disciplines on expropriation, transfers, performance requirement and board of directors. Safeguards and exceptions available. Non-conforming measures Annex I (binding current non-discriminatory measures) and Annex II (policy space for existing discriminatory measures ) ISDS outlines procedures for settlement of disputes between foreign investor and host government. Improvements and safeguards in TPPA government s right to regulate; avoiding frivolous claims; interpretation by Joint Commission binding on Tribunal. 9
Non-Conforming Measures (Investment and Services) Bumiputera preferences and land policies PETRONAS role under the Petroleum Development Act (PDA) Right to impose any condition when disposing assets of SOEs for the first time; and for subsequent transfers of assets in strategic sectors MFN exemption for ASEAN preferences Cultural services Wholesale and distribution services Air transport services 10
Investment (ISDS) Investor-State Dispute Settlement (ISDS) is NOT new for Malaysia 74 Bilateral Investment Treaties (BITs) 8 FTAs (Malaysia-Japan, Malaysia-India, Malaysia-Pakistan, Malaysia-New Zealand, ASEAN-China, ASEAN-Korea, ASEAN-Australia-New Zealand, ASEAN-India) which contain ISDS provisions. 2 cases against Malaysian Government - Philip Gruslin vs Malaysia - Malaysian Historical Salvors Sdn Bhd vs Malaysia 2 cases by Malaysian investors against foreign Governments - MTD vs Chile - Telekom vs Ghana Safeguards in TPPA 11
Labour Not about movement of labour. Key obligation is to adopt and maintain the ILO Declaration 1998. The elements : 1) freedom of association & right to collective bargaining; 2) eliminate forced labour; 3) abolish child labour; 4) eliminate employment discrimination Bilateral Labour Consistency Plan with US. 12
Market Access Export Taxes Malaysia is allow to maintain export duties Malaysia s Offer -goods 85% of tariffs to be eliminated upon entry into force; 64.5% are already without duties Tariffs on sensitive products eliminated over 10-15 years; TPP Partners Offer -goods Immediate elimination by US (90%), Canada (95%), Mexico and Peru (80%) Japan wood and agriculture products 13
Malaysia: Main Exports to TPP Region 14
NON-FTA PARTNERS IN TPP
Canada Top Malaysia s Imports No. Product % 1. Chemical & products 36.5% 2. E&E products 13.5% 3. Other Agricultures 12.3% 4. Crude Petroleum 10.5% 5. Machinery & parts 6.8% Top Malaysia s Exports No. Product % 1. E&E Products 38.2% 2. Wood Products 10.5% 3. Rubber Products 10.5% 4. Chemicals & products 6.1% 5. Manufactures of Metal 5.1% USD807.7 m
Mexico Top Malaysia s Imports No. Product % 1. E&E Products 51.4% 2. Transport Equipment 13.3% 3. Petroleum Products 9.7% 4. Machinery & Parts 4.2% 5. Chemicals & Products 3.7% Top Malaysia s Exports No. Product % 1. E&E Products 72.0% 2. Processed Food 4.3% 3. Manufactures of Metal 3.7% 4. Chemicals & Products 2.8% 5. Machinery & Parts 2.1%
Peru Top Malaysia s Imports No. Product % 1. Manufactures of Metal 29.2% 2. Metalliferous ores & metal scrap 20.3% 3. Other agricultures 17.4% 4. Crude Fertilizers & Minerals 14.9% 5. Chemicals & products 8.5% USD37.3m Top Malaysia s Exports No. Product % 1. E&E Products 39.6% 2. Rubber Products 12.7% 3. Textiles, Clothing & Footwear 9.1% 4. Wood Products 6.3% 5. Chemicals & products 6.3% USD98.7m
USA Top Malaysia s Imports No. Product % 1. E&E Products 43.7% 2. Machinery & parts 10.6% 3. Transport equipment 10.0% 4. Chemicals & products 9.0% 5. Optical & Scientific equipment 6.0% Top Malaysia s Exports No. Product % 1. E&E Products 56.6% 2. Rubber Products 6.3% 3. Optical & Scientific Equipment 5.8% 4. Palm Oil 3.9% 5. Chemicals & products 3.7% USD19.68b USD16.0b
Offers Received for Biomass Products Country MFN Offer MFN Offer MFN Offer MFN Offer MFN Offer MFN Offer 1404.90 2306.60 4411.92 4411.93 4411.94 4601.99 Canada Free EIF Free EIF Free - 6% EIF Free EIF Free EIF 2.5% - 3% Peru 9% EIF 0% EIF 9% B11 9% B11 9% B11 9% EIF Mexico 10% EIF 15% B10 5% EIF 5% EIF 5% EIF 15% EIF USA Free EIF 0.32 cents per kg EIF Free - 6% EIF Free - 3.9% / 1.9 cents per kg + 1.5% EIF Free EIF 2.7% - 3.3% Singapore 0% EIF 0% EIF 0% EIF 0% EIF 0% EIF 0% EIF Brunei 0% EIF 0% EIF 0% EIF 0% EIF 0% EIF 0% EIF Viet Nam 5% EIF 0% EIF 5% EIF 5% EIF 5% EIF 24% EIF Australia 0% EIF 0% EIF 5% EIF 5% Year 4 EIF EIF 5% EIF 0% EIF New Zealand 0% EIF 0% EIF 5% EIF 5% EIF 5% EIF 0% EIF Chile 6% EIF 6% EIF 6% EIF 6% EIF 6% EIF 6% EIF Japan Free - 6% EIF Free EIF 2.6% EIF 2.6% EIF 2.6% EIF 3-3.8% EIF 20
Non-participation in TPPA / Cost of late entry Trade Rules: Miss opportunity to craft rules (Malaysia s interest). More onerous commitments if join later Loss of preferential market access Viet Nam and Singapore, and future members, will have advantage over Malaysia Implications for FDI and current investors Disdvantaged in the regional supply chain due to loss of preferential treatment Sending wrong signals not ready to accept international standards, good governance and ability to negotiate high standard FTAs, like MEUFTA. 21
WHY TPPA? Trade : 4 new preferential markets important for Malaysia as a trading nation Investment : Attracting high quality FDI and preserving existing investors TPP promotes: International standards Labour and Environment and Good governance- transparency, anti corruption Negotiated provisions have addressed key concerns/sensitivity - safeguards, transitions and other flexibilities 22
Please visit www.miti.gov.my for the legal texts of the TPPA, a summary of the Agreement, FAQs and other useful material. Thank you Menara MITI No. 7, Jalan Sultan Haji Ahmad Shah, 50480 Kuala Lumpur, Malaysia Tel: 603-8000 8000 Fax: 603-6201 2337 Email: webmiti@miti.gov.my Website: www.miti.gov.my 23