Infernal Ramblings
A Malaysian Perspective on Politics, Society and Economics

Revisiting the Ever Delayed US-Malaysia FTA

Written by johnleemk on 12:07:44 am Apr 10, 2007.

As bemoaned by the Malaysian government not too long ago, a major deadline set by the United States government for negotiations on a US-Malaysia Free Trade Agreement has come and gone. With President George W. Bush's "fast-tracking" authority — whereby the US Congress must approve the treaty in an up or down vote without any amendments — expires this summer, and so crucial milestones have been set for getting the deal done.

Today, The Sun carried an opinion piece titled "Re-think needed on free trade pact". The author seemed positively gleeful about the FTA's lack of progress, revelling in the chance that it would not materialise at all. He denounced the "intellectual and practical bankruptcy of free trade" without providing a single concrete example of how trade has harmed people.

The only "free trade" that is harmful is trade that is not free at all. FTAs which carry protectionist measures, such as special incentives for foreign investors, are nothing more than free trade agreements in name only.

Two concrete examples are brought up of the ostensible harm carried by free trade. One of these pertains to agriculture; it is noted that many Western countries heavily subsidise their agricultural industries, at the expense of farmers in the developing world. In the first place, this shows how unfree the trade deal with the US actually is — but that imperfection aside, this is not necessarily a terrible enough indictment to make it worth rejecting any bilateral FTA.

The solution to the West's folly of protectionism? Tariffs on agricultural imports and subsidies for the inefficient farmers of the developing countries. As one Cambridge University economist vividly pictured it, this is like blocking up our bays because other countries have rocky harbours. Or, as I like to think of it, this is cutting off our nose to spite our face.

After all, in the end, who benefits from the lower food prices that the West is inefficiently creating? We, the consumers. We should be thanking the West for being so stupid and giving us discounts on our food that we would not otherwise be getting.

Of course, it's true that the farmers in countries like Malaysia will lose out. But that's not a problem — we have a welfare system for a reason. Provide the newly unemployed with a proper education and capital to start new businesses — the FTA will open up a lot of opportunities in the industrial sector (something that the FTA opponents have not been denying), and the newly unemployed can easily capitalise on them if they have the right tools.

The other example supposedly showing the harm of free trade? Drugs. Specifically, the intellectual property rights over medicines. FTA opponents correctly note that the FTA will harm Malaysian consumers and producers by implementing harsh intellectual property regulations.

The specifics, however, are never mentioned. Having briefly examined the FTA in the past, I believe that there's not enough information just yet to be critical of these laws — is it truly fair to patent-holders to let pirated drugs enter the market? If the government wants, it can provide the original drugs at a discount price for those who need it, but it shouldn't be permitting infringement of existing rights.

What's more worrying is the possibility that even more draconian laws will be put in place. Generic drugs based on originals whose patents have expired may be subject to a ban as well — thanks to insufficient transparency about the negotiations, it's hard to say whether this is a proposal that will end up in the final deal, if there is one. In such a case, the FTA may be worth re-thinking after all, although there must always be a holistic consideration of all the costs and benefits.

The issue of patent rights and medicine aside, it seems to me that there is still not a well-founded case for criticising the FTA. Like it or not, it will open up tremendous opportunities in the industrial sector by giving our manufacturers greater access to American markets for consumer goods. This is something that we should be welcoming. We cannot rely forever on primary goods like agricultural goods to form the bulk of our economy.

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