The document discusses the potential impacts of free trade agreements (FTAs) between developing and developed countries. It notes that FTAs often include provisions beyond just tariff reductions that can negatively impact developing countries. An independent analysis commissioned by the EU found that an FTA with North African countries would likely lead to increased unemployment, falling wages, loss of government revenue, and worse living standards. Developing countries may have difficulty implementing mitigation measures due to reduced government funds from tariff cuts. The document also discusses concerns over the impacts of FTAs on agriculture, industrialization, export taxes, services, workers, and investment in developing countries.

1. Impacts of North-South Free Trade
Agreements (FTAs)
Impak Perjanjian Perdagangan
Bebas (FTA) antara Negara
Membangun & Negara Maju
Third World Network
3 December 2011, Kuala Lumpur
1

2. Apa itu FTA?
 Perjanjian perdangangan bebas antara
dua atau lebih buah negara
 Malaysian sedang merunding FTA bersama
 Amerika Syarikat, melalui Perjanjian
Kerjasama Trans Pasifik/Trans Pacific
Partnership (TPP)
 Kesatuan Eropah/European Union (EU)
 Objektif utama: Membuka pasaran,
termasuk untuk pemerolehan kerajaan,
akibat mengurangkan tarif (cukai import)
 Bolehkah syarikat/petani Malaysia bertanding?

3. Cost-benefit analyses
 European Union commissioned cost-benefit
analysis for its FTA with North Africa (including
Turkey, Egypt, Israel, Jordan, Syria, Morocco =
EMFTA)
 The independent analysis only considered lower tariffs
for industrial and agricultural products and services
liberalisation.
 It did not consider the inclusion of traditional losses for
developing countries (intellectual property, investment,
government procurement)
 It found that the FTA would be bad for poverty,
hunger, education and health in the developing
countries involved
3

4. Cost-benefit analyses continued
 EU’s cost-benefit analysis results continued
 The FTA would cause:
 Significant rise in unemployment
 Fall in wages because of increased unemployment
 Loss of government revenue so reduced government spending on
health, education etc
 Worse living standards and health for rural women
 Developing countries would have to take expensive and
difficult mitigating measures which are not certain to work
 (And there is less government revenue available for mitigating
measurs or retraining workers because of the cut in tariffs)
 African Union Ministerial Declarations have refused
European Union FTA negotiations:
 On government procurement, investment or competition
 On intellectual property protection beyond WTO levels
 On tariff reduction until the WTO allows developing countries
to reduce tariffs by less in FTAs
 On services liberalisation beyond WTO levels
4

5. Cost-benefit analyses continued
 Benefits erode over time as:
 other countries negotiate EUFTAs and also get the lower
EU tariffs on their exports
 WTO negotiations lower EU tariffs for exports from 153
countries
 Costs such as stronger intellectual property, EU
competition in government procurement and
service, and investor protection (if included) stay
constant
5

6. Some of the countries which have
said no to USFTAs
Some of the countries that have withdrawn
from USFTA negotiations
Australia refused twice
Switzerland (after 1 round of negotiations
when USA refused to show sufficient
flexibility in IP chapter and agriculture)
Botswana, Lesotho, Namibia, South Africa,
Swaziland (after almost 3 years of
negotiations, because of IP, investment and
government procurement demands)
Argentina, Bolivia, Brazil, Paraguay,
Uruguay, Venezuela (after 10 years of
negotiations as part of the Free Trade Area 6
of the Americas)

7. Skop rundingan FTA sangat luas
 Market Access  Financial Services
 Industrial Goods
 Telecommunications
 E-Commerce
 Agriculture
 Business Mobility
 Textiles
 Government Procurement
 Technical Barriers to Trade  Competition
 Sanitary and Phytosanitary  Intellectual Property
Measures
 Labour
 Rules of Origin
 Environment
 Customs Cooperation  Capacity building
 Investment  Trade Remedies
 Services  Legal and Institutional

8. Process
 USA: Strong influence of US companies on US
position
 USTR’s advisory committees: almost all members are
from industry
 USFTA text is often drafted by these committees
 Companies that make big donations to election
campaigns have ear of US Government
 Malaysia: Under Malaysia’s Constitution, the USFTA does
not have to be approved by the Parliament
 Malaysia’s laws (and possibly Constitution) will have
to be changed to comply with the USFTA
 These changes to the laws must be passed by the
Malaysian Parliament, otherwise tariffs can be raised on
any Malaysian export to the USA if a successful
challenge is made against Malaysia
8
 Implication: Parliament has no choice, it must pass the
law

9. Petanian
9

10. What does the EU & US want?
 To export more of its subsidised products to Malaysia
 Eg very subsidised chicken, eg: Ghana:
 In 1992: domestic poultry farmers supplied 95% of the
Ghanaian market,
 2001: their market share had shrunk to 11%.
 This was because of large EU subsidies which meant that
imported chicken is available (wholesale) at a price that is
only slightly more than half of the wholesale price of local
chicken). So Ghana’s chicken farmers needed tariffs of
80% to be able to compete with subsidised EU chicken
 Bolivia’s President Morales: a USFTA would only be
good to invade the country with subsidized products,
to the detriment of local producers and manufacturers
10

11. Risiko kepada petani-petani
 Mexico: Petani miskin menanam jagung tetapi
akibat FTA dengan US (NAFTA) Mexico menerima
import jagung yang disubsidi dari US sebanyak 3
kali ganda dari sebelumnya
 Hampir 2 juta petani Mexico terpaksa meninggalkan
tanah mereka sejak NAFTA dikuatkuasakan
 Akibatnya, rakyat Mexico keluar mencari kerja
semakin bertambah, kemiskinan desa meningkat
dan bertambahnya pengeluaran dadah secara
haram

12. What does the US want? continued
 Malaysia:
 Currently has 40% tariffs on rice
BUT based on previous USFTAs the US will require almost all
Malaysian tariffs (including on rice) to fall to zero
 Wants to reduce a growing food import bill
BUT increased imports of US agricultural products could
worsen Malaysia’s foreign exchange and balance of payments
 9th Malaysia Plan: Malaysia is aiming for 90% self-sufficiency in
rice
 But if Malaysia’s rice tariffs fall to 0% and with US subsidies on rice
production, US rice would be cheaper, so there is likely to be a
large increase in rice form the USA. So how will Malaysia achieve
90% of self-sufficiency in rice
12

13. What does Malaysia want?
 If Malaysia hopes to export more agricultural products to
US, these are the problems:
 USTR could not offer lower agricultural tariffs under fast track
 Even if we get extra quotas/lower tariffs, the US subsidies may
still make Malaysian exports uncompetitive
 US cannot reduce its agricultural subsidies for products to one
country as it is not practical.
 Australia got:
 no extra sugar sales to USA
 ½ cow per farmer per year extra beef sales to USA
 Mexico got some extra fruit and vegetable exports
 But US blocked them via SPS measures and anti-dumping
complaints
13

14. Some other agriculture impacts
 Food security
 GMOs
 Mad cow disease
 Higher input costs for farmers:
 UPOV on seeds
 Seizure of seeds at the border (EU)
 Data exclusivity on agricultural chemicals
14

15. Pembuatan
15

16. How did developed countries
industrialise?
 Former Head of the Macroeconomics and
Development Policies Branch, UNCTAD: no
country (except Hong Kong) has
industrialized without using infant-
industry-protection, http://twnside.org.sg/
title2/t&d/tnd36.pdf
 Next 2 slides are from
http://twnside.org.sg/title2/t&d/tnd24.pdf
 More info re trade & industrialisation (Akyuz
& Shafaeddin):
http://twnside.org.sg/publications_tnd.htm
16

17. Country/Year Per capita Income (at Average applied tariffs
1990$) (%)
US 1820 1257 35-45
1875 2445 40-50
1913 5301 44.0
1950 9561 14.0
1980 18577 7.0
Germany 913 3648 13.0
1950 3881 26.0
1980 14113 8.3
France 1913 3485 20.0
1950 5270 18.0
1980 15103 8.3
UK 1913 5150 0
1950 6907 23.0
1980 12928 8.3
Developing Countries 3260 8.1(2.1)*
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2001

18. Tariffs MT
LT HT
RL
Time
RL : Resource-based and labour-intensive producs
roducts
LT : Low technology-intensive products
MT : Medium technology-intensive products
HT : High technology-intensive products
18

19. What Malaysia wants
 To export more electrical machinery, wood
products, textiles and clothing, rubber products
 Lower tariffs for Malaysian industrial goods being
exported to USA. But:
 US industrial goods tariffs are already very low,
(compared to Malaysia), so not much to gain
 Under fast track, the US could not reduce its remaining
high tariffs by much
 Any gains are eroded as:
 Other countries sign USFTAs
 Industrial tariffs are lowered at the WTO
 US will still protect its jobs eg yarn forward rule:
 Eg Singapore had to agree to the yarn forward rule in its
USFTA  Singapore Government has said because of its
USFTA it will have to restructure its textile industry and
establish an agency to reskill its 10,000 textile workers.
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20. Export taxes (EUFTA) lessons
learned
 Export taxes have been used by
governments as a tool in their industrial
policy since the 11th century
 Europe used export taxes as a source of
revenue and a means of preserving raw
materials for domestic manufacture
 for British King Henry VII, export taxes
were most important tool in industrial
development
Export tax info: www.twnside.org.sg/title2/
par/Export_Taxes.doc
20

21. Export taxes – examples continued
 Chilean Government’s export duty on
nitrate supplied about half of Chilean
Government revenue for a long time
 Value added processing, eg: Indonesia
went from 4% of world market share
in plywood to 80% in a few years due
to a combination of export taxes,
export restrictions and government
procurement of domestic plywood
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22. Export taxes
 EU: > 50% of major mineral reserves are in
countries with GNI/capita ≤ $10/day
 EU RMI:
 EU is “highly dependent on imports of strategically
important raw materials”
 “Securing reliable and undistorted access to raw
materials is increasingly becoming an important
factor for the EU’s competitiveness”
 “Access to primary and secondary raw materials
should become a priority in EU trade and regulatory
policy.”
 Targets export taxes & restrictions and pre-
establishment rights in mining
 EUFTA: remove/restrict Malaysia’s export
taxes 22

23. Perkhidmatan
23

24. Masalah akibat membuka sektor
perkhidamtan
 Negara membangun tidak boleh bertanding
dalam sektor perkhidmatan
 Negara maju mempunyai syarikat gergasi
e.g. 80% daripada pasaran global
pelancongan dikuasai oleh 3 syarikat
 Pendapatan akan dihantar balik ke EU/US
 Membuka sektor seperti air, telekom,
elektrik, bank, kepada syarikat asing
mungkin tidak strategik
 Dengan FTA, susah untuk mengelak atau
mungurus krisis kewangan
 Tidak boleh mengguna ‘capital controls’
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25. What the US wants
 IMF: The United States, as the world’s principal exporter of
services, has a particular vested interest in market opening
in this area
 World Bank: USFTAs lock in the services sectors
countries have opened at the WTO and push to break
into the rest of the services sectors
 USTR: Malaysia is often the country the US services
industry most wants to break into
 Service sectors USA is targeting: telecommunications,
financial, energy, healthcare, distribution, professional,
broadcasting: currently
 80% of Malaysia’s TV programs must come from
bumiputera owned companies
 60% of radio programs must be Malaysian
 No foreign ownership of terrestrial broadcast networks
25

26. What the US wants (continued)
 Impact on economic stability
 Could restrict ability to prevent/control financial crises
 IMF: expressed reservations to the U.S. government
that the limitations that the U.S.-Chile FTA imposed on
the Chilean government regarding short-term capital
inflows reduced the (Chilean) government’s ability to
manage a macroeconomic crisis
 Difficult to protect future sectors
 Telecommunications and insurance sector liberalisation was
so controversial in Costa Rica that it pulled out of its USFTA
negotiations. (It later rejoined)
26

27. What Malaysia wants
 Malaysia may want to export its
construction services, but:
 If Malaysia wants more Malaysians to get
USA visas
 USTR is not allowed to give them
 If Malaysia wants the qualifications of its
engineers, accountants, lawyers to be
recognised in USA
 It is not necessarily in USTR’s control because
regulations are set by US states
27

28. Impak ke atas pekerja
28

29. A variety of chapters can affect
workers including:
 Lower tariffs on agricultural and
manufactured products increases import
competition
 Opening of government procurement reduces
jobs for Malaysians
 Regulatory coherence chapter
 Investment chapter including
 Investor protection
 Macroeconomic stability
 Intellectual property chapter making
medicines more expensive 29
 What about a labour chapter?

30. Pelaburan
30

31. FTA melindungi hak-hak pelabur
 ‘Pre-establishment rights’: semua orang/syarikat
EU/US boleh masuk ke Malaysia
 Definisasi ‘pelaburan’/’pelabur’ sangat luas
 Segala tindakan kerajaan yang mengurangkan nilai
sesuatu pelaburan boleh dianggap sebagai
‘expropriation’
 Langkah untuk melindungi kesihatan rakyat
 Langkah untuk melindungi alam sekitar
 Tindakan untuk memitigasi krisis kewangan
 Upah minimum, cuti hamil yang dibayai, undang-
undang keselamatan dan kesihatan di tempat kerja
 Pelabur asing boleh menggugat kerajaan Malaysia di
makamah antarabangsa; kalau ia menang, boleh
menuntut kompensasi wang, termasuk interest
 ‘capital controls’ dilarang
 Di bawah USFTAs: 72 kes dengan tuntutan 31
US$28billion ke atas kerajaan yang terlibat

32. What Malaysia wants
 More foreign direct investment (FDI), but:
 World Bank and UNCTAD: no proof that stronger
investor protection increases investment by foreigners
 UNDP: no convincing evidence that an FTA with
developed countries increases FDI
 Economists: FDI depends more on market size, peace
and stability, infrastructure etc
 USTR cannot force companies to invest in Malaysia
 Even if stronger investor protection in USFTA
encouraged investment, it would also encourage
unproductive and potentially destabilising short term
capital flows because that is also protected
 Even if get FDI in the form of factories in Malaysia, WTO
no longer allows Malaysia to require local content and
USFTA forbids technology transfer requirements, so not
much value added possible
32

33. Untuk lebih maklumat:
 www.ftamalaysia.org untuk berita, aktiviti,
kempen TPP dan FTA Malaysia yang lain
(eg EU FTA)
 www.twnside.org.sg untuk maklumat
berkenaan FTA dan WTO
 Ada soalan? Sila hubungi:
twnkl@twnetwork.org
Terima kasih!
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