Brave New World (The Star)
19 April 2007
"The US likes to think that liberalisation is the best way to help developing countries, but this is not necessarily true."
Horror films; I can’t stand them. I hate being scared and not being able to do anything about it. I mean when that girl crawled out of the well in The Ring, all I could do was whimper into my popcorn. Furthermore, the protagonists are so dumb. If someone said to me, “If you watch this video, you’ll die in a week”, I’d say, “No thanks, man, I’d rather watch Rush Hour 3 and die immediately.”
And why is it when it’s so obvious that something monstrous is lurking behind a closed door, the scantily clad heroine just has to step through it?
Now, speaking of heroines (though perhaps not scantily clad) and monsters, our very own Minister of International Trade and Industry appears to be heading straight into the clutches of the United States of America and its proposed Free Trade Agreement (FTA).
It all but makes me want to scream, “No, Rafidah! I’m sorry, I mean, no, Datuk Rafidah! No! Don’t go there! You’ll doom us all!”
Now, why the scepticism? OK, let’s start with some basics. An FTA is essentially about the liberalisation of trade within a group of countries or between two countries.
It seeks to reduce or eliminate trade barriers to each other’s markets.
Trade barriers are things like tariffs and quotas on imports. Without such barriers, we will have what is known as an “open market” where goods and services will be able to flow more easily between the nations.
An open market would theoretically mean greater competition, which leads to better efficiency and ultimately more economic development.
This is all well and good if the playing field were level and if you were talking about two equal partners. The reality, though, is that each country is at a different stage of development and we are not all created the same.
When we are dealing with an economic and military powerhouse like the US, this inequality becomes even more obvious.
The US likes to think that liberalisation is the best way to help developing countries.
This is because without the government providing protection from foreign competition, local industry will simply have to improve. This is not necessarily true.
When a market which was previously protected is suddenly opened up, there will be a surge of cheap imports, and local companies may not be able to reduce their prices to compete without making losses. They could end up closing shop.
The exporting country, on the other hand, particularly if it is very rich, can absorb any losses it may make; and when their competitors are out of business, they can swoop in and charge whatever they like.
There is an element of serious unfairness here as well. If we look at history, all the economic superstars of today – the US, South Korea, Japan, etc – had protectionist policies when they were starting out. So, they are saying that what was good for them is not good for us.
Be that as it may, it is possible that Malaysia does not want to be left behind in the FTA craze. After all, Singapore has an FTA with the US. It may be that we fear losing out on the lucrative US market if we don’t play ball.
The question is, how much of that US market is open to our goods anyway?
Let’s take agriculture as an example. Will our farmers be able to sell their products to the US at a cheaper rate and therefore be more attractive to the American consumer?
It is unlikely, for although the US may open up access to their markets, their own farmers are subsidised so heavily that they can afford to produce at a loss and still stay in business.
So, while Pak Abu of Kedah is working his fingers to the bone to sell his crops as cheaply as possible, Billy Joe Bob of Arkansas can be as inefficient as he likes and still sell his goods dirt cheap because his losses are covered by a hefty government subsidy.
As an example, after Mexico agreed to the North American Free Trade Agreement (NAFTA), its import of cheap corn from the US tripled and local farmers went bust. Two million Mexicans have found themselves out of work since the NAFTA.
Besides, the Americans are mean negotiators and they won’t budge on terms which will endanger their own industry. In their FTA negotiations, the Australians failed to get the US to lift the quota on Australian sugar.
South of the Causeway, the Singaporean textile industry is now bound to a clause in its FTA with the US which says they can only use local or US yarn if they want their clothing to be exempt from US import duty.
This means they can’t buy cheaper raw materials from other parts of the world, making their goods more expensive and less competitive. It also means US inspectors have the power to come into Singapore to check that the sneaky natives don’t try to slip in any yarn which is not Yankee Yarn.
An FTA with the US can also be dangerous to our health. They will almost certainly demand clauses that stop us from doing things like making laws that require the proper labelling of food.
Here, I am talking about food with Genetically Modified Organisms in them. In this day and age, it is possible for genes from different biological organisms to be spliced into another organism.
I for one would like to know if the tomato I’m eating is nothing more than a tomato.
The Malaysian Government is on its way to pass legislation to make labelling a necessity so that I will know just that.
The US doesn’t like labelling, however. They think it is prejudicial to their heavily genetically modified products, so they will almost certainly insist in their FTA that such laws are not passed.
It’s basically them saying: “You don’t have a right to know what our food export consists of because you might not want to buy it and that is not ‘free trade’.”
There are so many points to ponder, but I want to raise just one more health-related issue – and that is the matter of drugs.
Patented drugs are very expensive. Fortunately, a generic drug, one that uses the same formula but not the brand name, can be produced cheaply.
It is the production of generic drugs which provides developing countries with affordable treatment for their citizens.
The legality of producing generic drugs is too complicated to explain in the space I have here, but take my word for it, it’s all above board and perfectly OK, even according to the World Trade Organisation.
US FTAs, however, usually have clauses which make it much harder to produce generic drugs, usually through the extension of the patents of the original drug- makers.
What does this mean in everyday life? Well, drugs which might have cost hundreds of ringgit may now cost thousands. For people who are dependent on cheap generic drugs, the FTA can very well be a death sentence.
It could be that all these fears have been dealt with by the heroes of MITI and the US monster has been tamed. But we don’t know, as everything is confidential.
What is needed right now is the opening up of the negotiation process between us and the US. The people need to see what is being negotiated because at the end of the day, it is the lives of ordinary Malaysians which will be affected.
Surely we have a right to have a say.