Malaysian leaders remain unconvinced by US Trans-Pacific Partnership deal

THE US is aggressively pursuing a trade pact with the 12-member strong Trans-Pacific Partnership (TPP) to a concrete resolution in next month's Asia-Pacific Economic Cooperation summit in Indonesia.

However, it is likely that signing of agreement, hoped to conclude at year-end, will continue well into next year with many of the 12 countries, which include recent members of Australia, Canada, Malaysia, Mexico, Peru and Vietnam all come with complex issues to resolve.

The significant absence of China in these talks is important to how the trade-free bloc will work seen by many to represent a geopolitical body rather than a trade pact that will remove non-tariff barriers.

Barack Obama's personal visit at the forthcoming summit in Indonesia to be followed by East Asia Summit in Brunei, and a visit to Malaysia is an attempt to push forward the opening up of markets and creation of 5,000 US jobs for every extra US$1 billion in exports.

The TPP's aims are to regulate government procurement, the role of state-owned enterprises as well as intellectual property rules has come under criticism by countries such as Malaysia and Vietnam.

Its attempts to create stricter intellectual property rules could impact the price of life-saving medicines due to limiting access of generic rules.

For many countries, exemptions are being banded about to prevent killing off domestic industries through tariff reductions. Malay Economic Action Council's head Nizam Mahshar has advised that its government not cross 75 "red lines in the TPP. "We are not convinced the TPP will provide what Malaysia needs."

Malaysia's Prime Minister Najib Razak is under significant pressure to reassure the country that the TPP will fight for its domestic industries best interests and aim to boost 10 per cent of the amount of trade covered by preferential access.

Malaysia has proposed the exemption of tobacco control from the TPP which would prevent companies challenging public health campaigns against cigarettes.

For the country's former prime minister Mahathir Mohamad, the TPP stands as a threat to Malaysia's independence while its former finance minister goes as far to say that it pushes forward the concept of "modern-day American hegemony."

Malaysia, Japan, and Vietnam, view the trade pact as chance to break down vested interest and force liberalisation of protected, inefficient sectors.

Vietnam is particularly keen to get onboard the TPP to make up for its yawning trade deficit of almost US$17 billion with China compared to trade surplus with the US of $15 billion consisting mainly of garments and seafood.

The TPP would support the textile industry by decreasing tariffs to zero within four years from its present 17.5 per cent. However, this will come at a cost in Chinese imports which it relies upon that would be exempt from tariff reductions under the US "yarn-forward" origin rules which asks for locally sourced materials from a TPP country only.

The relationship between TPP countries and China - particularly those heavily reliant on its markets and investment - will be tested by the US trade pact already at odds with a pact that many people feel is there to temper China's economic might, said Adrian Hearn, coordinator of international relations at the University of Sydney China Studies Centre,

TPP's provisions on state-owned enterprises will complicate the ability of its members to accept investment from Chinese companies, added Mr Hearn on China as "the dragon in the room."