Pseudo National Interests Blocking FTA

Pseudo National Interests Blocking FTA

Co-written with Din Merican

(From: www.Malaysia-Today.net)

Prime Minister Abdullah has done it again, doing what he does best: avoiding making tough decisions. By failing to conclude the FTA negotiations by the end of this month, that important national decision has been effectively taken away from him. Events will now dictate to him. There will be no FTA with America in the foreseeable future and with that, another lost opportunity. Abdullah is again sacrificing the nation’s future by pandering to short-term parochial interests.

His denials notwithstanding, Abdullah is eyeing an early election to stave off Anwar Ibrahims’s political re-emergence. He is fearful that FTA could be viewed as anti-Malay and anti-NEP. That is his failure for not reining in such ill-informed critics as his son-in-law.

By blandly declaring that he is not bound by the time constraint, Abdullah clearly demonstrates that he has not been negotiating in good faith with the Americans. He soils Malaysia’s international credibility, and he is now attempting to blame the Americans for the failure.

Abdullah’s long career in government has numbed him of any sense of urgency. On this crucial FTA issue, he again exposes his lack of vision and courage of his convictions. He is utterly incompetent; his detached management style borders on dereliction of duty, a breach of faith with the citizens.

We should have been negotiating aggressively with the Americans right from the beginning and not be sidetracked by endless cabinet squabbles. Even under the best leadership, his huge cabinet would be unwieldy. Under Abdullah, it behaves like a classroom of rowdy third-rate students, the loudness of their opinions inversely related to their soundness.

Abdullah’s assurance that he would protect the national interest was trite and unnecessary. Of course he should. Now on to substantive matters!

To her credit, Trade Minister Rafidah Aziz recently publicly voiced her support for the FTA. She rightly dismissed those nouveau nationalists and pseudo advocates of our rice farmers. We wish others in responsible public positions would also voice their support, as did Yong Poh Kon, Chairman of the Federation of Malaysian Manufacturers, and the equally seasoned corporate leader Adam Kadir. Manufacturing is a sizeable sector of our economy; agriculture, in particular rice farming, is way down there.

Our Ambassador in Washington, D.C., should be apprising Abdullah of America’s political realities. That is her job; instead she is intruding herself in the minutiae of the negotiations. The protectionist Democrats would unlikely extend the current “fast track” provision, and they are also likely to take over the White House in the next election.

The claim of American time pressure is mischievous. The decision to enter negotiations was made early last year, with both parties fully aware of the deadline. Instead of diligently tending to this important matter, our leaders were consumed with useless symbolic matters like Islam Hadhari.

Reflecting his own ignorance, Abdullah leans on inept advisors like Second Finance Minister, Noh Mohamed Yaccop, and his untested son-in-law. Noh Mohamed’s antipathy towards America is not surprising. The Federal Reserve publicly identified him as a “state-sponsored rogue currency trader” when he was at Bank Negara. That multibillion-dollar debacle, and his pivotal role in it, has yet to be accounted for.

Back To Basics

Amidst the pseudo nationalistic posturing of our self-serving leaders and pundits, it is good to revisit the basic principles of negotiations and the rationale for an FTA.

Foremost, you negotiate only with parties you trust. If you feel the other side is out to exploit you, then do not participate. The other consideration is that the agreement must be mutually beneficial, with each side being better off with than without the agreement.

FTA with America meets both criteria. We do not believe that either side is out to exploit the other; and the ensuing increased trade would benefit both.

Trade is an effective instrument for development, economic and non-economic. Today’s China is a positive example of that wisdom; Myanmar, negative. The golden era of the Malacca Sultanate was related to the fact it was in the path of and active participant in maritime trade.

Our leaders recognize this, at least superficially, hence their trumpeting our trillion ringgit trade figure. Trade with America is a major chunk of that.

With the exchange of goods and services comes the flow of ideas and people. It is instructive that Islam entered the Malay world through trade. Our significant bilateral trade with Singapore insulates the major irritations between the two countries. America and China, once bitter enemies, are today major trade partners and with that, world peace is greatly enhanced.

We should encourage trade by dismantling its obstacles – the essence of an FTA. It does not remove all obstacles, only the tariffs on exports and imports. The ensuing increase in trade would more than offset the tax loss. This is a not matter of faith in capitalism; it is empirically borne out. The “non-tariff” barriers however, remain, and can be as long a list as human ingenuity can make it.

America is Malaysia’s biggest trading partner and consistently in our favor. We should nurture that and not take it for granted. You always need to cultivate your best customers.

Currently America has FTA with Singapore; consequently expect American trade, investments, and other interests to preferentially flow there. The stark reality of the marketplace is that once a pattern is set, it is difficult to change. Once a market is lost, it is tough to recapture.

This crucial insight eludes Abdullah; he never had to meet a payroll. Such grim economic realties are insulated from him and thus beyond his comprehension.

America already has FTA with four Muslim nations. Again, Malaysia is surrendering her leadership role in this important bloc.

Basis For Negotiation

A contentious issue is the government’s procuring and competition policies. We believe that major projects must be open to international bidding, with the criteria transparent and where only cost, quality, and transfer of expertise and technology would be the major considerations. This lack of transparency goes to the heart of the pervasive corruption within UMNO.

The big losers with greater transparency would be those high-flying UMNO cronies whose particular expertise is in procuring lucrative public projects through “negotiated contracts” at bloated prices which they then quickly dispose for a fat, quick and dirty “commission.” They do not bring value to the venture; on the contrary, they add unnecessary costs. Worse, they give Malays and Malaysia a bad name.

If FTA with America would end that, we are for it. They of course would be the first and loudest in disagreeing with us, portraying themselves as nationalists, and us, American stooges. Only an informed public could disabuse them of their delusion.

Nor do those practices protect our GLCs. If they are to compete effectively globally, they must be able to meet competition at home.

America readily understands our racial dynamics; after all it shares many of our social dilemmas. America had its affirmative action long before our NEP. Besides, the Americas are not pushing on the competition issue; what they want is transparency. So should we.

The competition policy would grant American and foreign companies similar access, as opposed to privileged positions for our GLCs. Reciprocally, our GLCs would receive comparable opportunities in America, a market that could amount to in excess of US$250 billion.

To be sure, there will be dislocations with FTA and adjustments have to be made for those negatively impacted. I refer here specifically to our padi farmers, not those ersatz capitalists and their champions within UMNO. In championing the padi farmers, FTA critics like Khairy Jamaluddin are hiding behind their nationalist façade. They and Abdullah are being dishonest in portraying those needed adjustments as being an infringement on our sovereignty.

Of the readers who responded to an Utusan Melayu on-line poll recently, less than 14 percent thought that an FTA with America would benefit Malaysia. Amazingly, nearly half (45 percent) felt that the issue “needs further study.” This again reflects the failure of leadership in government, media, and academy. These issues are well laid out in the websites of MITI as well as the US Trade Representative’s Office (USTR), but our leaders have not done their homework.

We have yet to read any editorials in the mainstream media on the issue. Our academics, in particular our professors of economics, have also remained curiously silent; likewise our Members of Parliament. Only in the much-maligned blogosphere could one find robust discussions on the matter.

This need for ‘further study’ hides a greater underlying public unease. Having seen the debacle over Johore’s crooked bridge, Malaysians have minimal confidence – justifiably so – in our officials’ ability to conduct complex negotiations. Devoting more time to “study the issue” would not help. What we need is expert outside help.

When Chile negotiated its FTA with America, it hired the best, yes, American talent to help it get the most from America! This may be incomprehensible to Malaysians who may consider that akin to treachery, but in the world of business, you put your clients’ best interest first. After all they are the ones paying you and your family’s bills.

There is no lack of transparency in the current negotiations as alleged, rather lack of attention, diligence, and initiative among our political and intellectual leaders. We can blame only ourselves for that, not the Americans.

Din Merican is Senior Research Fellow, Cambodian Institute for Cooperation and Peace, and Visiting Professor, University of Cambodia, Phnom Penh. (dmerican@yahoo.com). The views expressed do not implicate these institutions.