EU-Malaysia FTA: ‘Trade invaders’

By Anil Netto

Negotiations between the Malaysia and the European Union for a free trade agreement (FTA) are expected to begin in Brussels next week. But most Malaysians are being left in the dark about what this means for Malaysia while Parliament is not even looking at this seriously.
The way I see it, the EU-Malaysia FTA aims to prise open the Malaysian market for large European firms – in the same way that these firms are eyeing the vast Indian market under the EU-India FTA and the Asean market under the EU-Asean FTA. That’s the main agenda of Corporate Europe.
These large European firms or BusinessEurope are working very closely with EU Commission negotiators to secure the best possible outcome for themselves. What are they looking for? We can get a pretty good idea of what they want by looking at the negotiations for the EU-India FTA.
One of the main concerns is that the manufacture and export of affordable generic medicine by India could be affected, and there would be less control over exports of raw materials from India and imports of subsidised European agricultural produce into India.
Thanks to the good folks at Corporate Europe Observatory and India FDI Watch, we know this is what Big Business in Europe is looking for:

Full liberalisation of trade in industrial goods:
total elimination of import tariffs for all industrial goods within seven years and no possibility of excluding certain sensitive products from tariff cuts. Longer time frames for these cuts should only be possible for a very limited number of sensitive products.
Nearly full liberalisation of trade in agricultural products
elimination of agricultural import tariffs with only a few exceptions for sensitive products that might be exempt from liberalisation or liberalised to a lesser extent. Tariffs for processed food and beverages, however, should be reduced to zero.
Dismantling all regulations on investments by EU companies in India:
there should be no limits to foreign ownership for European banks, insurance and telecom companies. Sectors that are completely or relatively closed to foreign investors such as retail, accounting, legal and postal services should be opened up to European multinationals, the unlimited transfer of their profits guaranteed and limits on risky forms of investment eliminated.
Protection for European investments, particularly against all forms of expropriation.
Liberalisation of trade in services
European companies want a less regulated services market in fields such as research, insurance, banking, telecommunications and maritime transport. This includes the liberalisation of risky and highly speculative financial instruments.
A ban on export taxes and other export restrictions
to secure unhampered access to manufacturing inputs for European industries, India should abstain from export restrictions on raw materials such as rice, cotton, leather, rare earth, paper, wood products and metals that the country has used strategically to encourage infant industries or for reasons of price stability.
The protection of intellectual property rights (IPRs) beyond what is required under WTO rules
this includes ´data exclusivity‘ for a minimum period of 10 years, to strengthen the monopoly rights of pharmaceutical and agrochemical companies. It also includes an army of IPR enforcement measures ranging from at the border measures against potentially counterfeit goods to “cleaning up any street market that sells pirated European goods” (EuroCommerce).
An ambitious government procurement chapter:
This would enable European companies to bid for public contracts in sectors such as energy infrastructure, water treatment, healthcare, transport or construction.
The elimination of regulatory (´non-tariff‘) barriers (NTBs) that hamper market access for European exporters. This includes a demand for regulatory transparency, information on any proposed new regulation in India long before it is implemented and ´consultation mechanisms‘ through which European corporate interests can provide comments and input.
The facilitation of the migration of key personnel for both industry and services subsidiaries: the mutual recognition of professional qualifications is key.
Strong and rapid dispute settlement mechanisms: this also includes so called investor-to-state provisions that would allow European companies to directly sue India at international tribunals when they feel that their investment or profits are being jeopardised.
Intense cooperation between business and the Commission
the Commission should “closely involve industry, keeping it regularly updated throughout the FTA negotiation process, from preliminary consultations and the launch of the talks through to the completion of the final agreement” (European Tyre and Rubber Manufacturers Association).

Because Big Business in Europe is working closely with the EU, their demands are likely to be close to the EU negotiators’ position, which is (going by the experience in India):

IPR
Go beyond TRIPS standards: “This chapter shall complement and further specify the rights and obligations between the Parties beyond those under the TRIPS Agreement” (art. 8.1)

• introduction of data exclusivity in India (art. 18)
• extent patents from the standard 20 to up to 25 years (art. 17.3)
• border protection provisions that allow the seizure of products suspected of infringing IPRs at the Indian border (art. 36)
• training of personnel for the enforcement of IPRs (art. 38)136

Tariffs

• Elimination of more than 90% of tariffs on manufactured and agricultural products within 7 years; aiming at tariff liberalisation for all industrial products
• Zero tariffs on chemicals, textiles and probably also dairy, automotives, processed food and beverages
• Less radical liberalisation commitments for a limited list of sensitive agricultural products

Services and investment
“far reaching liberalisation of services and investment”

• emphasis on the following sectors: banking,insurance, retail, accounting, legal and postal services…
• full liberalisation of capital movements
• no limits on risky forms of investment
• Maximum protection for EU investors
• Investor-to-state provisions that allow companies to directly sue India through international tribunals

Government procurement
“progressive liberalisation of procurement markets at national, regional, and, where appropriate, local levels; as well as in the field of public utilities”
“gradual market access on the basis of the principles of non-discrimination and national treatment”
Access to raw materials
prohibit export taxes and other export restrictions

Given the disparity in negotiating strength, expertise and resources, Malaysian negotiators are likely to be no match for the EU’s. Worse, the Malaysian public has no idea what they are in for.
The likes of Tesco, Carrefour and heavyweight European banks (those that are still solvent, that is!), hotels and financial institutions could be setting up shop in the region while subsidised EU agricultural produce may end up flooding our domestic market. All these could severely affect local businesses, the domestic economy and ultimately, the Malaysian people.