briefing on the trans-pacific partnership agreement … · japan, malaysia, mexico, new zealand,...

Disclaimer: This document is for information purposes only, and does not constitute legal advice

BRIEFING ON The TRANS-PACIFIC PARTNERSHIP

AGREEMENT (TPPA)

BYSYAHRIL SYAZLI GHAZALIStrategic Negotiation Division MITI

21 January 2016

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Disclaimer: This document is for information purposes only, and does not constitute legal advice Disclaimer: This document is for information purposes only, and does not constitute legal advice

2Driving Transformation, Powering Growth

BRIEF BACKGROUND2005 (P4) - Brunei, Chile, Singapore & New Zealand.

March 2010 – USAAustralia, Peru & Viet Nam.

October 2010 -MALAYSIA

2012 – Mexico & Canada

2013 – Japan

Access to 800 million people with a combined GDP of USD27.5 trillion


STATUS

• Negotiations concluded on 5 October 2015 in Atlanta. Signing scheduled in February 2016 – special parliament debate on 26-28 January 2015.

• Membership is open to all APEC economies (21) but can consider non-APEC countries.

• Current membership (12): Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and US.

• Interest shown by Korea, Taiwan, Indonesia, Thailand and Philippines.

• Widely expected to be a building block towards the wider Free Trade Area of the Asia Pacific.

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30 Chapters in the TPPA…

1 – Initial Provisions27 – Administrative & Institutional Provisions28 – Dispute Settlement29 - Exceptions30 – Final Provision

2- Market Access3 – ROOs4 – Textiles and Apparel5 – Customs Administration6 – Trade Remedies7 – Sanitary and Phytosanitary8 – Technical Barriers to Trade9 – Investment10 – Cross Border Services11 – Financial Services12 – Temporary Entry13 – Telecommunications14 – E-Commerce15 – Government Procurement16 – Competition Policy18 – Intellectual Property

Rights21 – Cooperation and Capacity

Building22 – Competitiveness /

Business Facilitation

17 – Competition (SOE)19 – Labour20 – Environment23 – Development24 – SMEs25 – Regulatory Coherence26 – Transparency and Anti

Corruption

Standard Legal Chapters Traditional Trade Issues New Issues

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Flexibilities that we have obtained in TPP…

• Longer transition periods• Different thresholds – e.g. GP Chapter• Non-Conforming Measures - country specific list • SOE – country specific annex• Bumiputera policy• Total exclusion / Carve-out – e.g. procurement by

State Governments

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Legal and Institutional Process

Entry into Force•60 days after the date on which all original signatories have notified the Depositary in writing of the completion of their applicable domestic procedures (ratification);

•If not all signatories have ratified within 2 years of the date of signature , 60 days after the expiry of this period if at least six of the signatories, which together account for at least 85 per cent of the combined gross domestic product of the original signatories in 2013 have ratified; or

•If both do not take place, 60 days after the date on which at least six of the original signatories, which together account for at least 85 per cent of the combined gross domestic product of the original signatories in 2013, have ratified.

TPP Commission•Comprising representatives of all parties, responsible for the administration of the Agreement, including review of Agreement; supervise work of all Committees; resolve difference or disputes regarding interpretation or application of Agreement; and issue interpretation of the agreement.

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Legal and Institutional Process (cont…)

AccessionOpen to any State or separate customs territory that is a member of APEC, and such other State or separate customs territory as the Parties may agree . Parties to decide on accession procedures .

WithdrawalParties may withdraw from this Agreement by providing written notice of withdrawal to the Depositary and the other Parties. Withdrawal shall take effect six months after written notice.

Exceptions•general exceptions;•security exceptions;•temporary safeguard measures (capital controls);•taxation measures;

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Dispute Settlement Mechanism (DSM)

• The DSM establishes the procedures for the avoidance and settlement of disputes.

• The Chapter provides for the process of settlement of disputes, first through a process of consultations before reference to an independent Panel, established in accordance with agreed procedures.

• A Panel shall comprise three members, selected in accordance with the procedures set out in the Chapter.

• Panel findings and recommendations are binding on the Parties to the dispute.

• Parties must implement findings and bring the offending measure into compliance with the Agreement.

• If a Party fails to comply with the panel recommendations, the Parties to the dispute may agree to a mutually acceptable compensation.

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Investment

• Key obligations of market access and protection through non-discriminatory treatment, minimum standard of treatment and disciplines on expropriation, transfers, performance requirement and board of directors.

• Safeguards and exceptions available.

• Non-conforming measures – Annex I (binding current non-discriminatory measures) and Annex II (policy space for existing discriminatory measures )

• ISDS – outlines procedures for settlement of disputes between foreigninvestor and host government.

• Improvements and safeguards in TPPA – government’s right to regulate; avoiding frivolous claims; interpretation by Joint Commission binding on Tribunal.

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Non-Conforming Measures (Investment and Services)

• Bumiputera preferences and land policies

• PETRONAS’ role under the Petroleum Development Act (PDA)

• Right to impose any condition when disposing assets of SOEs for the first time; and for subsequent transfers of assets in strategic sectors

• MFN exemption for ASEAN preferences

• Cultural services

• Wholesale and distribution services

• Air transport services

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Investment (ISDS)

• Investor-State Dispute Settlement (ISDS) is NOT new for Malaysia

• 74 Bilateral Investment Treaties (BITs)

• 8 FTAs (Malaysia-Japan, Malaysia-India, Malaysia-Pakistan, Malaysia-New Zealand, ASEAN-China, ASEAN-Korea, ASEAN-Australia-New Zealand, ASEAN-India) which contain ISDS provisions.

• 2 cases against Malaysian Government- Philip Gruslin vs Malaysia- Malaysian Historical Salvors Sdn Bhd vs Malaysia

• 2 cases by Malaysian investors against foreign Governments- MTD vs Chile- Telekom vs Ghana

• Safeguards in TPPA11


Labour

• Not about movement of labour.

• Key obligation is to adopt and maintain the ILO Declaration 1998.

• The elements :1) freedom of association & right to collective bargaining; 2) eliminate forced labour;3) abolish child labour; 4) eliminate employment discrimination

• Bilateral Labour Consistency Plan with US .

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Market Access

Export Taxes•Malaysia is allow to maintain export duties

Malaysia’s Offer -goods•85% of tariffs to be eliminated upon entry into force;64.5% are already without duties•Tariffs on sensitive products eliminated over 10-15 years; TPP Partners’ Offer -goods•Immediate elimination by US (90%), Canada (95%), Mexico and Peru (80%)•Japan – wood and agriculture products

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Malaysia: Main Exports to TPP Region

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NON-FTA PARTNERS IN TPP


Top Malaysia’s Imports

Top Malaysia’s Exports

Canada

USD807.7 mNo. Product %

1. E&E Products 38.2%

2. Wood Products 10.5%

3. Rubber Products 10.5%

4. Chemicals & products 6.1%

5. Manufactures of Metal 5.1%

No. Product %

1. Chemical & products 36.5%

2. E&E products 13.5%

3. Other Agricultures 12.3%

4. Crude Petroleum 10.5%

5. Machinery & parts 6.8%


MexicoTop Malaysia’s Imports


No. Product %


2. Processed Food 4.3%


4. Chemicals & Products 2.8%

5. Machinery & Parts 2.1%

No. Product %


2. Transport Equipment 13.3%

3. Petroleum Products 9.7%

4. Machinery & Parts 4.2%

5. Chemicals & Products 3.7%




Peru

USD98.7m

USD37.3m

No. Product %



3. Textiles, Clothing & Footwear 9.1%

4. Wood Products 6.3%


No. Product %


2. Metalliferous ores & metal scrap 20.3%

3. Other agricultures 17.4%

4. Crude Fertilizers & Minerals 14.9%





USA

USD19.68bUSD16.0b

No. Product %



3. Optical & Scientific Equipment 5.8%

4. Palm Oil 3.9%


No. Product %


2. Machinery & parts 10.6%

3. Transport equipment 10.0%


5. Optical & Scientific equipment 6.0%


Offers Received for Biomass Products

Country MFN Offer MFN Offer MFN Offer MFN Offer MFN Offer MFN Offer

1404.90 2306.60 4411.92 4411.93 4411.94 4601.99

Canada Free EIF Free EIF Free -6%

EIF Free EIF Free EIF 2.5% -3%

EIF

Peru 9% EIF 0% EIF 9% B11 9% B11 9% B11 9% EIF

Mexico 10% EIF 15% B10 5% EIF 5% EIF 5% EIF 15% EIF

USA Free EIF 0.32 cents per kg

EIF Free -6%

EIF Free - 3.9% / 1.9 cents per

kg + 1.5%

EIF Free EIF 2.7% -3.3%

EIF

Singapore 0% EIF 0% EIF 0% EIF 0% EIF 0% EIF 0% EIF

Brunei 0% EIF 0% EIF 0% EIF 0% EIF 0% EIF 0% EIF

Viet Nam 5% EIF 0% EIF 5% EIF 5% EIF 5% EIF 24% EIF

Australia 0% EIF 0% EIF 5% EIF 5% Year 4

5% EIF 0% EIF

New Zealand

0% EIF 0% EIF 5% EIF 5% EIF 5% EIF 0% EIF

Chile 6% EIF 6% EIF 6% EIF 6% EIF 6% EIF 6% EIF

Japan Free -6%

EIF Free EIF 2.6% EIF 2.6% EIF 2.6% EIF 3 - 3.8% EIF

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Non-participation in TPPA / Cost of late entry

• Trade Rules: Miss opportunity to craft rules (Malaysia’s interest).

• More onerous commitments if join later

• Loss of preferential market access

• Viet Nam and Singapore, and future members, will have advantage over Malaysia

• Implications for FDI and current investors

• Disdvantaged in the regional supply chain due to loss of preferential treatment

• Sending wrong signals – not ready to accept international standards, good governance and ability to negotiate high standard FTAs, like MEUFTA.

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WHY TPPA?

• Trade : 4 new preferential markets – important for Malaysia as a trading nation

• Investment : Attracting ‘high quality’ FDI and preserving existing investors

• TPP promotes: International standards – Labour and Environment and Good governance- transparency, anti corruption

• Negotiated provisions have addressed key concerns/sensitivity -safeguards, transitions and other flexibilities

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Please visit www.miti.gov.my for the legal texts of the TPPA, a summary of the Agreement, FAQs and other

useful material.

Thank you

Menara MITINo. 7, Jalan Sultan Haji Ahmad Shah, 50480 Kuala Lumpur, Malaysia

Tel: 603-8000 8000 | Fax: 603-6201 2337 | Email: [email protected] | Website: www.miti.gov.my

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