| KUALA LUMPUR
KUALA LUMPUR Oct 1 Malaysia's former prime
minister Mahathir Mohamad and opposition leader Anwar Ibrahim
haven't agreed on much, if anything, in the 15 years since the
latter was ousted from Mahathir's government and then jailed on
sodomy and corruption charges.
But a U.S.-led trade pact - the most ambitious since the
demise of the Doha round of global talks - has succeeded in
uniting the great rivals in condemnation of what they see as a
U.S. plot to impose its economic model on Asia.
Their rare unity is one measure of the struggle President
Barack Obama faces in pushing forward his signature trade pact,
a cornerstone of his plans to create more U.S. jobs, during his
sweep of Southeast Asian countries and summits next week.
Obama, who touts the deal by saying that 5,000 U.S. jobs are
created for each extra $1 billion in exports, will have a rare
chance to push other leaders personally for breakthroughs at an
Asia-Pacific Economic Cooperation summit in Indonesia, followed
by an East Asia Summit in Brunei, and a visit to Malaysia.
But the proposed Trans-Pacific Partnership (TPP), by seeking
unprecedented access to domestic markets, is proving highly
sensitive in developing countries such as Malaysia and Vietnam,
whose political systems could be shaken by intrusions in areas
such as government procurement and state-owned enterprises.
Such sensitivities are increasing the risk of a watered-down
deal as politicians succumb to demands for exemptions and
opt-outs from pressure groups in countries as diverse
economically as Australia, Brunei, Mexico, Singapore and Peru.
"The elimination of tariffs can kill some of our industries,
especially those in the process of developing," said Nizam
Mahshar, head of the Malay Economic Action Council, which is
pressuring Malaysia's government not to cross 75 "red lines" in
the TPP. "We are not convinced the TPP will provide what
The three-year-old talks, now involving 12 nations, are
aimed at establishing a free-trade bloc that would stretch from
Vietnam to Chile, encompassing 800 million people, about a third
of world trade and nearly 40 percent of the global economy.
Proponents call it a "high-standard" agreement to eliminate
tariffs and tackle an unprecedented range of non-tariff barriers
that restrict growth.
For the United States, there is also strategic appeal,
complementing its shift of diplomatic and military resources to
Asia to tap the region's fast growth and balance the growing
influence of China, which has not joined the pact.
To its opponents, such as Mahathir and a range of advocacy
groups globally, the TPP represents an encroachment of U.S.
economic might that gives big corporations unprecedented powers
to challenge national policies in the name of free trade.
More intrusive than other trade pacts, the TPP seeks to
regulate sensitive areas such as government procurement,
intellectual property and the role of state-owned enterprises as
well as giving corporations more rights to sue governments.
TOUGH SELL IN DEVELOPING ASIA
Among the Malay council's concerns is that liberalising
state procurement rules would undermine Malaysia's long-standing
affirmative action programme to benefit majority ethnic Malays.
Former finance minister Anwar has called the TPP a secretive
push for "modern-day American hegemony" while his nemesis
Mahathir, a veteran opponent of globalisation and U.S.
dominance, denounced it as a threat to Malaysia's independence.
Such opposition has put pressure on Prime Minister Najib
Razak to reassure the public that the government, which says the
TPP will boost by 10 percent the amount of trade covered by
preferential access, will fight for its interests.
Najib's government announced in August it was initiating
fresh studies on the impact of the TPP and it says it will not
be bound by deadlines to conclude the talks, which negotiators
had hoped to wrap up by the end of this year.
Malaysia launched a proposal in August to exempt tobacco
control measures from the agreement, countering U.S. wording
that could allow companies to challenge public health campaigns
against cigarettes. Opponents of the deal have also warned it
would lead to higher medicine costs by limiting access to
generic drugs under intellectual property rules.
In TPP nations such as Malaysia, Japan, and Vietnam,
reform-minded leaders are seen as using the pact as external
leverage to break down vested interests and force liberalisation
of protected, inefficient sectors.
Michael Froman, the U.S. trade representative, last week
played down concern that there were too many unresolved issues
to wrap up the talks this year, saying much of the work on trade
deals tends to get done "at the last minute".
"I think it's hard to judge from the outside whether or not
there is too much work to be done," he said in Washington. "We
see a path forward. There's a lot of momentum."
"DRAGON IN THE ROOM"
Vietnam's Communist leadership wants to join the TPP "with a
"vengeance", said Vietnam expert Carl Thayer, seeing it as a way
to steal a march on China and further internationalise an
economy that has been paralysed by a bloated state sector.
Vietnam had a trade surplus of just less than $15 billion
with the United States last year, fuelled largely by its garment
and seafood exports, compared with a yawning deficit of nearly
$17 billion with northern neighbour China.
"The TPP overall has serious costs for Vietnam, but look at
the market it is gaining access to and look at the trade deficit
with China," said Thayer, emeritus professor at the Australian
Defence Force Academy in Canberra.
Still, Vietnam would "negotiate down to the last man, trying
to get concessions, delay etc," he added.
Hanoi may not see enough benefits from the deal - which
would cut tariffs on textiles to zero in four years from 17.5
percent now - to agree to far-reaching reforms of its domestic
economies, such as its huge, debt-laden state-owned enterprises.
Vietnamese trade officials acknowledge that a range of
companies, including exporters who depend on state subsidies,
and inefficient domestic-focused firms, would suffer from the
One stumbling block is the U.S. insistence on "yarn-forward"
origin rules for the textile sector, meaning that all materials
must be sourced locally or in a fellow TPP country to qualify
for duty-free access. Vietnam mainly sources its fabrics and
other inputs from China.
Nguyen Xuan Duong, the director of Hung Yen Garment
Corporation near Hanoi, which has 12,000 workers, hailed the TPP
as a "great opportunity" but said the industry would need
long-term government support to wean itself off Chinese imports.
"Local companies just want short-term profit, no one wants
to invest in a sub-material factory which only gives profit
after five to seven years," said Duong, whose firm exported
apparel worth $200 million last year, 70 percent to the United
That is one example of how the exclusion of Asia's largest
economy from the talks could have a profound impact on TPP
countries' ties with China. Chinese state media have criticised
the pact as an attempt to contain China's economic rise,
although Beijing has since said it is studying joining the deal.
"China is the dragon in the room," said Adrian Hearn,
coordinator of international relations at the University of
Sydney China Studies Centre.
"Most TPP countries have become increasingly reliant - in
some cases dependent - on Chinese markets and investment. The
TPP's provisions on state-owned enterprises will complicate the
ability of its members to accept investment from Chinese