Malaysia agreed to the CPTPP in 2018 but only plans to ratify it next year, though experts argue that the ratification of the trade deal will help with the country’s economic recovery.
FMT takes a look at the CPTPP and how its ratification could help heal a tattered economy.
What is CPTPP?
The CPTPP traces its roots to the multilateral free trade agreement known as the Trans-Pacific Partnership. That deal involved 12 countries including Malaysia, but essentially ended when the United States withdrew.
However, the remaining 11 countries agreed to revive the treaty with some changes and it became known as the CPTPP.
CPTPP involves Australia, Brunei, Canada, Chile, Japan, Mexico, Peru, New Zealand, Singapore, Vietnam and Malaysia. So far, it has come into force only in Australia, Canada, Japan, Mexico, New Zealand, Singapore and Vietnam.
Other countries, including the United Kingdom and Taiwan, have voiced interest in joining the CPTPP.
What does CPTPP cover?
The CPTPP enhances market access by providing for almost complete liberalisation of tariffs among its members.
The agreement covers virtually all sectors and aspects of trade in order to eliminate or reduce barriers. The agreement also features market-access commitments in trade in goods, services, investment, labour mobility and government procurement.
The agreement also establishes clear rules that help create a consistent, transparent and fair environment to do business in CPTPP markets, covering key issues like technical barriers to trade, sanitary and phytosanitary measures, customs administration, intellectual property, transparency and state-owned enterprises.
What does CPTPP mean for Malaysia?
According to the Institute for Democracy and Economic Affairs (IDEAS), the trans-Pacific treaty creates one of the largest free trade areas in the world, with a combined trading value of USD10 trillion, representing 13.5% of the global GDP or 15.3% of world trade.
The CPTPP will provide Malaysia with market access to about 500 million people. Should more countries join the CPTPP, Malaysia would have greater market access.
The CPTPP requires Malaysia to commit to reforms including meeting certain health and safety requirements and adopting international standards for non-tariff measures. However, the treaty will significantly reduce the cost and complexity of trade between CPTPP members.
Why hasn’t Malaysia ratified the CPTPP?
According to Arividya Arimuthu, a senior official from the international trade and industry ministry, the ratification of the CPTPP is pending a clear mandate from the Cabinet.
“A lot of things have to come together before we can go to the Cabinet. There is a cost-and-benefit analysis that has been commissioned that should help us to understand the costs and benefits associated with the CPTPP.
“We are also undertaking stakeholder consultations and we have ministries working on amending the relevant laws under their purview,” she said in a webinar earlier this month.
What has been said about the CPTPP?
The Malaysia-Australia Business Council(MABC) has urged the government to ratify the CPTPP as soon as possible, saying as Malaysia recovered from the pandemic, the country must find new export markets to boost the economic recovery.
“CPTPP would not only benefit MABC members but also other Malaysian businesses and workers. We encourage the Malaysian government to move swiftly towards ratification of the CPTPP, to avoid missing out on tremendous economic opportunities.”
The international trade and industry minister Azmin Ali said there were sensitive issues in the agreement such as government procurement that delayed the ratification process.
Klang MP Charles Santiago claimed that Malaysia will not lose investors if it does not ratify the CPTPP. He said free trade agreements like the CPTPP were not a primary or deciding factor for investors.
However, economist Carmelo Ferlito, the CEO of the Centre for Market Education, said CPTPP was not a form of FTA as it claimed to be.
“CPTPP is a complicated agreement, and I wonder how complex agreements could facilitate something so simple as free trade. I hope that CPTPP-style agreements will lose relevance in the post-pandemic era in favour of true free trade agreements,” he told FMT.