Deva Ridzam: Free trade agreement won't affect Malaysia's sovereignty

NST Online » Columns

2008/06/15

By : Deva Ridzam

WITH a high risk of failure of the Doha Round of World Trade Organisation (WTO) negotiations and the bilateral Malaysia-US Free Trade Agreement (MUSFTA) talks with the US in a cul-de-sac, where does this leave Malaysia's trade policy?

Significant progress was made at the seventh round of bilateral negotiations with the US in Kuala Lumpur in January. The talks achieved improvements on tariff lines, services, intellectual property rights and telecommunications.

Despite this, things do not seem to be looking up for both sides. In the US, the political mood for bilateral FTAs in general has dampened. The Colombian and other FTAs, which have been completed, are in trouble, as the US Congress doesn't want to vote on them. Even the South Korean FTA deal faces an uncertain future.

Under these circumstances, it would be difficult to convince any country to continue FTA talks with the US if agreements are to be held up in Congress.

In Malaysia, International Trade and Industry Minister Tan Sri Muhyiddin Yassin was spot on when he stated that Malaysia should progress slowly regarding Musfta.
He was also correct to insist that labour and environment issues be addressed at other forums. However, what is most intriguing is that Muhyiddin also said: "We have the mandate from cabinet, which covers national sovereignty as among the critical areas to Malaysia and one we cannot compromise on."

That is a rather distinctive ministry definition of sovereignty, to say the least. Worries about loss of sovereignty in a FTA, be it with the US or any other country, are based on a fallacy.

This is because sovereignty is all about a country's ability to rule itself. Sovereignty is indeed the legal condition necessary for the inclusion of particular lands and waters within the boundaries of a country.

It gives a country the right to exercise the functions of a state, to the exclusion of any other state. The only significant sovereignty issues facing Malaysia are territorial disputes with our neighbours.

Negotiations with third countries on FTAs, including Musfta, do not mean Malaysia giving up its capacity to decide by itself, and in its own way, whatever is required in the national interest. FTAs involve no abrogation of national sovereignty.

Countries concerned will first have to be satisfied with the conditions and safeguards, including ensuring that the agreement to be signed is consistent with the provisions of the WTO.

Also, Malaysia, like any other country, will only sign on when it gets as much out of such agreements as it is required to give up. Even the concern over government procurement is not insurmountable.

Arrangements could be found to establish various threshold levels.

Let us not forget, too, that FTAs involve neither more nor less loss of sovereignty than when Malaysia joined the United Nations or the WTO and, for that matter, the Asean Free Trade Agreement.

In a nutshell, an FTA with the US would not in itself make Malaysia any less sovereign, as was the case for countries previously joining the North American Free Trade Agreement or the European Union.

Indeed, FTAs have generally been proven to make countries more competitive and prosperous.

When Malaysia and the US in 2003 announced that they would begin negotiations, the stated goals for the proposed FTA were to remove tariff and non-tariff trade barriers, and expand bilateral trade.

Since then, what both countries have indeed been seeking is a comprehensive free trade arrangement with safeguards and flexibility factored in that would be to the mutual benefit of both.

Cooperation in an increasingly interdependent world is not surrender. To freely enter into and conclude a FTA is no different than to becoming a party to any international agreement simply because they themselves are exercises of sovereignty. After all, the Malaysian economy may be “resilient” today, but it may not always be so. It is also not sufficient to keep the economy growing at six per cent; rather we should accelerate it under the Ninth Malaysia Plan.

We need the markets, the populations, the opportunities and the discipline of belonging in a global economy. In the long run, Malaysia is better off with an FTA with the US, our largest trading partner (close to 20 per cent) and with other major world traders and, at the same time, pursuing a successful conclusion of the global Doha Round of talks.

It is about time Malaysia sorted out its trade policy. Unfounded concerns over sovereignty do not help clear thinking about our national interest. We have to advance both sovereignty and national interest together in a world that has become increasingly competitive.

Our trade policy must keep up with the times. This is one of the most important economic challenges for Malaysia — to be flexible, competitive, reforming and open. Growing the pie should be a continuous process.

What we sorely lack is confidence in ourselves. Why can’t we be as productive, as aggressive and as ingenious as other countries? We can, of course. We have the talent, resources and much more to take advantage of the undeniable changes that are transforming international trade.

In recent decades, other countries have outperformed us. This is more than an embarrassment. It is a threat to our sovereignty, that is, our ability to deliver the kind of future that Malaysians have come to expect.

Also, should we be content to conclude FTAs with Asian countries only — Japan and Pakistan, for example? Should we not be interested in concluding one with the world’s largest economy, US$14 trillion(RM46 trillion)?

Our trade with the US is an extremely important component of our economy.
The US is also an important source of technology, investment, education and much more.

We must, above all, decide what we want to be as the world moves on.

Otherwise, we will remain trapped in the past while others head into the future. There is a temptation for some to believe that we can growwithout changing. This is a dangerous illusion.

The only way we can look after ourselves is to become highly competitive.

This can best be achieved by building upon interests that we share with other countries, including those in Asia, the European Union and the US as well as our interest in a more open global trading system through the WTO process.

That’s why Malaysia must pursue Musfta in earnest right into 2009.

Datuk Deva Mohd Ridzam is a former ambassador to the European Union, Belgium, Luxembourg and Cambodia.