This article first appeared in The Edge Financial Daily, on January 12, 2016.

KUALA LUMPUR: Former senior United Nations (UN) official Prof Dr Jomo Kwame Sundaram said the Trans Pacific Partnership (TPP) agreement will provide limited net economic benefits to its member countries, and said the Malaysian Parliament should reject the trade pact.

The prominent economist said the Peterson Institute projections, which suggested modest additional gross domestic product (GDP) growth after 10 years, used a controversial computable general equilibrium (CGE) method.

He said the UN Global Policy Model (GPM) would be more realistic, as it incorporates the impact of the agreement on employment.

“Using GPM projections of TPP trade impacts, it offers more realistic macroeconomic projections, considering changes in employment and inequality, and their impacts on economic growth.

“Benefits to aggregate demand and economic growth are even more limited than the Peterson Institute’s already modest claims and negative for some countries as the TPP will likely lead to employment losses and increased inequality,” he said.

He explained that the GPM found that the TPP will generate net GDP losses in some countries, but not Malaysia, and that economic gains will be negligible for other participating countries.

Jomo said developed countries will see less than 1% extra growth over 10 years, while developing countries will see less than 3% additional economic growth.

Besides that, he said the TPP will lead to employment losses in all countries, totalling 771,000 lost jobs, greater inequality with a lower labour share of national income, and losses in GDP and employment in non-TPP countries.

“These projections are largely due to two changes to the TPP. First, production for export will partly replace production for domestic markets, with negative consequences, as exports are less labour intensive and use more imported inputs than production for domestic markets.

“Second, businesses in participating countries will strive to become more competitive by cutting labour costs, negatively affecting income distribution, thus further weakening domestic demand,” he said.

Jomo was speaking during a panel discussion at the 2016 TPP Forum yesterday, organised by the Malaysian Economic Association and the Faculty of Economics & Administration, Universiti Malaya.

Meanwhile, Ministry of International Trade and Industry (Miti) deputy secretary-general Datuk J Jayasiri said it is clear that Malaysia needs to be a part of the TPP, as it opens up the market.

“We look at it this way. Any market opening measures mean exporters will have opportunities to enter new markets. If we are out of the TPP and our competitors are in the TPP and they get preferential treatment, it means that our exporters will be disadvantaged. 

“It is very clear that we need to be in the TPP, to enjoy the preferential treatment, especially for these four countries (United States, Canada, Mexico and Peru) which we do not have preferential access to,” he said.

Federation of Malaysian Manufacturers president Datuk Seri Saw Choo Boon said the TPP would make Malaysia more competitive, noting the threat of Vietnam which is opening up its economy.

“The TPP will open up Canada to us, and we are negotiating a free trade agreement (FTA) with the European Union (EU). Some of the issues are similar to TPP’s issues.

“Vietnam, on the other hand, has already concluded negotiations with the EU, and this will be implemented next year. Vietnam being in the TPP and in the EU FTA will mean that it will be a serious competitor for Malaysia.

With Vietnam’s more liberal stance, he said the possibility of Malaysian exporting companies moving to the former cannot be discounted.

“We believe that we will not be worse off with the TPP. Even if it’s just a 1% or 2% increase in GDP, we need every little increase to help our economy move forward. We need to be a global player,” said Saw.

According to the Miti, the trade pact will be tabled in Parliament on Jan 27 and Dewan Negara on Jan 28 for voting. The ministry said the TPP is expected to be signed in February, with or without Malaysia’s participation.