Free Trade Agreement (FTA) Fair Enough?


This year, we are confronted with a serious test to our sovereignty. And the most worrying part is that most Malaysians are not aware of what’s going on.

I was traveling in the northern regions recently and casually asked Pak Haji, a padi farmer and Umno stalwart in his late 50s, if he had heard of the Malaysia-United States Free Trade Agreement (FTA) which is currently being negotiated. He said he had read about it in the Malay newspapers but really didn’t understand what it was all about.

I explained to him that the FTA was a legally binding document between our country and the US which would abolish nearly all tariffs and non-tariff trade barriers, and provide each other preferential access to each other’s market. I was met with a blank expression on his face. He then asked me, “What’s in it for me?”

Good question. I told him that currently we have a 40 per cent tariff on rice imports to protect people like him and to enable us to become almost self-sufficient in rice over the next few years. I explained that was part of the reason why he saw people smuggling rice during his shopping trips to Padang Besar at the Thai border.

He wanted to know what would happen if the US could freely export their rice into Malaysia. I had to tell him that the US and other developed countries had extremely high subsidies on farming and that in some cases it was better to be a cow in Europe than a farmer in sub-Saharan Africa (the average Euro cow gets US$2 — RM7 — a day of subsidy which is more than what half the people in the developing world live on).

His laughter trailed off quickly when I told him that US rice farmers were so heavily subsidized that they are able to sell at 25 per cent below production cost which means that US rice could flood our market and force Pak Haji and 116,000 other padi farmers out of work.

He said surely the government wasn’t going to commit to such an absurd agreement. I couldn’t give him a reply. Although I knew the government doesn’t want to include rice in the market access list for the FTA, the US was pushing hard for its inclusion. It may well be one of the 58 contentious issues which the Minister of International Trade and Industry alluded to when she was asked recently about the status of the talks without actually saying what they were.

That’s just rice. The litany of concerns surrounding this FTA is considerably long. Apart from rice, the agricultural sector as a whole has cause for worry.

Currently our applied tariff for food items range from 10-40 per cent, all of which will be effectively removed under the FTA. This will have a profound effect on the agricultural sector which is experiencing a new lease of life under the Prime Minister’s green revolution.

After Mexico inked the North American Free Trade Agreement (NAFTA) with the US and Canada, at least a third of their farmers were impoverished due to the subsidized US corn that flooded into their market.

The US is notorious for protecting their farmers, and even then not all American farmers benefit since only one per cent of farms (usually the rich, corporate farms) receive almost 25 per cent of subsidies.

And while the whole point of the FTA is reciprocity, in other words what you give me I give you equally, market access for our agricultural products to the US may continue to be stymied notwithstanding the agreement.

Tariffs are not the only way to block imports, and our agro-exporters will continue to confront arbitrary health standards and photon-sanitary conditions designed to protect the American consumer from disease.

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Updated: March 20, 2019 — 9:41 am