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FACULTY OF SCIENCE AND NATURAL RESOURCES

SJ30203 INTERNATIONAL ECONOMY


SEMESTER 2 2016/2017

INDIVIDUAL ASSIGNMENT

Prepared For

DR. RAFIQ IDRIS

Prepared By
HOO LYNN BS14110346

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Table of Contents

Trans-Pacific Partnership Agreement (TPPA) .................................................................... 2

Regional Comprehensive Economic Partnership (RCEP) ...................................................... 4

Conclusion ..................................................................................................................... 5

References ..................................................................................................................... 6

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TRANS-PACIFIC PARTNERSHIP AGREEMENT (TPPA)
The Trans-Pacific Partnership Agreement (TPPA) is an international trade agreement
signed between 11 countries, namely Australia, Brunei, Canada, Chile, Japan, Malaysia,
Mexico, New Zealand, Peru, Singapore, and Vietnam. Under the Trump administration,
The United State of America was pulled out of the partnership on 23 rd January 2017,
making good on a pledge to scrap a del he denounced as a “job killer” and a “rape” of
US interests (Channel News Asia, 2017). The former Obama administration claimed that
the agreement aimed to promote economic growth, support the creation and retention
of jobs, enhance innovation, productivity and competitiveness, raise living standards,
reduce poverty in the signatories countries, and promote transparency, good governance,
and enhanced labour and environmental protections (USTR, 2015). The Prime Minister
of Australia, Malcolm Turnbull, calls it a “gigantic foundation stone for our future
prosperity” as TPP contains measures to lower both non-tariff and tariff barriers to trade
(The Guardian, 2015). However, Trump address that not only will the TPP undermine US
economy, but it will undermine US independence (The Atlantic Daily, 2016) . Thus, Trump
called off the participation of USA in TPPA tagging it as a horrible deal (BBC, 2017).

The advantages or favour of joining TPPA include creating more jobs and
prosperity for the participants. TPPA is estimated to increase exports by $305 billion per
year by 2025, which is 11.9% higher by year 2025. Malaysia's Gross Domestic Product
(GDP) is projected to increase by US$107bil (RM444bil) to US$211bil (RM876bil) over
2018-2027, which would raise GDP growth between 0.6 and 1.15% in 2027 (The Star,
2016). The Malaysian International Chamber of Commerce (MICC) believes that for
Malaysia to expand its market access opportunities and enhance its competitiveness,
TPPA is important. Also through TPPA, consumer benefits from trade liberalization. A key
feature of FTAs is tariff elimination which allows the consumers to enjoy wider range of
imported goods and services, with better quality and at competitive prices. The
manufacture are also able to source cheaper inputs as a results of liberalization (MITI
FTA, 2016).

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Moreover, investments is projected to rise by US$136bil (RM565bil) to US$239bil
(RM993bil) over 2018-2027 - attributable largely to higher investment growth in textiles,
construction and distributive trade (The Star, 2016). This is because TPPA will build
investor confidence and attract foreign investment as well as build capacity through free-
trade agreements (FTA) which has an important role global integration. Concurrently,
foreign companies in non-TPPA countries are also showing interest in exploring Malaysia
as a base for their operations to enjoy the benefits of the TPPA. The combination of
greater market access for Malaysian products and services under the TPPA and the
continued inflow of foreign investments will create a powerful catalyst which will drive
Malaysia’s economic transformation agenda (MITI FTA, 2016).

However, joining TPPA does not means it’s all good; there’s potential negative
impacts on Malaysia as well. For instance, Intellectual Property Rights (IPR) raises many
concerns. One of the main concerns on IPR revolves around access to affordable medicine
and healthcare as well as longer protection term which might delay manufacturing of
generic drugs (MITI FTA, 2016). Approximately 80% of the medications consumed by
Malaysians are generic medicines. Generic medicines are medicines that are cheaper than
the original patented medicines but does almost the same thing as it (Manaf, Koshy, &
Ibrahim, 2014). The introduce of tighter rules for copyright protecting intellectual
properties by TPPA could means monopoly for pharmaceutical companies that are
currently holding drugs. As a result, drug prices will be locked in high, and unintentionally
block cheaper, generic versions from entering the market. This will make access to
lifesaving medication much harder, denying consumers access to HIV/AIDS, tuberculosis
and cancer drugs could be deadly. There is also concern that TPPA will boosts corporate
power as foreign companies can legally attack domestic laws and regulations. As TPPA
forces equal rules on unequal partners. Both the rich and industrialized countries
(Australia, Canada, Japan, New Zealand and Singapore) and the other remaining
developing countries are subjected to the same tax and financial policies, together with
low levels of trade regulations. The local producers and farmers may lose their
competitive advantages with the tariff-free imports from other TPP countries.

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REGIONAL COMPREHENSIVE ECONOMIC PARTNERSHIP (RCEP)
During the 21st ASEAN Summit in Phnom Penh, Cambodia in November 2012, the
Regional Comprehensive Economic Partnership (RCEP) negotiation was launched. It is a
proposed free trade agreement (FTA) between 16 countries, namely ten member of the
ASEAN and the six states with which ASEAN has existing free trade agreements: Australia,
China, India, Japan, South Korea and New Zealand. RCEP is viewed as an alternative to
the Trans-Pacific Partnership (TPP), a proposed trade agreement which includes several
Asian and American nations but excludes China and India (CNBC, 2015). In year 2015,
the total trade of RCEP was significant at US$11.9 trillion and total FDI inflows to the 16
countries amounting to US$329.6 billion. While in 2016, RCEP is set to cover 30% of the
world’s economy and a market of 3.4 billion people with combined GDP of US$21.4 trillion.
(TheJakartaPost, 2016).

RCEP aims to establish deeper economic cooperation between ASEAN and its
regional trading partners, where modern and wide-ranging trade agreement including
goods, services, investment, economic and technical cooperation were to be achieve
together with settling disputes (CNBC, 2015). 10 of the 16 countries (China, Singapore,
Japan, Thailand, Indonesia, Korea, India Australia, Viet Nam and the Philippines) are
Malaysia’s top 16 trading partners. In year 2016, 61.7% or US$223.07 billion of Malaysia’s
trade is within RCEP countries. 60.6% of Malaysia’s exports are destined for these
countries and similarly these countries supply 63.3% of Malaysia’s import requirements
(MITI FTA, 2016). Moreover, India, China, Indonesia, Cambodia, Myanmar, Viet Nam,
Philippines and Thailand are among the fastest rising economies in the world. India is
expected to overtake the U.S. to become the 2nd largest economy in the world by year
2050. Since Malaysia is already an open economy, greater trade openness and reduced
barriers within the 16 participating countries will provide additional benefits for Malaysia.
For instance, greater market access for exports of goods and services, more opportunities
for Malaysian companies to enhance their participation in the regional and global supply
value chain and attractive base for Malaysian companies cross-border investments.
Malaysian company’s investments in the region is expected to increase as these countries

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open up their economy. The goal is also to see more and more Malaysian companies
expanding their base to these neighboring countries. In 2016, Malaysia trade to the RCEP
parties covers 62% (USD221.7 billion) of the nation's global trade (MITI FTA, 2016).

However, as all things has its weakness, the same goes for RCEP. RCEP deal lacks
the protections for labor, human rights and the environment set by the TPP. For example,
the wide diversity in economic size and development stages among negotiating members.
Less developed members are concerned over the social costs of opening up to more
developed members and the risks of falling into low-wage trap of development. Small
economies are also concerned over being overwhelmed by low-cost imports from the
giant economies of China and India. RCEP prohibits the internet transmissions of
broadcast, similar to the Broadcast Treaty that would inhibit the free use of public domain
material. It also suspends internet accounts of repeated trespassers, and the censorship
boards that are considered to damage the rational use of copyrighted works. Moreover,
RCEP found it necessary to confine the availability of copyright limitations and exceptions.
The overall impact of this is that the treatment of limitations and exceptions in RCEP
begins from a very negative starting point, although the same narrow three-step test is
also found in the Berne and TRIPS conventions.

CONCLUSION
As many critics believe that TPPA is a measure by the US to secure its position as the
world’s economy leader against the rapid emerging economy control of China. While,
RCEP is the counter attack of China against TPPA. Thus Malaysia should stride with much
caution so that it is not caught between the economy power struggle of these two
economy giants. As for whether should Malaysia sign TPPA or RCEP or both? All this
depends on whether does the benefit outweighs the pest. In order to do so, more
research should be conducted to reckon the pro and cons of the agreements. More studies
should be done to analyse each aspect of both agreements especially on RCEP as
currently there’s very little of it.

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REFERENCES
BBC .2017. Retrieved from http://www.bbc.com: http://www.bbc.com/news/business-32498715
Channel News Asia. (24 January, 2017). Retrieved from Trump orders US withdrawal from trans-
Pacific trade deal: http://www.channelnewsasia.com/news/business/international/trump-
orders-us-withdrawal-from-trans-pacific-trade-deal/3461188.html
CNBC. 2015. Retrieved from http://www.cnbc.com: http://www.cnbc.com/2015/10/14/tpp-deal-
pressures-rcep-trade-talks-in-busan-china-keen-for-progress.html
MITI FTA. 2016. Retrieved from http://fta.miti.gov.my/:
http://fta.miti.gov.my/index.php/pages/view/246
The Atlantic Daily. 2016. Retrieved from https://www.theatlantic.com:
https://www.theatlantic.com/business/archive/2016/11/tpps-death-wont-help-the-
american-middle-class/507683/
The Guardian. 2015. Retrieved from https://www.theguardian.com:
https://www.theguardian.com/business/2015/oct/06/australia-and-the-trans-pacific-
partnership-what-we-do-and-dont-know
The Star. 2016. Retrieved from www.thestar.com.my:
http://www.thestar.com.my/news/nation/2016/02/04/how-malaysia-will-benefit-from-
tppa-trade-deal/
TheJakartaPost. 2016. Retrieved from http://www.thejakartapost.com/news/2016/12/07/rcep-
talks-speed-up-amid-tpp-failure.html
USTR. 2015. Retrieved from Summary of the Trans-Pacific Partnership Agreement:
https://ustr.gov/about-us/policy-offices/press-office/press-
releases/2015/october/summary-trans-pacific-partnership

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