In its efforts to sell its bilateral free trade agreements (FTA) with other nations to the public, the government seems to have thrown caution to the wind, said the Consumers Association of Penang (CAP).

While the Ninth Malaysia Plan (9MP) sets out policy plans and initiatives developed ostensibly in the national interest, several issues borne out by the FTA negotiations with the Unites States suggest otherwise, said CAP legal advisor Meenakshi Raman.

She said US insistence that Malaysia's tariffs on a number of items be reduced or eliminated may impact negatively on Malaysians, especially those from the lower-income bracket.

She said this in a paper presented in a recently concluded two-day seminar on the 9MP organised last week in Petaling Jaya by the Asian Strategy and Leadership Institute.

While up to 30 percent of the government's revenue are derived from import tariffs, the US is Malaysia's second-largest source of imports.

"The Malaysian government may have less money to spend on public services, including public housing, education, public transport, water, crime prevention and infrastructure if its tariffs on US imports have to fall to zero percent as the US demands," said Meenakshi.

"Hence, a key question is how much revenue will Malaysia lose if we eliminate tariffs on US imports and the implications of this for our national budget and expenditure."

More particularly, the US government requires Malaysia's 40 percent tariffs on rice to be eliminated, which may lead to the dumping of US rice at margins 25 percent below the cost of production.

"We must note that even Thai rice farmers who generally bear lower production costs than Malaysia, are worried that they can't compete in their US FTA negotiations," she said.

Knock-on effects

Meenakshi also said US' demands pertaining to intellectual property rights such as those on copyright may result in increasing the cost of education.

Similarly, she said, "access to affordable generic medicines" may be impaired "due to longer and higher patent protection for drugs produced by US pharmaceutical companies".

The US government has set an ambitious timetable for the FTA to be signed, with negotiations to begin here early next month and to be completed by year's end.

Based on other FTA experiences, Meenakshi said the prospects are high of penalties for actions seen as reducing the value of foreign investments in the country.

"The investment chapter of Malaysia's existing FTA (with Japan) requires the Malaysian government to pay compensation, including interest, for any measure the government takes that reduces the value of Japanese investment," she said.

For example, investors have made US$28 billion in claims against the three governments under the North American FTA for measures "such as banning a chemical because it was contaminating the groundwater".

"Malaysia is about to start FTA negotiations with is largest investor, the US, where it will have to provide similar protection to its investors," she said.