Yang Amat Berhormat Dato Seri Amirudin Bin Shari, Menteri Besar of Selangor,
His Excellency Ouyang Yu Jing, Ambassador of the People’s Republic of China to Malaysia,
Datuk Tan Yew Sing, President of the Malaysian China Chamber of Commerce (MCCC)
Mr Loo Kok Seong, Organizing Chairman of the Malaysia China Entrepreneurs Conference (MCEC)
Mr Han Shengjian, Director General of the Hainan Provincial Bureau of International Economic Development (EDEB)
Distinguished guests, ladies and gentlemen
Selamat pagi and a good morning to all. 大家早上好！
It is indeed my honour to address all of you who are gathered here today in the Kuala Lumpur Convention Center and those who are watching online from China. I am sure we are all looking forward to the day when we can gather in one place together whether in Malaysia or in China to interact face to face. I have very good memories of my official trips to China when I was the Deputy Minister of International Trade and Industry (MITI). In fact, in my 20 months as Deputy Minister, I visited China a total of 6 times – to Nanning, Qinzhou, Xiamen, Nanjing, Shanghai, Beijing, Suzhou, Shenzhen and Guangzhou – which the most of any country I visited. This is testament of the value we place on our trade and investment relationship with China. But for now, we will have to meet virtually, and we have to thank technological innovations that has enabled us to have this hybrid conference today.
I would like to thank Mr Loo Kok Seong for inviting me to share a few thoughts today on the economic impact of Free Trade Agreements (FTAs) such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The importance of the flow of goods and services in the global supply chain has been made more apparent by the COVID19 pandemic. As an example, the disruption in the supply of different products such as semiconductor chips have affected the production of many goods ranging from cars to electronic consumer goods. These disruptions in the supply chain makes even more clear the need to have proper rules and regulations governing free trade in the global economy. At the same time, these disruptions also present a unique opportunity for governments and companies to show concrete examples to the larger public of the benefits of the free movement of goods and services across borders which are facilitated by Free Trade Agreements (FTAs). This is why I have entitled my address today “Communicating and Realizing the Shared Benefits of Free Trade Agreements (FTAs)”.
There are 5 points I would like to make on communicating and realizing the shared benefits of Free Trade Agreements (FTAs). I will refer to the RCEP FTA as a reference point for these shared benefits.
Firstly, the government needs to explain the technical details of FTAs such as RCEP to the business community so that entrepreneurs can use this information to expand their trade in goods and services to existing and new markets overseas. FTAs are very technical in nature and most business people will not have the experience to understand the technical language in these documents. This is why it is important for government officials from the relevant ministries such as the Ministry of International Trade and Industry (MITI) in Malaysia to explain these FTAs in a language that can be easily understood by the business community. For example, one of the key benefits of the RCEP is the simplification of the Rules of Origin (ROO) of manufactured products. This aspect of RCEP means that as long as the contents of a product come from anywhere within the 15 RCEP countries, it can be exported to any of these 15 countries without any changes in the formulation of the product. For example, the ingredients of shampoo that is made in Malaysia can come from Thailand, Japan, and New Zealand and can be exported to China using a common tariff for this product within the RCEP FTA. I am sure that there are other benefits of the RCEP FTA to the business community which is why more briefings need to be conducted by the government to all of you, for example, so that you can increase your understanding of this FTA and find out how you can benefit from it!
Secondly, the business community needs to share best practices among themselves on how to align their business strategies to penetrate existing and new markets based on the interpretation of the different FTA rules and regulations in different countries within the FTA. Even after government ministries like MITI explains the technical details of the RCEP FTA to the business community, it may not be easy to translate this knowledge on paper into actual business practices of penetrating new markets within the FTA countries. This is where associations such as the MCCC can play an effective role. I have seen how many of the members of the MCCC have shared knowledge and best practices among themselves when going into the large and complicated market in China, for example. I am sure that there are also organizations in China that can help the business community there to enter into new markets in the RCEP countries including Malaysia.
Just as how government ministries such as MITI should share technical know-how with the business community, the business community should also share with each other the business know how of aligning your business strategies using the opportunities provided by the RCEP FTA. If there is something good, we should not be afraid to share it so that the overall business pie can grow. This will result in all of us being able to enjoy shared and common prosperity.
Thirdly, the business community needs to find effective and trustworthy partners within the FTA countries so that win-win business initiatives and partnerships can be created to enhance business opportunities. For example, in a large market like China, it would be very risky for many of the SMEs in Malaysia to go into this market alone. It would be much better as a business strategy to look for trustworthy partners in China that can work with Malaysian SMEs to grow the business together in China for Malaysian products and services. Of course, the nature of these kinds of business partnerships can expand to beyond the RCEP countries. For example, I recently heard of a business initiative whereby a Japanese company send its raw wagyu beef to Malaysia to be processed and certified as halal for export into the Middle Eastern market where the JAKIM halal logo is widely recognized and accepted. I encourage all of you here to day to look for such win-win opportunities.
Fourthly, the government and the business community need to showcase how previous FTAs have benefitted the country’s economy in the creation of new jobs, an increase in innovation and healthy competition and the increase in good quality Foreign Direct Investment (FDI). The benefits of FTAs usually take some time before they can be seen and felt in a country’s economy. For example, the China-ASEAN FTA was signed in 2010. But it did not immediately result in a significant increase in trade as well as FDI between China and ASEAN. But now, more than 10 years later, China is the largest or second largest trading partner for most of the countries in ASEAN. Many Chinese companies started to invest in ASEAN over the past 5 years and many more are looking for investment opportunities in ASEAN including and especially Malaysia. Without this public communication on the larger benefits of FTAs which are spread out over an extended period of time, members of the public in countries like Malaysia would now know about and cannot feel the benefits of these FTAs. Without public knowledge of these benefits, the public support for current and future FTAs including for RCEP and CPTPP would also not be very high.
Fifthly, governments need to reassure the public that there are government policies in place to help those who may be negatively affected, in the short term, by FTAs. We cannot deny that there will be some companies and individuals that will lose out from FTAs especially those which cannot compete directly with the products and services from overseas. But if the government can help these affected companies and individuals to transition and upskill to other better business and job opportunities in the medium to long term, these negative effects of FTAs can be reduced significantly. For example, I know of companies in my own constituency which used to produce sport shoes or sneakers but because of global competition, many of them have shifted their business strategy to producing safety shoes for a niche market as well as coming up with their own brands of office shoes for the domestic and export market.
If all these five points which I have presented can be properly implemented, the benefits of FTAs such as RCEP and CPTPP will be felt by all – governments, the business community and also the members of the public.
Here, I want to take the opportunity to share a few thoughts on the CPTPP. The CPTPP represents the future direction of FTAs which are currently and will be negotiated between trading nations and regional entities such as the EU. Future FTAs will not just cover trade in goods and services but encompasses other aspects of economic activity including increasing the standards of transparency and openness on areas such as government procurement; increasing the standards by which workers, especially foreign workers, are being treated by companies and the regulatory environment which these companies operate in; and enhancing the protection of intellectual property especially in the production and trade in the service sector.
These are areas that all trading nations should aim to strengthen within the framework of their domestic laws and regulations. But FTAs such as the CPTPP can help speed up the process of reform within individual countries. In the long run, adherence to better standards in these areas will benefit all of the countries involved. For example, China as a country is leading the charge in terms of patent registration on many innovative products and services. Many Chinese technology companies are among the most innovative in the world and have a lot of Intellectual Property assets to protect. Most people with a smartphone or with young kids would know of TikTok, owned by ByteDance, a Chinese company, even if you don’t use the app yourself. By strengthening such standards using the push from FTAs such as the CPTPP, countries like Malaysia and China will be more competitive and more resilient in the long run.
One final note on the CPTPP – Malaysia should welcome the application by all countries and economies which want to join the CPTPP including China, the United Kingdom, and others who have expressed interest. But Malaysia also has to firstly ratify the CPPTP by amending a number of domestic laws and regulations so that we are in adherence to the rules spelled out in the agreement. MITI and the government of Malaysia must do more to convince the public of the benefits of the CPTPP. If Malaysia does not ratify the CPTPP, it will not be able to have a say in who is able to join the CPTPP and the terms of entry for such countries. This would apply if the United States, for example, were to want to re-join the CPPTP which it left during the start of the Trump presidency back in 2016. It would be in Malaysia’s interest to have a seat at the negotiating table to influence the terms and conditions under which interested countries and economies apply for entry into the CPTPP.