What are BITs, FTAs and the TPPA?

ARCHIVES 2013

By admin-s On Jul 2, 2013

Malaysia should learn from Peru’s experience and be most cautious about signing any BITs or FTAs that a company like Lynas may later use against Malaysia.

Lim Mah Hui, FMT

On June 14, 2012, Malaysiakini reported that Malay Economic Action Council representatives walked out of a meeting with the Ministry of International Trade and Industry (MITI) because the latter was unwilling to disclose details of their negotiations on the TPPA (Trans-Pacific Partnership Agreement).

MITI has been engaging in negotiations on the TPPA for many months and is inclined to sign the agreement. To a lay person, TPPA, BITs and FTAs are dry and arcane abbreviations that do not interest us. Yet they have serious impact on our lives. So what are they and why should we bother about them?

BITs stand for Bilateral Investment Treaties, FTAs stand for Free Trade Agreements, and TPPA stands for a specific FTA called the Trans-Pacific Partnership Agreement that is currently under negotiation among a number of Pacific Rim countries including Malaysia. All these are bilateral or regional agreements signed between countries.

The US has been pushing hard for countries to sign such agreements with it. The current furore over the TPPA arises from a fear that these treaties and agreements may contain provisions on such issues as investment and intellectual property rights that could have adverse consequences on a signatory country’s national policy-making capacity. For example, the tighter and more monopolistic intellectual property regimes imposed by such agreements could prevent Malaysia from producing cheaper generic versions of essential medicines patented by the major pharmaceutical corporations.

In this article, however, I shall focus only on the investment aspects of these agreements.

In the heyday of economic and trade liberalization, many countries signed bilateral investment and trade agreements with each other to promote trade and investments. There are over 3,000 BITs in existence.

The purpose of BITs (as well as the investment chapters in FTAs) is to promote and protect the investments that one country has in another country. However, it is now recognized that the first generation BITs are one-sided; they protect the interests of private investors at the expense of public interests. Many governments that have signed such treaties, without understanding the legal implications, are now paying for the mistakes.