Tuesday, January 26, 2016

TPPA and Jomo: The Academic Debate

Recently, KS Jomo has been in the headlines on his criticisms about the TPPA (e.g. here), or more specifically, the models that showed that the TPPA would be a net benefit to Malaysia (however marginal).

Some of his concerns I consider absolutely legitimate – assuming full employment and ignoring the impact on labour utilisation, labour income and inequality undermines the net-benefit conclusion of the CGE models most have used to analyse the TPPA. I also think that his call for the ongoing debate on the TPPA to encompass more than trade and include the socio-economic aspects should be supported.

Having said that, the GPAM model used by Prof Jomo and his colleagues has significant weaknesses too. Not least because the claim that Malaysia would see job losses, a reduction in the labour share of income, and a negative impact on GDP growth don’t stand up to much scrutiny.

I haven’t as yet tracked down the details of the GPAM model, but the paper analysing the TPPA (link here) treats Malaysia as part of a bloc that includes Singapore, Vietnam and Brunei as a single entity. How you can make any definite conclusions on a single country based on aggregated regional data is beyond me, especially since the raw data in the paper shows the labour income share dropping (pg 16; for the bloc as a whole), whereas Malaysia over the past decade and a half has seen the labour share of income stable and then rising.

I’m also really surprised that Jomo neglects the huge, huge impact that the TPPA will have on Malaysia’s labour laws, particularly in terms of freedom of association. For decades, trade unions have been highly restricted in how they can operate and to what degree (MTUC for example is registered as an NGO, and cannot operate as a trade union). That will change with the TPPA, and the resulting increase in labour bargaining power should, ceteris paribus, act to increase the labour share of income. That’s an institutional change that few if any models, trade or otherwise, incorporate in their framework.

For a more thorough critique of the GPAM model, try here. Prof Jamal notes the same problem as I did, and then some.

On a larger note, and this isn’t confined to the current topic, I wish more people would bother to read the damn academic papers before taking their conclusions at face value. It saves embarrassment in the long run.


  1. Hi Hisham,

    Just wanna ask an oversimplified layman question: in a nutshell, is TPPA bad for uncompetitive corporations and good for consumers?


    1. @Fung

      More or less, though the effect on competition would be pretty muted I think. It will be an evolutionary process, rather than a revolutionary one, thanks in part because of all the carve-outs Malaysia got.

  2. Being an untutored farmer out in the boondocks, I shouldn’t be in this debate but since you spoke about labour in there and welcomed a comprehensive discussion of the treaty I thought I will chime in with a penny farthing of my thoughts and readings:


    Maybe the respected Prof Jomo could be invited to participate given that mine is just a simpleton’s, a salt of the earth type (to be precise), contribution, whose views matter not a jot in the perspective of pro capitalist economists like your good-self (wink wink). You may also want to refer to these:




    plus this ARTICLE: A Wishful Thought: Enforceability and Avoidance of Labor Provisions in Foreign Trade Agreements

    I know that NAFTA maybe superfluous but I reckon Mexico would be a good proxy for Malaysia with its tortillas, tacos and senoritas….hehehehe…Aye….got to run ….my barn just caught fire and the my donkey has bolted its stables….awwww…sh%#

    Warrior 231

    1. @Warrior

      I'll address this if and when I have the time, but I don't think Mexico is a good proxy for Malaysia in this case, given the distance in time. Mexico had very large macroeconomic imbalances when they joined NAFTA and a very different economic structure, and that's not the case here. You might have had a point if we were thinking of joining back in the early 1990s (when we had similar imbalances), but not now.

      Incidentally, I just looked up Mexico's GDP data. In Peso terms, it looks like NAFTA goosed the Mexican economy onto a permanently faster growth path. There's a very noticeable kink in the data series beginning from 1995.