Employment Act amendments should not justify CPTPPA ratification


The amendments to the Employment Act, 1955 recently presented in Parliament by the Human Resources Minister, disturbingly credits the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) as the key purpose on why these amendments were done, so that Malaysia could ratify the CPTPP. The ‘Huraian’ section of the Pindaan Akta Kerja (Pindaan) 2021 reads as follows;

Rang Undang-undang ini bertujuan untuk meminda Akta Kerja 1955 (“Akta 265”) bagi mematuhi standard dan amalan antarabangsa sebagaimana yang dikehendaki oleh Perjanjian Perkongsian Trans-Pasifik, Pelan Konsistensi Buruh Malaysia – Amerika Syarikat dan Pertubuhan Antarabangsa. Tujuan pindaan ini antara lain, adalah untuk mengadakan peruntukan bagi perlindungan terhadap diskriminisasi dan buruh paksa, dan untuk mengadakan peruntukkan bagi faedah bersalin

We the undersigned organizations unequivocally assert that any amendments to our labour laws to protect and enhance the right of our workers can be done by the government of Malaysia as a sovereign nation without the CPTPP ratification. The bill implies that the amendments were done solely as a requirement of the trade agreement. When the US led the Transpacific Partnership Agreement (TPPA) negotiations that concluded in 2015, it cited human rights violations and ranked Malaysia into tier three of the US Annual Trafficking in Persons report in 2014. Later the then Secretary of State John Kerry, was criticized for upgrading Malaysia from tier three to tier two watch list so that Malaysia could continue talks with the US in the TPPA negotiations. He subsequently clarified that the US would work with the then Najib Government, to ensure that Malaysia addresses labour rights violations and amends its laws accordingly. As a result of that commitment, Malaysia signed the TPPA together with side letters between Malaysia and the US, laying out its commitments to amend our labour laws.

The amendments to the Employment Act will see the introduction of anti-discrimination clauses, stricter control on employment of foreign workers and heavier penalties to fight forced labour, increase in maternity leave from 60 to 90 days inclusive of a 3-day paternity leave, and working hours per week reduced from 48 hours to 45 hours. Many of these demands have long been raised by women’s rights and labour activists here locally. Even though we welcome the proposed amendments to the Employment Act, Putrajaya should not mislead the rakyat that these amendments were only possible because of the CPTPP agreement. It is unacceptable to justify the adverse effects of the trade agreement by sugar coating the 30 over chapters in this agreement with these pro-labour amendments.

We are deeply concerned that if Putrajaya proceeds to ratify the CPTPP, the adverse effects of the agreement will outweigh any benefits to the workers from the Employment Act amendments. Workers can only enjoy their rights if they have a job. Unfortunately workers in the manufacturing sectors of developing countries in particular have seen their wages fall, their jobs disappear and their unions suppressed when such trade agreements come into force. Trade liberalization in developing countries have only proven to destroy local small and medium size industries that are simply not ready to take on the effects of globalization.

A report by UK’s War on Want “Trading away our Jobs” notes the following:

Analysis of the impact of trade liberalization in 18 countries of Latin America and the

Caribbean from 1970 to 1996 reveals the negative effects of tariff cuts on both overall and manufacturing employment.

For example, the cut in average tariffs from 32% in 1980-85 to 14% in 1991-95 caused a reduction in manufacturing employment of up to 5.8% across Latin America. During two decades of freer international trade and increased exposure to international capital, overall unemployment rates in the region increased.

In the 1990s, unemployment in Latin America increased from 7.6 million to 18.1 million, from 4.6% to 8.6% of the labour force, with almost all this increase related to the loss of existing jobs. Unemployment climbed throughout the decade in Argentina, Brazil and Colombia, and an upward trend was also observed in Bolivia, Chile, Ecuador, Paraguay, Uruguay and Venezuela.

Likewise it is forecasted that if Malaysia ratifies the CPTPP, it will lead to a much greater increase of imports than export. Malaysia would have to remove its tariffs on imports from CPTPP countries by 100%. The tariff elimination will make the affected imports cheaper, increasing their entry into the Malaysian market, which could reduce the sales of local products that compete with these imports. As a result of imports increasing by more than exports, the effect of the CPTPP is estimated to reduce Malaysia’s trade balance by US$2.4 billion per year (RM9.6 billion). This will have a negative impact on the job market1.

The enhancement of the labour laws, namely the Industrial Relations Act, Employment Act and the Trade Union Act would be overwritten by the elaborate powers given to investors and foreign capital in the CPTPP. Various chapters including the investment chapter have many provisions that could stifle the enforcement of the workers’ rights envisaged in these amendments. The investment chapter specifically gives unprecedented powers to firms of the other CPTPP countries to challenge Malaysia should she conduct her affairs in a manner that is seen to impact the value of the investment of the investor. The rights in the investment chapter, trump any labour provisions in the CPTPP as the latter are not enforceable by workers the way foreign investors are able to enforce the investment chapter.

For example, the CPTPP has provisions for “fair and equitable treatment”, national treatment for investors and the ability for investors to challenge government policies in international private arbitration tribunals through the Investor-to-State Dispute Settlement mechanism. These mean that Malaysia cannot change or improve its policies and regulations (even though it is in the interest of workers) if it is to be interpreted as expropriating the investors’ profits, including future expected profits. An increase in minimum wage will be construed as affecting the investors’ cost of doing business and expropriating their future profits. Thus, the investor may challenge the decision in an international arbitration court.

The fear of being sued by investors, will have a chilling effect on policy makers and force them to hold back on any attempt to increase minimum wage in the future. Such was the case when the French company Veolia sued Egypt. Veolia had signed a contract with the Governorate of Alexandria in 2000, to provide waste management services for 15 years. In 2012 Veolia took action against Egypt under the Bilateral Investment Agreement between France and Egypt, which allows for a French investor to sue the state if they can claim that a change in law causes damage to its investment. In this case, part of the damage alleged was the increase in minimum wage following a change in the labour law.

This very same investment chapter in fact restricts the ability of the government to require that any foreign investment:

  • use domestic content (local inputs of goods, services or labour) in its processes;
  • buy local products or give a preference to Malaysian products or buy products from Malaysians;
  • impose any requirements to use local technology.

Given this, the nature of investment provided for under the CPTPP will not necessarily result in any enhancement of economic growth in the way of financing new infrastructure, the creation of jobs for locals, resource transfers or the exchanges of knowledge, technologies, and skills.

Thus, we reiterate that even though the pro-labour amendments are welcomed but it should in no way justify support for Putrajaya to proceed to ratify the CPTPP. The Government should cease its focus on the trade agreement ratification, and exercise its power as a sovereign nation to formulate laws that are beneficial to the rakyat, irrespective if there is a trade agreement to comply with or not.

This statement is endorsed by

  1. IDRIS Association
  2. Third World Network
  3. Persatuan Sahabat Wanita
  4. Parti Sosialis Malaysia.

1 https://www.researchgate.net/publication/332345192_CPTPP_Implications_for_Malaysia’s_Merchandise_Trade_Balance

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