Amid stagnant multilateral trade talks under the World Trade
Organisation (WTO) but fast-moving bilateral and regional negotiations,
Thailand is looking at pursuing more free-trade pacts to ensure its
competitiveness and level playing fields for Thai enterprises.
The government has been under
pressure to consider three major pacts: the US-led Trans-Pacific Partnership, a
Thailand-European Union FTA, and a comprehensive Thailand-India FTA. Many
enterprises and academics support pushing ahead with talks, claiming that
market liberalisation will facilitate trade and investment amid a global
economic downturn.
Others, however, have warned
against rushing into joining these pacts for fear of losing competitiveness
with developed nations.
The Nation has reviewed the pros
and cons of these potential FTAs as well as summing up the results of past
trade agreements. Should Thailand join every trade pact to grasp the benefits
of liberalisation amid the stalling of multilateral talks? Or should we slowly
study the possible impacts of such agreements, such as emphasis on intellectual
property (IP) rights and liberalisation of trade in services and investment?
Should we consider extending the negotiation periods to ensure the readiness of
Thai enterprises to compete?
Trans-Pacific partnership
Many Thai enterprises want the
country to join the US-initialised TPP. The pact so far involves nine
countries: the United States, New Zealand, Singapore, Chile, Brunei, Australia,
Peru, Vietnam and Malaysia. Japan, Mexico and Canada have also shown high
interest in joining the agreement. Notably, the US is Thailand's third-largest
trading partner, accounting for 10 per cent of total export value. Thai
enterprises involved in foods, toys, electronics, garments, sugar, jewellery
and ornaments, and footwear support joining the TPP. Exporters share similar
views, saying the agreement would entail tariff cuts and lowering of non-tariff
barriers to services and trade. Thai exports are facing difficulties amid the
slowing economic growth of the US.
Nevertheless, trade experts have
warned that Thailand should think twice about rushing into the TPP, which could
be a bid to get around WTO rules that currently protect developing nations. For
instance, Supachai Panitchpakdi, secretary-general of the United Nations
Conference on Trade and Development (Unctad), warned that the TPP would include
many requirements and standards imposed by the United States, such as labour
rights, that developing countries including Thailand and Vietnam would find it
difficult to commit to. The US could also force governments to privatise
state-owned companies in exchange for market access.
Non-governmental organisations
(NGOs) have also expressed strong concerns on the issue of IP protection, since
the US would want to impose its own standards, including on drug patents.
Although trade with the US is
important and many Thai exporters rely on that market, it seems the country
will play a less critical role due to its slowing growth and the emerging of
Asian economies.
Thailand should carefully study
whether to join the TPP and concentrate on the current regional integration
with other Asia countries under Asean+3 and +6, the so-called Regional
Comprehensive Economic Partnership (RCEP), because it will certainly help
promote the growth of Thailand's trade during the rising of Asia.
Thailand-EU FTA
Thailand should also carefully
consider whether to start negotiating a free-trade agreement with the European
Union, as the two parties have different standards on many trade-related issues
including protection of intellectual property and drug patents.
Will it be worthwhile for
Thailand to participate in overall market liberalisation in exchange for a cut
in export privileges to the EU market? Inevitably, Thailand will definitely
lose benefits under the Generalised System of Preferences of the EU. However,
according to a Commerce Ministry report, trade under the GSP to the EU accounts
for only 2-3 per cent of the total exports from Thailand. The Trade
Negotiations Department reported that the Commerce Ministry had conducted a focus-group
discussion about a Thailand-EU FTA with seven key sectors. The following broad
sectors took part in the consultation: electronics and electrical appliances,
automobiles and auto parts, and steel; fashion goods, including textiles and
garments, jewellery and ornaments, footwear and leather goods; medicines;
banking and finance, tourism and animation; agriculture and foods; alcoholic
beverages; and environmental and plant protection. Most supported negotiating
this FTA since it would ensure tariff cuts after the EU reduces its GSP,
scheduled to take place by 2014.
However, people living with the
Aids virus have called on the government to proceed carefully on free-trade
negotiations with the EU, as its demands for copyright protection could make it
difficult for patients to access cheap medicines. NGOs also worry about easy
access to alcohol and tobacco by Thai youth and other consumers because of
lower tariffs.
Economic experts warn that the
euro crisis could expand across the whole European continent. Thailand and the
other Asean countries, therefore, should strengthen cooperation among
themselves and get rid off non-tariff barriers to promote trade and regional
economic growth.
RCEP
Asean and six leading Asian
economies recently announced the official establishment of the Regional
Comprehensive Economic Partnership, which will be the biggest free-trade market
on the globe. The RCEP will gather up the free-trade agreements between Asean
and the six partner nations - China, Japan, South Korea, India, Australia and
New Zealand - to open up more trade, services and investment among the member
states.
The RCEP countries will commit to
liberalising almost 100 per cent of trade, following the lead of many effective
bilateral free-trade pacts between Asean and its partners. However, there is
still a degree of protection for sensitive goods of some countries such as
rice.
Asean governments and the private
sector envisage the RCEP as paving the way for stimulating the Asian economy
and helping to balance expansion between Eastern and Western countries. The
pact between Thailand and the other 15 countries will also offset the power of
the TPP. The Asean countries and its six RCEP partners together account for 56
per cent or US$255 billion (Bt7.8 trillion) of Thailand's total trade.
The RCEP will also act as an
important stepping stone to achieving the Free-Trade Area of the Asia-Pacific
before 2020.
Thailand-India FTA
The comprehensive Thailand-India
FTA is almost finalised. However, the private sector is concerned about opening
of the professional labour market and an imbalance in benefits from
liberalisation of trade in goods, since India protects much of its market.
Thailand and India formed an FTA
on September 1, 2004, through an early-harvest scheme featuring 84 items coming
under zero tariffs. The two countries want to proceed further with a
comprehensive FTA, but India has offered only 59 items for tariff reductions,
much lower than Thailand’s proposed 150 items.
India wants Thailand to open its
labour market to higher-educated professional workers such as doctors and
engineers, as India has a surplus of such manpower. Critics have warned, for
example, that even with Thailand's stringent requirements for obtaining a local
licence to practise medicine - which include passing a Thai-language exam -
many Indian doctors will be qualified to work in the Kingdom, given the sheer
size of the country's population.
Private enterprises have called
on the Thai government to consider the pact carefully to ensure the most
benefit for the country.
However, a source in the
India-Thai Business Association said liberalisation on professional workers
would not harm Thai workers as has been feared. Indian professionals would
prefer to work in the US or wealthy Middle Eastern countries, as they would
earn more money.
Thailand should consider that
India is the world's second-biggest market in terms of population. Having a
full FTA with India would certainly benefit Thai exports. Since implementing
the early-harvest scheme in 2004, Thai export to India has been boosted by more
than 100 per cent, while Indian shipments to Thailand grew by about 30 per
cent.
Other potential FTAs
Thailand is considering
negotiating FTAs with African countries and with the member states of the Gulf
Cooperation Council, namely Saudi Arabia, Oman, Qatar, Bahrain, the United Arab
Emirates and Kuwait.
Other FTAs that Thailand has
already concluded, and which have helped stimulate Thai export amid the
downward trend of global trading, include those with China, Japan, Peru, Chile,
Asean, Australia, New Zealand, and Chile.
Petchanet
Pratruangkrai
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