Updates: Thailand's Free Trade Agreements with Asian Countries
Resource: RAND (www.rand.org/)
Notes: Signing dates are for first agreemets (usually framework agreements). Effetive dates are the first tariff reductions (under initial or subsequent agreements), not date of full implementation.
The Thai government has been looking to pass much-awaited trade agreements with South Korea and India. Analysts said the political turbulence in Thailand has the potential to disrupt the FTA timetable. However, amidst the chaos, the Thai Parliament managed to approve the government’s plan to accept the Asean-Japan Comprehensive Economic Partnership (AJCEP) agreement, or Asean-Japan Free Trade Agreement.
Trade Agreement with India
The Free Trade Agreement between India and Thailand is expected to add $12 billion to India-Asean bilateral trade by 2010. The talks started during the previous National Democratic Alliance (NDA) regime and both countries signed a framework agreement on the FTA in late 2003.
Thailand’s political troubles are still unresolved and officials at the Indian Federal Ministry of Commerce and Industry said the FTA was likely to miss the target effective date of Jan 1, 2009, reported the Bangkok Post. The ambitious trade agreement is seeking to abolish customs tariffs of around 80% of goods to zero, including raw materials like iron ore as well as aluminum, plastic and certain kinds of machinery. During the course of talks in recent weeks, many contentious issues cropped up, including the content of the negative list on which there would be no duty cut, as well as duty cuts on palm oil, tea and coffee, among others. Other operational issues include preparation of the list of items for reduction out of a total of over 5,000. Some will not see any cut, while others will see partial slashing of duty. But a majority of the items will see complete elimination of duty.
Trade Agreement with South Korea
Ambassador Chung Hee-moon, the Ambassador of South Korea to Thailand, said in a recent interview with the Bangkok Post that Korea is one of the top five economies in Asia and in today’s tough market conditions, it is necessary for Korea to play a vital role in showing that it is an integral part of the region. This includes the trade relationship and progress in the Trade Agreement with Thailand. Despite the short-term stumbling blocks due to Thailand's political chaos, the Ambassador was positive that this year's two-way trade is expected to reach $10 billion as in the first nine months alone the figure passed $8 billion despite the economic crisis.
Thailand and South Korea have had diplomatic ties for 50 years and trade has been rising at a rapid pace. Two-way trade between Thailand and South Korea was worth $8.2 billion in 2007 compared with $7.8 billion in 2006. Thailand’s exports to Korea were worth $2.9 billion last year against imports worth $5.3 billion.
Most of Thailand’s exports to Korea were focused on
Imports were dominated by
The Ambassador also mentioned that the one area that has been thriving is tourism, as both Thais and their Korean counterparts are fond of each others’ countries. More than one million Koreans visit Thailand each year and of these 50% of newlywed Koreans travel to Thailand for honeymoons, mostly to Phuket, Samui or other venues. Thais are also fascinated about Korean pop culture and the younger generation and that encourages them to visit the country.
Trade Agreement with Japan
Japan is the second-largest export destination for Thailand after the United States. Last year, Thai shipments destined to Japan were valued at 625 billion baht. Japan also tops the list of foreign investors in Thailand. The two countries have signed the Japan-Thailand Economic Partnership Agreement. Asean, of which Thailand is a member, has a free trade agreement with Japan.
Thai exports to Japan are mainly food and consumer products. Thus, the Thai Deputy Prime Minister Olarn Chaipravat, in charge of economic affairs, told the meeting of the Japan-Thailand Joint Trade and Economic Committee in October 2008 that he expected those items would feel minimal impacts from the slowdown in the Japanese economy. Most Japanese operations in Thailand are in high-tech industries and consequently, the recession in Japan was unlikely to lead to lay-offs, he added.
On the progress of other trade agreements: The Thai Parliament in early October 2008 approved the government’s plan to accept the Asean-Japan Comprehensive Economic Partnership (AJCEP) agreement, or Asean-Japan Free Trade Agreement.
Trade Agreement with China
Recently a study by the Thailand Development Research Institute (TDRI), commissioned by the Office of Industrial Economics, showed that Chinese imports under the Asean-China free trade agreement (ACFTA) with certificates of origin totalled just $251 million, or 1.76% of Thailand’s total imports from China. The figures suggested that Thai companies did not take advantage of the opportunity to import raw materials at preferential tariffs from China which covering both farm and industrial goods. The trade pact took effect between the 10-member Asean bloc and China in July 2005, covering both farm and industrial goods. The agreement, covering an economic region with nearly 1.8 billion consumers, represents the largest free-trade agreement area in terms of population, with annual trade estimated at $1.23 trillion.
In comparison, the figures of importation are still relatively small, accounting for just 12.3% of Thailand’s total exports to China. One Commerce Ministry official commented with the Bangkok Post that the ACFTA was still quite new for many Thai businesses. In any case, tariffs will continue to decline in 2010 in line with the plan.
Read more about ASEAN Free Trade Agreement on our website:
- Free Trade Agreement with Asia