Securing free trade agreements: Enhanced international trade depends on political clarity

While Thailand is pushing ahead with efforts to expand its network of free trade agreements (FTAs), the lack of a permanent government means that approval and implementation of any deals could be delayed. Thai officials have played down concerns that the political troubles, which may not see a new government installed until at least June 2014, will slow the formalising of a series of bilateral and multilateral FTAs, saying that progress is being made in talks to liberalise trade ties and open up markets for Thai goods and services. On March 11, 2014, Srirat Rastapana, permanent secretary at the Commerce Ministry, said progress on the new FTAs was continuing, aided by all of Thailand’s political parties supporting moves to liberalise trade. Despite still waiting for a new government to be formed, the state agencies involved in advancing FTA negotiations would continue their work, she said. “Although the political problem remains, we are still functioning. All political parties have a certain direction, and all of them aim to promote the country’s economy,” said Srirat. Negotiations on both the Trans-Pacific Partnership – which Thailand has yet to formally sign on for – and a Thailand-EU FTA should be completed in 2015, along with finalising the trade requirements for the launch of the ASEAN Economic Community, she added.

Two-Way Trade Deals 

Parallel to these broad-spectrum FTAs, Thailand has a number of bilateral FTAs in the pipeline, which will complement the six trade deals it already has with Japan, Australia, New Zealand, Peru, China and Chile. In early March 2014, Salman Khurshid, India’s minister of external affairs, said an FTA between Thailand and India was close to being finalised, with an agreement to be signed once a new Thai government is in office. According to Indian forecasts, trade and investment between the two countries could grow by up to 40% a year once the FTA is in place, while Thai officials have said bilateral trade volumes may reach $16bn by 2015, nearly double the 2012 figure. Meanwhile, Thailand and Pakistan have held extended informal talks towards lowering trade barriers between the two countries. In 2013, the two governments signed memoranda of understanding to set up a joint trade committee and a joint business council, measures aimed at helping boost bilateral trade, which currently exceeds $1bn per year.

Much Anticipation

Though some in Thailand have raised concerns that the liberalisation of trade could ultimately see the domestic economy swamped by imports and foreign investors taking up a substantial stake in local businesses, officials have been at pains to respond to such concerns. In late 2013, Jintana Chaiyawonnagal, deputy director-general of the Trade Negotiations Department, said of the forthcoming pact with India that Thai enterprises should not be worried about the liberalisation of foreign investment rules between the two countries. Local companies have a strong competitive edge at home, while Thai businesses are competent in the areas of the Indian economy to be opened up, including the tourism, hotel, restaurant, meeting, entertainment, legal, construction and hospital segments, she said. Although some local businesses may benefit from a short-term postponement of the lowering of trade barriers, the overriding concern appears to be that continued political uncertainty will delay improved access to foreign markets.

“If the political situation is prolonged, the country’s competitiveness in terms of product prices will be affected, since we cannot make any new FTA deals while there is an absence of a permanent government,” Nopporn Thepsitthar, chairman of the Thai National Shippers’ Council, told the local media in March 2014.

Caretaker Prime Minister Yingluck Shinawatra also weighed in on the matter of the interruption to FTA negotiations between Thailand and the EU, warning that same month that extended delays could harm the national economy. Brussels is set to remove Thailand from the list of countries that benefits from its Generalised System of Preferences (GSP), she said, noting that an FTA is Thailand’s “best option” to penetrate the EU market once the preferential tariffs come to an end.