Sat, 03 Apr 2004

Free trade pacts irreversible within economic globalization

Pichaya Changsorn and Usanee Mongkolporn, The Nation, Asia News Network, Bangkok

The Thaksin government's drive to forge free trade agreements with major trading partners has garnered support, but also created doubts in the country. The issue became a matter of debate at a seminar organized by Prachachart Turakij.

Prominent economist Virabongsa Ramangkura weighed in on the controversy over the ongoing negotiations for free trade agreements (FTAs) by throwing his support behind the Thaksin government's aggressive deal-making, reasoning that the trend is irreversible and will yield clear economic benefits for Thailand.

Public debate over FTAs was brought to a boil with the recent release of a book titled Thailand-U.S. FTA: Sovereignty Not for Sale by a group of academics led by Thammasat University Prof. Rangsan Thanapornphan. The authors conclude that the negative effects of bilateral free trade will far outweigh the positive ones.

Virabongsa said yesterday that the actual economic impact of FTAs was more positive than was reported in the local media. Virabongsa served as finance minister and chief economic adviser under several previous governments. He said that FTAs tend to be controversial in any country in the world even though the net effect of such deals on the overall economy tend to be positive.

"It's hard to argue against the economic benefits of FTAs. But because of their social and political impacts, FTAs will always be a controversial issue in any country, including such economic powerhouses as the U.S."

The Thaksin administration has moved quickly to forge free trade pacts with eight countries and one regional group, among them economic powers like the U.S., Japan, India, Australia, and China. The government has been criticized by academics, the media and local industry for its rushed approach.

Speaking at a seminar organized by Prachachat Turakij newspaper and the National Institute of Development Administration, Virabongsa said Thailand had more than 10 years of experience with free trade thanks to its pact with ASEAN members. Thailand has proved to be sufficiently competitive, he said.

Also, ASEAN has been negotiating free trade pacts with India, South Korea and Japan, meaning that Thailand will eventually have to enter into free trade arrangements with these countries.

"If we wait for research findings to be released before acting we may never achieve anything. Sometimes we need to use common sense. For me it is as simple as this -- if Thailand, which has 63 [million] people, is entering the door of another house [the U.S.], which has 280 [million] residents, and if each of them has an income 30 times as much as our people, and so all we could do is buy from them more than we can sell, then perhaps we should reconsider the FTA negotiations," said Virabongsa, referring to the Thailand-U.S. FTA.

Virabongsa said that because free trade would come sooner or later, forging FTAs with partners of Thailand's choosing would help the country better prepare for the future.

He said that concluding FTAs could lead to restructuring in the manufacturing and farm sectors and that the government needed to come up with measures to shield industries that are adversely affected.

Ninnart Chaitheerapinyo, vice chairman of Toyota Motor Thailand, said Thailand's automotive sector enjoyed trade surpluses with China and India. India in particular is a little uncomfortable with the strength of the Thai automakers. China is not interested in opening its auto sector.

Australia has just concluded an FTA with Thailand that is expected to be signed in May.

Ninnart said Thailand would likely see its auto exports to Australia grow by more than 10 per cent as a result. In the auto sector alone, Thailand enjoyed a trade surplus with Australia in excess of Bt20 billion last year.

"The main beneficiary should be Thai pickup truck exporters. All of Thailand's major auto companies are already exporting to Australia. For passenger cars, we could export more small cars," he said.

Vibullak Ruamrak, a senior official from the Commerce Ministry, said free trade pacts generally take over 10 years before they are fully implemented, giving local industry time to adjust. FTAs, she said, also have a provision that allows a country to temporarily suspend tariff cuts on certain industries in the event the deal results in an influx of imports, thereby disrupting local industries.

Nipon Surapongrakcharoen, vice chairman of Federation of Thai Industries, said he supported the government's plan to forge ahead with FTAs because "it is better that we change before we're forced to change".

Thailand's telecom sector will definitely feel the pressure of free trade, one telecom executive said.

Vichai Bencharongkul, co-chief executive of the cell-phone operator Total Access Communication (DTAC), said local operators were not prepared for any free trade deals pertaining the telecom sector.

He said that while local operators have yet to pay concession fees to state telecom agencies, any new operators gaining access to the market as a result of a free trade arrangement are unlikely to be saddled with the same burden. He added that local telecom operators had not been consulted regarding any possible FTA arrangement that could affect the telecom sector. State telecom regulators/operators TOT Corp Plc and CAT Telecom Co are already studying the effects of FTAs.

Under its agreement with the World Trade Organization, Thailand is bound to open its telecom sector in 2006, but Vichai said that this deadline should be postponed so local operators can better prepare themselves.