The downside of free trade arrangements

The Nation, Asia News Network, Bangkok

Free Trade Arrangements (FTAs) have become fashionable lately. North and South America are contemplating one while the European Union is looking into setting up an FTA with a group of least developed countries with historical ties with European countries. ASEAN and China are discussing an FTA. Japan has not ruled out an FTA with ASEAN. Senior officials from Japan, China and South Korea met last Wednesday and agreed that an FTA between them might be considered eventually.

Thailand is equally active, eager to go on an FTA offensive with China, the U.S., Japan, India and South Korea.

But if everyone has an FTA with everyone else, will there be a natural evolution into a regional or even global FTA? Why not just do it under the aegis of the World Trade Organization?

Things are not that simple, of course. Not least because the credibility of the WTO to push through more liberalized global free trade has been undermined in recent years by two main factors, the fallout of trade disputes between the EU and U.S. that tended to polarize everyone else and the tendency by the EU and U.S. to take advantage of the less developed nations.

But is an FTA really an alternative? It is not only a secondbest option compared with a WTO agreement but may even hurt positive aspects of global free trade.

First, a bilateral FTA discriminates against all the trading nations but the two partners.

Secondly, the bargaining power lies with the bigger nations, because there is no counterweight as in WTO negotiation with the consensus of one country one vote.

Thirdly, it may create overdependence of a weaker nation upon a stronger one.

An FTA might indeed be able to jumpstart trade in certain items faster than the WTO. For example, Thai farm products might get faster access to Japan, and the Indian market might be cracked faster that by waiting for global trade talks.

All of these aspects point to a need for Thailand to act with caution with regards to the FTA thrust. The interests of the country need to be weighed not only for today but for decades ahead. A wrong move will cost the country dearly. It is also a fact that Thailand doesn't really have a sufficient number of trade negotiation experts to efficiently and effectively carry out the task at the moment.

The government also needs to be transparent about FTA negotiations. They should not be used as a tool for political populism or as a tradeoff against other foreign policy objectives. In fact, the Foreign Ministry should take a broader stand, maintaining its support for multilateralism rather than wholeheartedly embracing bilateral trade diplomacy.

Last but not least, we must understand fully what our capacity is. History tells us that a giant leap in world affairs is always dictated by the more powerful countries.