Back to the Thailand-US FTA talks

03/03/2008 12:00 - 951 Views

This month's return of an elected civilian cabinet and Parliament to Thailand has improved US-Thailand relations. Although the United States never really withdrew its engagement of the kingdom, military and security relations have been restored. This week, the US Trade and Development Agency reopened its offices in Bangkok. Now it's time for Thailand to upgrade its economic relations with the United States by resuming the Thailand-US Free Trade Agreement (Tufta) talks.

Trade between Thailand and the US has been robust, even during a year affected by threats of a US recession and a sluggish Thai economy. The total annualised 2007 trade flow was more than US$8 billion in exports and $22 billion in imports according to US government statistics, slightly higher than 2006. This makes the United States the largest trading partner of Thailand.

Despite the transitional situation, Thai-US economic relations remained stable and even improved slightly. In fact, events during the period since the Tufta talks were suspended in early 2006 demonstrate the need to and cement the gains in trade and investment that would be achieved through Tufta.

Both countries experienced political changes that affected trade and investment policy - Thailand with the interim government and now the Samak cabinet, and the United States with President Bush losing his governing majorities in the Congress.

Tufta would have insulated the Thai-US economic relationship from these political changes.

If Tufta had already been in place, many of the trade disputes between Thailand and the United States could have been avoided or minimised. The US government's continuous customs bond requirement, the bane of the Thai seafood industry, might not have been imposed on Thai shrimp. Thailand's World Trade Organisation (WTO) dispute on the US government's "zeroing" methodology in anti-dumping disputes (a technical policy that biases the US in favour of imposing anti-dumping duties) probably still would have occurred, but the US might have been much more receptive to implementing the WTO panel results on an expedited basis.

The ongoing US legislative efforts to renew the Generalised System of Preferences (GSP) programme and disputes on its applicability to Thai exports would have become moot for Thailand. Finally, the Thailand-US Treaty of Amity, and its attendant issues related to foreign investment, could have been replaced by Tufta.

The Tufta talks were suspended because the Thaksin government had lost its mandate. Politically, although not legally, the US decided not to resume Tufta talks until an elected government took office. Now that Thailand has that government, though, the US administration has lost its Trade Promotion Authority (TPA) expedite obtain legislative FTA approval.

It would appear we are now in the converse situation where the Thai government has a mandate to resume the Tufta talks yet the US government does not.

Nevertheless, Thailand should resume the Tufta negotiations even if the US administration does not have TPA. The Democratic majority leadership in the US Congress expects to grant the next president TPA next year, most likely to pass a new WTO agreement, but also to pass new FTAs. By returning to the Tufta talks, the Thai government can signal that it wants to reserve its place when TPA resumes.

Resuming the Tufta talks would also give the Thai government an additional forum, and perhaps even some additional diplomatic tools, for dealing with sticky trade issues such as the continuous customs bonds, "zeroing" and GSP.

Perhaps most importantly, the Thai government can use this period until TPA resumes in 2009 to educate and engage Thai civil society on the benefits of the Tufta. Tufta became controversial because of issues related to intellectual property and agriculture, among others.

Through open outreach, the Thai government can explain the immediate benefits and opportunities that would result from the Tufta, as well as other Thai FTAs under negotiation or implementation such as those with Japan, and the Asean-EU, Asean-Korea, Asean-China and Asean-Japan agreements. Indeed, the absence of TPA may even allow for a more relaxed environment conducive to long-term thinking in both Thailand and the United States.

Malaysia has faced similar issues in its own FTA talks with the United States. Based on its own national interest, Malaysia has made a calculated choice to continue with its own FTA talks with the United States, despite the US administration's lack of TPA authority. The Thai government should make that same choice.

In sum, resuming the Tufta talks will provide Thailand with short-term tactical gains in trade diplomacy while offering long-term possibilities in economic growth. The Thai government should also take advantage of this TPA-free period to lay the groundwork for a full and engaged discussion of Tufta, so that all sides can participate and engage in the process. It's time to get the process back on track.

Edmund Sim is an International Trade Partner with Hunton & Williams LLP. He can be reached at esim@hunton.com

 

EDMUND SIM

Tuesday February 26, 2008

 

Source: www.bangkokpost.com

 

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