Bangkok Post

Free trade agreements (FTAs) draw flak

By Peter Janssen and Sid Astbury, dpa

6 December 2005

Bangkok/Sydney (dpa) - Thailand and Australia - two countries at the forefront of a regional proliferation of bilateral free trade agreements (FTAs) - will be worth watching at the World Trade Organization (WTO) talks starting in Hong Kong on December 13.

Australia began demolishing tariff walls in the 1980s, believing that free trade was its own reward. Domestic industries were exposed to international competition and sank or swam.

Two decades of reform has allowed Canberra to face rounds of international trade talks safe in the knowledge that it has little to lose and much to gain from the multilateral dismantling of protection.

Not surprising, given Australia’s low-tariff regimen, Prime Minister John Howard is calling on Europe and Japan to match concessions offered by the United States in order to kick-start the stalled Doha round of trade negotiations in Hong Kong.

Thailand is also pushing the WTO to move forward, but its input at the talks is likely to be minimal. Observers say Thailand, and the Association of Southeast Asian Nations (ASEAN) as a bloc, may have missed their opportunity to have a significant impact on the Doha round because of excessive concentration on bilateral FTAs of late.

Australia and Thailand have been two keen pursuers of FTAs.

Australia has signed FTAs with New Zealand, Singapore, Thailand and the U.S. It is negotiating one with Malaysia, with Gulf states, and has designs on an all-encompassing FTA with the 10 Southeast Asian countries linked together in ASEAN.

Thailand, under the helm of telecommunications tycoon-turned-Prime Minister Thaksin Shinawatra, has inked "partial" FTAs with China, India, Australia and New Zealand and is currently negotiating agreements with Japan and the U.S., along with Bahrain and Peru.

None of the agreements signed to date have been "comprehensive," covering trade, investment and services. Moreover, the plethora of well-publicized FTAs, have not been accompanied by any serious moves to liberalize the Thai economy at home.

"In Thailand, apart from progressive reductions in manufacturing tariffs, there has been no meaningful liberalization of the economy under the Thaksin administration," said Razeen Sally, senior associate fellow at the Institute of Southeast Asian Studies and an outspoken critic of Thailand’s "trade light" strategy.

"FTAs now dominate Thai trade policy, but they are full of gesture politics and largely bereft of economic strategy," said Sally in a recent editorial. "FTAs have diverted political attention and negotiating resources away from the WTO."

Thailand’s focus on bilateral FTAs may have been at the expense of formulating a more united ASEAN stance at the talks.

"ASEAN was very active in the WTO’s Uruguay round. They were together, they coordinated, they were active, they were vocal," said Carlos Bermejo Acosta, trade counsellor to the European Commission office in Bangkok. "Now there is no ASEAN stance on any issue."

Thailand maintains that by pushing through bilateral FTAs it has inspired the region to follow. Singapore and Malaysia have inked their own FTAs, but Indonesia and the Philippines have dragged their feet.

And while Thaksin may have gotten some political mileage off his FTAs, as a show of his can-do CEO governance style, some still question the longterm benefits.

In Thailand’s FTA with Australia, for instance, concessions Thailand seemingly won in terms of Australia opening its service sector to Thai companies, are likely to be offered to all at the WTO talks as part of Australia’s concessions. Thai negotiators might have better spent their time negotiating a better deal for the country, and ASEAN, at the WTO.

Australia too is not without its FTA critics.

Peter Sutherland, a former head of GATT, the WTO predecessor, has complained that progress toward free trade within the WTO has been blocked by a "spaghetti bowl" of customs unions and preferential trade arrangements entered.

His sentiments are shared by agricultural trade expert Peter Gallagher, who has cautioned that the instant benefits FTAs bring fade over time whereas those negotiated on a multilateral basis through the WTO don’t.

Said Gallagher: "The cost-benefit relationship is unlikely to endure. The benefits of the competitive edge will dissipate as third parties strike their own bilateral deals, while the additional compliance costs endure".

It’s an argument that the government of Australia is quick to counter.

Howard maintains that FTAs are not an alternative to the Doha round but a complement to it. He cites Australia’s FTA with the U.S. that took effect in January.

"This agreement has demonstrated that Australia committing herself to a free trade agreement with the United States has in no way affected or reduced our capacity to negotiate with the major trading blocs for a multilateral agreement," he said.

But not everyone is happy with the FTA that Canberra and Washington concluded. It was not a comprehensive deal because sugar was left out.

A precedent was set - a very bad one - that FTAs could be signed that let protection continue for certain products and services.