Battle to make free trade fair
6 September 2005
The political leaders of Thailand and Japan met last week in Tokyo to clear away some hurdles in the important negotiations for a bilateral Free Trade Agreement. This FTA, like others recently signed and vaunted by the government, is slightly misnamed because they do not even aim at actual, laissez-faire commerce. More realistically, they aim at achieving a set of mutual benefits. Lowering many tariffs will increase trade by making importing goods more affordable. But FTAs have to take in two other complicated factors, both of which have led to the delay of the Thailand-Japan FTA and problems with the others. Wide-open trade may be the objective of many who support international trade negotiations at any level, but a return to the bad old trade practices of the 19th century is unlikely in any current lifetime. Consumers require protection against the most rapacious businesses. In Asia, the most remembered and least lamented aspect of totally free trade was the Western trade of drugs for valuable goods, especially with China. Thailand and other countries still are cleaning up the remnants of the opium trade and dens. While few people would ever wish to return to those trade policies, dangers still lurk. FTA pacts cannot allow totally open trade for a second reason: The two or more countries in the agreement are not precisely equal. Thailand is no Japan or United States in the world economy. Advanced industrial nations have different agendas and pressures than Thailand. Negotiations, sometimes tough and even rancorous, make it clear to both sides that even gaining the appearance of a level playing field is difficult. Thailand and Japan have been pressing their urgent economic programmes on each other for months. The fight to get to a middle ground that provides the greatest fairness has been difficult.
Thailand is a developing agricultural country with some industry, while Japan is almost the opposite. Japan wants to bring cheap steel to Thailand to make cars for sale here and export abroad, while protecting its relatively few but culturally important farmers. Thailand wants to sell its cornucopia of delicious and carefully developed food to Japan, while protecting its relatively few but struggling steel factories. Prime Ministers Thaksin Shinawatra and Junichiro Koizumi sort of reached agreement on all this last week, mostly by agreeing to put the important parts of the FTA aside for a few years and adopt a bit of a watered-down pact, which probably will be signed by both countries in due course.
Thailand would have loved a huge step like seeing Japan open its tightly closed agricultural import market. But small steps are far better than none, and move towards the goal of more trade, at cheaper tariffs, to the advantage of consumers. Coming talks with the US are going to be at least as tough. The Americans want Thailand to honour its pledge to open up the telecommunications market in 2006 as it promised to the World Trade Organisation. Instead, Thailand is going to crack the door with tiny amounts of liberalisation next year, and claim Thai mobile phone operators and satellite firms are not yet ready for competition.
It has been the job of the WTO for two decades to tear down such barriers to free trade. The former Thai politician, Supachai Panitchpakdi, who relinquished his job as WTO chief last week to Frenchman Pascal Lamy, made few waves in his three years in office. Attempts to reach a new world trade agreement now focus on talks in Hong Kong later this year, and most analysts have been pessimistic. Mr Thaksin has given little attention to the WTO or multilateral trade agreements. Instead, he has focussed on bilateral negotiations with both regional and world powers. Trade is a key route to Thai prosperity, and increased trade must be a constant goal. Inevitably, there will be political clashes. To get privileges in foreign countries requires allowing foreigners wider access to Thai markets. The tradeoffs must always be fair. Chinese perishables are elbowing aside some Thai food products in the market. This is a good example of why the government must explain any apparent discrepancies in the free trade agreements it signs.