Bangkok Post, Thailand
FTAs to have minor impact
26 January 2010
By Somruedi Banchongduang
Thailand will not gain much from free trade agreements because of minimal exports between the agreeing parties, says Sethaput Suthiwart-narueput, an executive vice-president of Siam Commercial Bank.
The benefits from FTAs taking effect this year are insignificant, particularly for the country’s exports, said Dr Sethaput, also chief economist of the SCB Economic Intelligence Center.
About 56% of all types of export goods will receive the common effective preferential tariff (CEPT) rate of zero under the FTAs. But Thailand only exports a narrow range of CEPT goods to counter-parties, equivalent to 8% of export goods to the countries or 2% of Thailand’s total supply.
The tariff rate decreased by 1.2% in 2010 compared with a drop of 3.8% the year before.
The FTAs should negatively impact the industries of tobacco, liquor, textiles excluding clothing, electrical goods, coffee and tea. Such industries will face dumping measures from counter-parties, particularly China, South Korea and India. But those sectors are marginal contributors to the country’s economy, said Dr Sethaput.
Several business sectors will benefit from the FTAs due to lower raw material import costs and the wide spread between the existing tax rate and the new rate under the agreements.
The FTAs should provide greater opportunities for rubber products exported to China, tyres exported to Malaysia and Indonesia, and jewellery and rice.
Though the Asean Free Trade Area agreement from 2003 led to zero-rate tariffs among several Asian countries, trade among those countries did not change significantly, he said.
In 2008, Thailand’s exports to the region were 22.6% of total volume, while imports were 16.6% of the total. In 1998, Thai exports to Asian countries were 18.2%, while imports were 15.1%.
Dr Sethaput said Thai export growth would improve to 15% this year mainly due to the global economic recovery rather than the benefits of FTAs.
The SCB Economic Intelligence Center projcts Thai economic growth of 3.5% to 4.5% this year, mainly driven by government investment.