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Big changes ahead in world trade

The Nation (Bangkok) 7 January 2005

Big changes ahead in world trade

FTAs, end of barriers to be major catalysts


Looking ahead, 2005 will be another year of important changes affecting not only the export-driven Thai economy, but also world trade overall.

Workers at local garment and textile factories fear that the year of the rooster may bring heavy job losses now that the 30-year global quota system has been abolished, effective Jan 1.

Pongsak Assakul, president of the Textile Industry Association, said Thai textile manufacturers have been preparing since 2004 for potential impacts, with many mapping out production plans a full year ahead to serve the demands of global brand name clothing retailers.

Ever in search of an advantage in a highly competitive industry, local manufacturers have bought inside information regarding future world fashion trends by hiring Italian fashion consultants. The secret, it turns out, is that the colours for next year will be orange and green. Despite the added expense, apparel makers are gambling that any measure they take to increase their capability to add value to their products helps them keep a step ahead of low-ball producers from China, Bangladesh and Pakistan in the post-Multi-Fibre Arrangement period.

China is widely predicted to grab the lion’s share of world apparel trade, up from 18.8% currently. Today, it lags behind the 25-member European Union, the world’s largest garment exporter.

Thai exporters are confident that they will be able to maintain a tidy global market share of 1.8% thanks to production efficiency improvements.

The new year also brings with it a major challenge for Thai ranchers and dairy farmers, who now face an influx of diary and livestock from Australia as part of Thailand’s commitment to cut import tariffs on such products immediately.

While Thai consumers stand to benefit from cheaper milk, butter, cheese and meat, local producers have accused the government’s trade negotiators of selling them down the river. Thai dairy farmers say that even if the government gave them a hundred years to adjust, they would never be able to compete with Australian dairy farmers _ widely considered the most efficient in the world. Put simply, Australia, with its abundant grazing land and cooler climate, is better geographically suited for raising cattle than tropical Thailand. Local dairy farmers hope that they will not suffer the same fate as local garlic and onion planters in the North, who were wiped out by imports of Chinese garlic, which is favoured by consumers for its larger size, after the Thai-China FTA was implemented in October 2003.

Despite adverse effects such as these, FTA-mania under the administration of Prime Minister Thaksin Shinawatra is likely to continue, with his Thai Rak Thai Party expected to secure another parliamentary majority in the upcoming Feb 6 general elections.

While many countries are in the midst of hammering out multilateral trade deals, Thailand has opted to pursue bilateral and regional FTAs. In 2005, country-to-country talks with several countries will continue including India, Japan, New Zealand, Peru and the United States. Bangkok’s new round of talks with Washington in March may or may not be concluded by the end of the year. Issues such as intellectual property, fair trade competition, labour and the environment have posed a serious challenge for the negotiating teams of both countries.

As for the Thai-Japanese FTA, Thai negotiators have playfully dubbed the major obstacles in the talks ``khao mun gai sai namtan,’’ after a popular Thai dish, but with added sugar. It refers to rice, tapioca, chicken and sugar, four highly sensitive products which have presented a serious obstacle to a successful outcome of the talks.

Amid the flurry of bilateral FTAs, another round of multilateral trade negotiations under the World Trade Organisation is set to take place later this year in Hong Kong. The 148 trade ministers of WTO member nations have a mandate to conclude the Doha Development Agenda, which first took shape in 2001 at a previous meeting in Doha, Qatar’s capital city. If they can achieve a consensus, the Doha round of talks will be the shortest ever in the history of world trade negotiations.

Unless the deal goes through in Hong Kong, Thailand’s Dr Supachai Panitchpakdi, director-general of the world trade body, will not earn bragging rights that such a historic agreement was signed under his watch, since his three-year term as head of the WTO expires in August.

Leading candidates in the race include nominees from South American countries and France’s Pascal Lamy, the former European Union trade commissioner.

 source: The Nation