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Carefully weigh pros and cons of free trade area

The Nation, Bangkok

Carefully weigh pros and cons of free trade area

Editorial, 16 November 2012

Proposed Trans-Pacific Partnership must be discussed publicly with the involvement of all parties concerned

Discussion of the planned Trans-Pacific Partnership (TPP) will be a highlight of US President Barack Obama’s visit to Thailand next week. But the government will have to seriously consider the pros and cons of the TPP, to ensure the regional trade agreement will improve Thailand’s competitiveness and boost our capacity to enter the regional market.

The TPP is a proposed regional free-trade agreement being negotiated by the US and Asia-Pacific nations Australia, Canada, Vietnam, Mexico and six other countries.

The TPP is at the centre of the American trade-negotiating agenda as President Obama enters his second term. US businesses are looking for more opportunities to drive growth through external trade and other activities.

Washington has been preoccupied with financial problems as a consequence of the subprime crisis, but re-energised the TPP talks in 2010, with an increasing number of countries expressing interest in joining the talks. Washington says the TPP will further liberalise trade while the Doha Round of trade negotiations under the auspices of the World trade Organisation is delayed.

Asia has an increasingly affluent demographic. The US thus wants to level the field for American businesses in the region. However, there are cautionary words from some quarters in Thailand regarding downside effects of the agreement. The government therefore must communicate with all stakeholders to ensure public understanding of the issue. Otherwise the TPP talks could lead to political manipulation, with the content of the TPP being politicised. It would be unfortunate if the real essence of the talks is left out of the public debate.

In the mid-2000s Thailand engaged in disastrous bilateral trade talks with the US, which ultimately collapsed. Local non-governmental groups voiced concerns, over possible damage to pharmaceutical production, among other issues.

The Cabinet yesterday agreed to a Commerce Ministry proposal to have Prime Minister Yingluck Shinawatra announce the TPP discussion at a joint press statement with Obama. Agreement would lead to fewer tariffs on Thai exports to the US and would eliminate our reliance on America’s Generalised System of Preferences.

To ensure constructive talks, the negotiators should ensure that all stakeholders buy in to the concept. The agreement should create a fairer deal for the majority of people, but at the same time investors should not use nationalist sentiment to cover up their inability to improve.

Some have already cautioned about the content of the agreement. Some economists, for example, fear the TPP will limit Thailand’s ability to protect capital flow into the country. Pharmaceutical production is likely to again be an issue, as it is in the Thailand-European Union free-trade talks at the moment.

The agricultural sector must be sufficiently informed of the details of the prospective agreement and whether it will affect the government’s ability to subsidise their produce. In fact, some of the government’s populist subsidies could be in breach of international trade rules. Recently US farmers voiced concern over the Thai plan to dump a massive amount of subsidised rice on the world market, which would affect global prices.

None of this is not to suggest Thailand should shun the TPP, but all agencies involved must study the pros and cons to determine whether Thailand should help create one of the biggest regional free-trade areas.

There is a wide spectrum of areas to look at, including the content of the agreement and its coverage. The level of economic development among the prospective members of the TPP should also be addressed. In addition, the responsible agencies should weigh the benefits and downsides if Thailand decides not to get on board, and how Thailand’s competitors can benefit from the trade privileges under the TPP to access markets such as Japan and the US.

Agreement does not necessarily mean a disadvantage to Thailand. In fact, Thailand could apply pressure under the TPP to open new markets for our pickup trucks or agricultural produce.

The TPP study should be thorough. After all, the agreement is unlikely to be signed anytime soon due to domestic resistance in every participating country. Although President Obama will highlight the TPP on his agenda, he will not easily convince the US Congress to endorse the agreement, especially after he attacked his presidential rival for outsourcing American jobs overseas. Americans fret about this issue at a time of high unemployment, and some fear the free-trade agreement will send more jobs overseas.

These are the issues that the government must carefully consider before signing any agreement.