logo logo

Crisis may lead to more non-tariff barriers

The Nation | January 12, 2009

Crisis may lead to more non-tariff barriers

By Petchanet Pratruangkrai

Many of Thailand’s trading partners are expected to implement non-tariff barriers this year to shield their markets from a flood of imports as a looming global recession prompts governments to negotiate free-trade pacts.

The worldwide economic meltdown has prompted many governments to focus on free-trade agreement (FTA) negotiations this year, believing such pacts will facilitate growth in trade, investment and services during these tough times.

As a counterbalance, however, they are expected to impose many non-tariff barriers. An increasing awareness of the effects of climate change on the environment is expected to lead many developed nations to impose new kinds of non-tariff barriers to force their trading partners - in particular, developing nations - to more carefully consider the environmental impact of their manufacturing and packaging processes.

"Many non-tariff barriers will be issued this year by developed nations [and blocs] such as the United States and the European Union. They want to protect their markets from low tariff barriers after [securing] the free flow of trade, services and investment," said Pornsilp Patcharintanakul, deputy secretary-general of the Board of Trade of Thailand and the Thai Chamber of Commerce.

The incoming administration of US President-elect Barack Obama is likely to place more emphasis on human rights, product safety, the environment and intellectual property rights in its dealings with trading partners.

As a result, Pornsilp said, Thailand must place greater emphasis on research and development to ensure that trade, services and investment are not disrupted and that exporters reap the greatest possible benefit from FTAs.

Kiat Sitthi-amorn, a member of the Abhisit’s government economic team, said Thailand has faced many kinds of non-tariff barriers over the past few years and would face more as a result of the economic crisis.

Kiat, who is also the former president of the International Chamber of Commerce, said the government must negotiate to eliminate non-tariff barriers and ensure that liberalisation leads to growth in trade.

Moreover, Kiat said, private enterprises need to raise their awareness of the various forms of non-tariff barriers, such as higher product-safety, food-safety, health and environmental standards.

Chutima Bunyapraphasara, director of the Trade Negotiations Department, agreed that the global economic slowdown would result in an increase in non-tariff barriers this year as countries move to protect their markets from the effects of FTAs and try to avoid running high trade deficits.

Therefore, the Trade Negotiations Department and the Foreign Trade Department have a duty to negotiate with trading partners and at international forums such as the World Trade Organisation to eliminate non-tariff barriers, she said.

Along with an increase in non-tariff barriers, 2009 is also expected to offer Thailand the chance to revive free-trade pacts.

Since the coup of 2006, Thailand’s free-trade pacts have been stuck. This year, the country will have the chance to re-initiate free-trade pacts to boost trade and investment.

A new FTA is likely to be negotiated in cooperation with the Asean countries, in line with the bloc’s plan to integrate its 10 member states into an Asean Economic Community by 2015.

"Thailand will not initiate new free-trade pacts with individual countries, but is likely to negotiate under one umbrella with Asean member states and Asean’s trading partners," Chutima said.

By the end of 2008, more than 400 free-trade pacts had been negotiated worldwide, reflecting the global move toward eliminating tariff barriers to facilitate growth in trade, services and investment.

Asean has already signed trade agreements with Japan and South Korea. It has also concluded an FTA with China covering trade in goods, and plans to sign an investment agreement soon. Free-trade pacts with Australia, New Zealand, and India are planned.

The bloc is also negotiating a comprehensive package with the European Union, which, once completed, will be the largest FTA between two global regions.

Committing to such international agreements has been made more complicated by the Constitutions Act 2006, which requires parliamentary approval before any free-trade pact can be signed. As a result, Thailand has been left behind the other nine members of Asean on the pact with South Korea, and will be soon left behind on the pacts with Australia and New Zealand.

Chutima said Asean is also considering expanding its area of cooperation in free-trade talks with the Gulf Cooperation Council (GCC) countries, comprising Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates and Oman, and with the countries of Latin America’s Mercosur group of Argentina, Brazil, Paraguay and Uruguay.

Asean is conducting a feasibility study with the GCC, which has the potential to become Asean’s next close trading partner due to its emerging markets and high level of interest in investing in Asean.

Boosting trade with the resource-rich Latin American countries, meanwhile, is a key long-term goal for Asean.

Thailand’s existing free-trade pacts with China, India, Australia, New Zealand and Japan, help to generate more than Bt4 trillion of income to the Kingdom from trade and investment.

The Kingdom has completed negotiations on an FTA with Peru, which is expected to be implemented soon.

The country is also negotiating a pact with its six fellow members of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (Bimstec) - Bangladesh, Bhutan, India, Burma, Nepal and Sri Lanka - and the European Free Trade Association, which comprises Switzerland, Norway, Iceland and Liechtenstein.

Resuming bilateral trade talks with the United States may be difficult because of the US recession, and Thailand’s desire to protect its markets from the US, given the countries’ significantly different levels of development in many sectors, including intellectual property and services.

Bangkok and Washington held seven rounds of FTA discussions before the United States broke off the talks following the 2006 coup.

 source: The Nation