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FTAs key to accessing new markets

The Nation, Bangkok

FTAs key to accessing new markets

By Achara Pongvutitham, Petchanet Pratruangkrai

29 April 2005

Exporters should find ways to take advantage of free-trade agreements (FTAs) and access new markets, trade experts said at a seminar yesterday.

Despite the pitfalls and opportunities inherent in FTAs, they were sweeping the world and would continue growing as long as the World Trade Organisation is unable to coordinate comprehensive tariff reductions worldwide. Thus, Thai exporters were advised to try to work within the confines of bilateral and regional pacts.

“FTAs will enhance trade to help a country cope with the world’s changing trade environment,” said Narongchai Akrasenee, a trade expert involved in FTA negotiations. “Moreover, FTAs will be the trade model for the world over the next five to 10 years.”

The seminar, “Thailand’s Export Road Map: Opportunities and Challenges”, was organised by the Export-Import Bank of Thailand, The Nation and its sister paper Krungthep Turakij. The thrust of the meeting was to provide information on government policy in terms of trade, logistics, manufacturing and restructuring.

Speaking during the opening ceremony, Deputy Prime Minister Somkid Jatusripitak said FTAs create new business opportunities for exporters.

“Exporters will enjoy cheaper raw materials, low import tariffs and market access opportunities,” Somkid said.

The three-month-long trade deficit should serve as a warning that the country’s manufacturing base needs to restructure by building stronger manufacturing chains, creating value, improving packaging, building brands, and engaging in more research and development.

But to cope with the fast-changing world of international trade, Somkid said the country’s exporters need to become more efficient. Additionally, Thai manufacturers should expand operations into neighbouring countries to exploit their raw materials.

“Thai exporters should not concentrate only on manufacturing, but also on controlling markets in potential countries by surveying market demand more,” he said.

But Thai companies need to be careful, warned Narongchai, the FTA negotiator. While trade agreements create new partnerships, they create both advantages and disadvantages for exporters, he said.

After monitoring the world’s trade environment for more than 12 months, Narongchai discovered three new developments:

 Thailand’s counterparts prefer to outsource rather than manufacture locally. The change derives from the efficiencies created by the “information age”, communications technology and logistics.

 The fast expansion of modern trade channels, particularly superstores, has reduced the importance of brand name products. Big stores’ in-house brands have created more value than brand names.

 The price of goods made from natural raw materials are increasing due to the growth of emerging markets, particularly China and India. Commodities are in high demand in these two countries.

“Commodity goods are high-value products such as scrap steel,” he said.

The latter development has forced Thailand to employ resource-based manufacturing, by focusing on natural raw-material products such as rubber, sugar-cane and foods, which were its primary strengths in the past.

To ensure sustainable export growth, Thai exports should not rely solely on tangible goods, but also on services, he said.

Chutima Bunyaprapas, a trade negotiator at the Commerce Ministry, said FTAs would be an important catalyst for growth. Furthermore, the pacts spur Thai manufacturers to strengthen their competitiveness by restructuring their manufacturing processes.

There are currently more than 300 FTAs being negotiated around the world.

“We have to ensure our competitiveness in the world market, so we have to move faster on FTAs,” she said.

Kanit Saengsuphan head of the Fiscal Economic Policy Institute, said Thailand was in a well located to link with major emerging markets in the region, including China and India.