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Korea FTA threatens Thai leather industry

Bangkok Post | 19 June 2006

Korea FTA threatens Thai leather industry


Thailand’s leather products industry could be hurt by an influx of Korean goods under a free trade pact, according to David Chiu, the president of the Thai Leather Goods Association.

Bangkok is continuing to negotiate with the Seoul government after refusing to sign an Asean-Korea trade pact last month because of Korea’s resistance to opening up its rice market.

The agreement aims to liberalise merchandise trade between Korea and the 10-nation Asean bloc by 2010 as part of plans for a wider regional free trade pact.

Mr Chiu said, however, that a more modest Thailand-South Korean free trade agreement seemed to be nearing a conclusion quietly.

Although business operators have representatives participating in the negotiations, leather goods are still included on a list of products considered for import tariff reductions under the agreement.

Mr Chiu said his group had made its concerns known to Thai negotiators but had not received a response. It wants leather goods placed on a list of sensitive products on which tariffs would not be cut too quickly.

’’Although Thai producers have competitive production and labour costs compared to South Korean manufacturers, the Korean producers still have an advantage over the Thai leather goods industry in terms of cost and quality of raw materials,’’ said Mr Chiu.

He said Thai leather goods makers needed to import raw materials such as tanning leather, fittings and accessories, with import duties ranging from 5% to 20%.

’’The Korean upstream industry for leather goods is much stronger than that of Thailand. It has high quality and competitive costs in the tannery manufacturing system that can suit all needs of its leather goods producers,’’ he said.

The Thai leather industry has been focusing on product quality improvement in order to avoid competition in the labour-intensive market, but the upstream side of the Thai industry is still weak.

Currently, the average import duties for leather goods items are 40%.

In addition, said Mr Chiu, South Korea had proposed the inclusion of about 100 items manufactured in the Kaesong special economic zone situated in North Korea in its trade agreement with Thailand.

The proposal reflect’s Seoul’s policy to promote peace with the North by supporting its economic development.

Proposed products from North Korea include light industrial and technology products, metal goods, organic chemicals, televisions and leather products.

Mr Chiu said the Kaesong zone offered much lower labour costs than those of Thailand and several Southeast Asian countries, raising concerns among Asean nations.

 source: Bangkok Post