Legal implications of Thailand-US FTA

Bangkok Post, 12 July 2005

By invitation

PORNAPA L. THAICHAROEN and RUPINDER MALIK

Legal implications of Thailand-US FTA

The free trade area (FTA) agreement with the United States will be the most comprehensive that Thailand has negotiated with any trading partners, both in terms of its scope and the impact it will likely have on certain sectors and also on the Thai business law landscape.

The proposed Thailand-US FTA agreement comprises 23 chapters, including the common elements established under other FTA agreements, then adding additional topics relating to textiles and apparel, financial services, labour, telecommunications and agriculture. Already, concerns regarding competitive disadvantage to certain sectors in Thailand have been raised by various NGOs as well as the domestic industries that would face the consequences of amplified competition and cost adjustments.

Because it is so widespread, ambitious and aspires to revolutionise trade and investment liberalisation between Thailand and US, the proposed Thailand-US FTA agreement may require new laws or amendment to existing domestic laws and regulations in Thailand. This is a new development for Thailand’s push to liberalise trade with key trading partners, as Thailand’s initial viewpoint was to not change existing laws and regulations to accommodate any FTA agreement.

Taking the example of the Thailand-Australia FTA agreement, the Thai government did not initiate any legislative and regulatory amendments and instead set up procedures to accommodate the Australian investors and companies under the FTA agreement. The same appears to be the case for the Thailand-Japan FTA agreement, where it seems that Thailand will not enact or modify the laws but will instead formulate some internal guidelines and regulations in order to comply with the agreement.

We should bear in mind that only three rounds of the Thailand-US FTA agreement negotiations have taken place, with a fourth having opened yesterday in Great Falls, Montana. Thus it is premature to conclude the literal impact of this agreement on Thailand’s current laws and regulations, some of the sensitive issues and the probable impact on certain aspects of the legal system in Thailand can be contemplated.

One of the most debatable and sensitive issues relates to intellectual property rights (IPR). Insufficient protection of IPR and ineffective enforcement in Thailand have been issues already. The US seeks a commitment on ``Trips Plus’’ provisions through the FTA agreements it negotiates. (Trips is WTO jargon for Trade Related Aspects of Intellectual Property Rights.) In general terms, ``Trips Plus’’ provisions include commitments that go beyond the global standards stipulated under the WTO Trips agreement.

For instance, it is likely the US will seek extension of copyright protection and the signing of additional treaties, such as the Patent Co-operation Treaty, 1984. In fact, the US in its agreements with Chile and Singapore also required accession to several IPR agreements. If we accept that key issues relating to copyright, patent, trademarks and enforcement will be addressed to ensure a concrete and positive outcome, it would inevitably necessitate modifications to the existing Thai IPR laws and regulations and enacting of new laws.

The US requires inclusion of labour and environment provisions in all its negotiated FTA agreements. This issue may provoke an assessment of certain labour and environment policies and enforcement of relevant laws in Thailand. Besides, it is believed that the US will insist on the elements stipulated in the comprehensive chapter on transparency under the US-Chile FTA agreement.

Customs regulatory procedures and government procurement policies are additional susceptible issues to be concluded under this FTA agreement. Because Thailand is not a party to the WTO Government Procurement Agreement (GPA), the GPA benefits may be insisted upon by the US.

On investment, the US is seeking privileges currently granted under the US-Thai Treaty of Amity and Economic Relations as well as elimination of other barriers to investment. As a result the laws relating to foreign shareholding, among others, will be considered. The dispute resolution provisions in a number of FTA agreements allow only government-to-government action, while some FTA agreements permit investor-state disputes. It seems that the Thailand-US FTA agreement will allow third party resolution for commercial disputes between the investor and the host country.

There are also some existing concerns in relation to the Thai Trade Competition Act (1999). Under the US-Singapore FTA agreement, Singapore committed to enact laws regulating anti-competitive business activities. While Thailand already has a competition commission and relevant laws in place, certain statutory changes can be expected in Thailand as a result of the feasible commitments under the competition policy chapter of the Thailand-US FTA agreement.

Even though potential commercial gains are expected from this FTA agreement, domestic industries and US companies are equally sceptical of the legislative changes in Thailand. The negotiations involving sensitive issues need both consideration and caution. As the negotiations continue, it will be important to analyse the implications on the existing laws and regulations of Thailand.

Pornapa L. Thaicharoen is a partner and Rupinder Malik a consultant at Baker & McKenzie. They can be reached at

pornapa.l.thaicharoen@bakernet.com

rupinder.malik@bakernet.com

source: Bangkok Post