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Local manufacturers cry foul over change in stance on steel

Bangkok Post

4 April 2005

Local manufacturers cry foul over change in stance on steel


Removing protection of hot-rolled steel under the Thai-Japan free trade area (FTA) agreement will create unfair treatment between local steel manufacturers and automotive makers, according to steel manufacturers.

Commerce Minister Thanong Bidaya said last week that certain types of hot-rolled steel could be removed from Thailand’s sensitive list under the Japan-Thailand Free Trade Area agreement to help support growth of the auto industry, a policy shift that caught trade negotiators off guard.

But an official at steel company who wanted to remain anonymous said most of the necessary steel items particularly those imported from Japan, had already gained special treatment with low or even zero import duties.

"The Thai government never helps us (the steel industry) out, unlike its policy toward the petrochemical, energy and automobile industries," he said bitterly.

He added that Japan’s steel industry was much stronger than Thailand’s as the Japanese government had been subsidising it since the end of World War II.

Last year, Japan shipped 120 billion baht worth of steel out of the total steel imports of 350 billion baht in Thailand.

The source indicated that the local car market would not necessarily benefit from the special low import duty of hot-rolled steel products because it had already been granted tax refunds and other privileges through a variety of measures including the BoI’s promotional privileges and refunds for imports of raw materials used for the production of exported products.

"(Under a bilateral FTA pact) Thailand would become an export and production base for Toyota and other Japanese carmakers because of the refunds of import duties," he said.

Also, if the government wants to push Thailand as the "Detroit of Asia", auto parts should not be on the list of products eligible for tax cuts under the Japan-Thailand free trade pact as it would lead to unfair competition favouring Japanese carmakers to those from other nations.

Win Viriyaprapaikij, executive director of Sahaviriya Steel Industries Plc, the country’s largest hot-rolled steel producer, said the Thai government should carefully weigh decisions related to the FTA pact in terms of benefits as well as a bad side effects adding that in principle, free trade agreements were supposed to provide optimum benefits for both parties involved.

However, he agreed with Deputy Prime Minister Somkid Jatusripitak’s assessment that local industrial companies needed to make their operations more efficient and pointed out that steel manufacturers had already invested huge amounts of capital to improve their efficiency despite the fact that they suffered immensely after the 1997 economic crisis.

He said that Mr Somkid’s recent call to set up a bilateral commission between Thailand and Japan to examine steel quality standards and product requirements of the domestic auto industry was just a way to prolong the bilateral trade talks.