logo logo

Somkid calls for commission to study steel-related issues : Now a major obstacle in Japan FTA talks

Bangkok Post

Somkid calls for commission to study steel-related issues

Now a major obstacle in Japan FTA talks

By Wichit Chantanusornsiri & Achara Ashayagachat

2 April 2005

Somkid: Agrees with Thanong

Thailand and Japan should establish a bilateral commission to examine steel quality standards and product requirements of the domestic auto industry, according to Finance Minister Somkid Jatusripitak.

If Thai mills are unable to produce steel as required by carmakers, then the product should be included in negotiations under the Japan-Thai free-trade agreement, he said yesterday.

’’The government considers the competitiveness and survival of domestic industries [in trade negotiations],’’ said Dr Somkid, who also is deputy prime minister for economic affairs.

’’But the Thai steel industry also needs to face facts and upgrade its operations as well.’’

Steel has emerged as a major obstacle in the negotiations towards a bilateral trade area (FTA) agreement. A key Thai negotiator yesterday warned that an agreement was likely to be delayed if Japanese officials continued to press for concessions on steel and other industrial product tariffs.

Thailand imported 97.5 billion baht worth of steel from Japan last year, representing 12.9% of total Japanese imports.

Japanese producers have long sought greater market access and lower tariffs for imported hot-rolled steel, which they say is necessary as domestic steel mills are unable to produce steel to meet the quality requirements of the car industry.

The Commerce Ministry imposed anti-dumping duties on hot-rolled steel imports from a number of countries last year, including Japan. Tariff revenues from steel imports last year totalled 5.5 billion baht.

Thai trade negotiators had intended to maintain steel on the country’s sensitive list in the Japan-Thailand FTA.

But Commerce Minister Thanong Bidaya earlier this week indicated he was willing to remove protection on steel in the talks, resulting in protests from local manufacturers and removing a key bargaining chip for Thai trade officials.

The two countries yesterday ended their seventh round of FTA talks in Khao Yai. They hope to finalise an agreement by the end of the year.

Pisan Manawapat, Thailand’s chief negotiator, said it was likely that talks would be extended further due to new demands by Japan’s Ministry of Economy, Trade and Industry (METI).

’’The ball is in the Japanese court. If METI changes its ambitious and unrealistic attitude, there is a chance that a balanced deal can be reached,’’ Mr Pisan told the Bangkok Post.

’’Now they are demanding more than what is in my capacity to deliver, so let’s allow the high-level policymakers to work it out.’’

Mr Thanong’s comments on Wednesday regarding steel led the Japanese negotiating team to scrap the final day of talks and seek a direct meeting with Dr Somkid to seek more concessions to liberalise industrial products and services, iron and auto parts.

Mr Pisan told the Japanese team, led by Mitoji Yabunaka, that Dr Somkid was unavailable, but that a joint committee should be established to consider the issue of iron and steel. Japanese negotiators yesterday told Mr Pisan that they disagreed with the idea, viewing that a committee could lead to little headway in the issue.

Thailand is seeking greater access in the Japanese market for agricultural products, while Japan wants greater market access and lower tariffs for a wide range of industrial products.

Japan has agreed to cut its current 6% tariff on Thai chicken in half, boost annual tapioca starch quotas to 200,000 tonnes from 70,000, and end the current 9.6% tariff on canned tuna within five years.

Other concessions include an immediate elimination of tariffs for Thai fruit imports and an increase in molasses quotas to 4,000 tonnes in three years and 5,000 in the fourth year.

Thailand, meanwhile, has suggested that steel base rates be maintained for another 10 years, and then eliminated within five years.

Thai negotiators also offered to eliminate auto parts tariffs, now 10-30%, within 15 years.

Mr Pisan said that a trade deficit of $9 billion on bilateral trade of $35 billion was acceptable, so long as imports eventually resulted in higher auto exports.

’’But if METI does not lower its aggressive requests on sensitive issues such as hot-rolled steel, we will have to increase our demands for sugar, rice, footwear and canned pineapple in return,’’ he said.

He said Mr Thanong was scheduled to visit Japan from April 9-11 to negotiate agricultural product access. Dr Somkid is also planning to visit Japan shortly to discuss the trade talks, but it remains a question mark whether the talks could be finalised by May, when Prime Minister Thaksin Shinawatra is scheduled to visit Tokyo.

’’I believe that chief cabinet secretary Hiroyuki Hosoda, who also is Japan’s FTA coordinator, will consider a comprehensive strategy for Thai-Japan relations, and not just look at short-term gains,’’ Mr Pisan added.