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Thai FTA defers sticking points

The Japan Times : Sept. 2, 2005

Thai FTA defers sticking points

Staff writer

Prime Minister Junichiro Koizumi and his visiting Thai counterpart, Thaksin Shinawatra, agreed Thursday on a basic accord to lower mutual trade barriers that left key decisions on high tariffs on Japanese cars and Thai rice unresolved.

But Foreign Ministry officials stressed that the strategic importance of a free-trade agreement with Japan’s biggest trade and diplomatic partner among the Association of Southeast Asian Nations outweighs individual issues, and said the FTA will smooth the way for concluding a separate FTA with ASEAN itself.

Under the pact, which will be formally signed next year, Bangkok will lower its 80 percent duty on finished Japanese luxury cars and other large cars to 60 percent by 2009, but will keep the tariff intact on all other cars. The two sides agreed to renew negotiations on the matter later.

Thailand also said it would cut import duties on car parts to 20 percent or lower by 2010 and scrap them the following year, but keep levies on engines and engine parts at current levels until it scraps them in 2013. Import duties on some steel parts will be removed immediately, with the rest to be scrapped in 10 years.

Japan will immediately abolish tariffs on shrimp, mangoes and durians, and lower its 6 percent tax on chicken to 3 percent in five years. But it left untouched import duties on other foodstuffs, including rice, wheat, dairy products and beef, saying those would be discussed in five years’ time. Tariffs on frozen and chilled pork, raw cane and beet sugar, refined sugar, canned pineapple, tuna, and plywood from Thailand will also remain intact, the agreement states.

Japan also dithered about opening its doors to Thai nurses, and the sides agreed merely to reach an accord in two years at the latest.

However, the two leaders lauded the agreement as being nothing short of "epoch-making."

"There are a few details left, but they are not major problems," Thaksin said at the Prime Minister’s Official Residence after an afternoon meeting with Koizumi.

The economic partnership agreement will not only benefit the two nations, but also the global economy, he said.

"I hope Thailand will become the production hub from where Japan will be able to export its products to the world," Thaksin said.

Bangkok seeks to protect its domestic auto industry until it is ready to compete with Japanese cars, and make sure Japanese automakers continue to invest in factories in Thailand.

Thaksin has said he wants Thailand to become "the Detroit of Asia." The idea is to produce fuel-efficient cars and pickup trucks and establish Thailand as an auto production hub within ASEAN. Thailand wants to then boost annual vehicle production to 1.8 million units in 2010, and export some 45 percent.

Japan wants to keep the politically loaded issue of rice out of the negotiations altogether.

But the overall FTA is palatable to both, according to Foreign Ministry officials. Money from Japan made up 45.9 percent of Thailand’s direct investment in 2004, making Japan Thailand’s leading investor. Japan is also its biggest source of imports, and second-largest recipient of its exports.

For Japan, an FTA with Thailand is expected to smooth the way for a Japan-ASEAN FTA. Japan has fallen behind the explosion of FTA negotiations in Asia. Final products are increasingly assembled with parts and capital goods collected from different parts of Asia for the global market.

Other Thai products that may become cheaper in Japan due to the FTA include coconuts, okras, papayas, bananas, pineapples, ham, pet food and cane molasses.

 source: Japan Times