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Thailand: Opposition to bilateral trade agreement grows strong

ASED | Berlin | 28 July 2004

Thailand: Opposition to Bilateral Trade Agreement Grows Strong

By Srisuwan Kuankachorn

Trade and consumers’ right activists who were at the forefront campaigning on FTA, called on the government to reveal all the terms and conditions of Tafta, voicing their grave concern that the local farm sector appear to be the losers while the winners are a handful of Thai big businessmen.

Thai prime-minister Thaksin upon his return from Australia vowed Tafta a great success. Yet, he admitted that “.... (we) never gain 100 %, but more gain than loss and impacts could be alleviated....” and asserted that “every party must adjust, (one) can no longer remain comfortable doing nothing....”.

FTA Watch, prime-mover of the campaign on FTA, slammed prime minister Thaksin for his “ague and ambiguous” defense of the deal and demanded that the government release a complete list of what Thailand can do and what Australia can do to allow the Thai public to weigh the pros and cons of the much-criticised deal.

Chakrachai Chomthongdee of FTA Watch posed a tough question about the transparency. He said “first he (prime minister Thaksin) failed to inform the Thai public on details of the agreement, despite his accountability to the Thai people.... now, after he has returned from Australia where he signed the agreement, he still has not clarified issues of utmost public concern.”

FTA Watch was formed by a group of concerned and interested NGOs, lawyers and economists who had for years researched on trade liberalization and tracked negotiations within the WTO. Its launch was during the Bangkok Summit of the Asia Pacific Economic Cooperation, October 2003 at which time the Thai government’s policy shift from negotiating within the WTO to seeking bilateral free trade deal became apparent.

Doubts emerged as to whether Tafta is a boon or bane for Thais as it is obvious that fewer sectors will reap most benefit from it. They include, for examples, automobile largely controlled by few foreign corporations and telecommunications and satellites currently under strong oligopoly in which the prime-minister’s own company is the leading player. Among other beneficiaries are restaurants, spas, auto repairs, textile, etc. In bid to defend the pact with Australia, in addition, the government argued that Thai consumers will benefit from cheaper-prices and higher-quality of food import from Australia. Thailand on the other hand has to open up large segment of services sector, all of which Australia has great expertise. These include such as education, consultancy, retail, construction, mining and most controversial of all “food”. Domestic dairy and meat production is believed to be hardest hit once Tafta is put into force at the beginning of 2005

Sairung Thongpon of Consumers’ Federation asked “the prime minister has insisted we will benefit but what criteria does he use to determine that?” And said “he has been talking about telecoms, satellite, autos and textiles, but how can he be sure it’s worth the potentially great damage to the agricultural sector? Why hasn’t he asked the Thai people first whether they would agree to the deal?”

Though consequences of Tafta enforcement are yet to unfold, certain farm sector has already feared of possible extinction as a result of FTA for they believe there is no way to compete with the Australian rivals.

Tafta calls for 49.4% of all Thai tariff categories to be cut to zero starting in 2005, with the rest to be phased out by 2025. While on the other hand, Australia will cut rates for 83% of its own tariff categories to zero starting next year, with the remaining categories to be cut by 2015.

Dairy products are one of Thailand’s most protected categories. Tariffs, currently 51% on a most-favoured nation basis, will be cut to 40% for Australian imports starting next year before gradually falling to zero by 2020. The agreement contains safeguards which allow for the imposition of restrictions on imports if trade is found to have hurt domestic producers.

Most dairy operations in Thailand are relatively small-scale and unsophisticated, according to Amnuay Thongkok, president of the Wang Nam Yen Dairy Cow Co-operatives of Sa Kaew province, who also said “’liberalising this sector can only hurt local producers, when you consider that Australian farmers mostly operate large-scale farms with advanced technology and lower costs”.

Sunthorn Nikhomrat, president of the Cattle Farmers Association of Thailand, echoed his frustration over the new agreement. He said “the only way to deal with the problem is to change government. The potential impact isn’t just going to hit dairy and cattle farmers, but the entire food chain, including feed producers” he said.

Mr Sunthorn said that while trade liberalisation would benefit consumers through lower retail prices, the costs would be borne by local farmers and producers. “’You can’t assume that you will be able to eat cheap imports forever” he said. His voice was in consonant with consumers right activist Sairung who point to the fact that “hailand is not a starving nation....we produce food for export, and even this government wants to make the country the kitchen of the world. But what the government has done will undermine our competitiveness, and it doesn’t seem to care that if our agricultural sector collapses...”

Hundreds of thousand small-scale dairy and meat producers are among those majority of farmers constituting over half of the country’s population. The government never sought any consultation with them about the FTA process with Australia. Nor did it intend to inform them of such a process and any possible consequence once the agreement was enforced.

Prime minister Thaksin said “.... all parties must adjust for the world has changed a great deal and the competition increased, but the government’s responsibility is to invade and search new market to bring in foreign currencies...”

Economists and trade negotiators echoed Thaksin saying that the liberalisation of tariffs and quotas is inevitable, domestic producers must take more steps to increase their productivity. Experts even viewed that the burden is on local producers themselves to improve their efficiency in order to better compete with foreign imports. For instance, Kasetsart University’s lecturer Akkawan Sangwipak, said for the dairy industry itself, a switch in focus to fresh milk could be one way to counter the threat from Australian import. “Farmers should be encouraging more consumption of fresh milk rather than powdered milk” he said. “There is no way that Australian producers would be able to compete in terms of fresh milk.”

But these ideas are viewed as naïve by groups like non-government development organizations experienced in working with farming communities for they see such ideas as highly impractical. Those who are informed of Thailand’s recent political history, tend to understand that vast majority farmers were for decades target of political suppression by military dictatorship and bureaucracy. Even nowadays, farmers still have virtually no strong political organizations of their own to negotiate for or against any policy and demand government’s action. Let alone such capacity as product improvement, public relations and marketing. Even farmers in developed countries depend a lot on the government in these respects.

The bilateral trade initiatives emerged during the government of Chuan Leekpai, Thaksin’s predecessor, as a contingency plan amidst the slow progress in the WTO arena and Asean-Afta. Yet, these initiatives came largely from technocrats, not politicians who had tended to be reluctant when coming the issues of import liberalization for their fear of unfavourable effect on farming communities to whom most elected politicians were supposed to be accountable. Thaksin government however made a swift change to pave for a new era of Thailand rising in international arena taking active role in pushing trade liberalization. The government was much in a rush but in total non-transparency negotiating for a pact with China, eventually signed in early 2003. The enforcement of the pact’s first phase (so-called early harvest) began months later with vegetable and fruit products, and hence severely affecting farmers. Among the hardest hit are indigenous highlanders in Thailand’s north who grow temperate vegetables and fruit trees for it is impossible for them to compete such cheaper and higher-quality fruits as apple and peach from China which have ever since flooded Thai market. To date, none of significant measures has been put in place to mitigate impacts on farmers. Nor were those measures ever thought of or studied thoroughly enough

After stalemate of the WTO’s Doha round in late 2003, FTA became a key policy strategy of Thaksin government that had employed an aggressive stance towards foreign trade. For his ambition i.e. eliminating poverty by 2009 and Thailand joining the first world in 15 year time, is far beyond that of any previous political leaders of the country, FTA has become an important piece of his policy jigsaw often referred to by his critiques as Thaksinomics.

To bring about the achievements, as Thaksinomics describes, the country needs improvement in two areas: domestic productivity and international trade status, more known as dual-track policies. The first track, domestic productivity improvement, has required an injection of massive funds into every sector of the economy whether farming, small and medium enterprise and export. While, the latter has put an end to the country’s long standing conservative stance towards international trade, which at least provided a shield for the country’s weakest sector “agriculture”.

With absolute control of the House of Representatives combined with strong political popularity, Thaksin has led the administration in such a business way as he once said “country is like a company” and as his critiques like to compare “he is the CEO”. He was perhaps the country’s most successful business tycoon after all. As consumers right defender Sairung remarked “it sounds like a CEO-style affair again.... this is a time when the prime minister enjoys absolute power and if he wants something it is very hard to resist him”.

This seems to be in a way true. Now completed are two FTAs. Despite growing and wide-spreading criticisms, several other deals including especially that with the US that will likely face stronger resistance than Tafta do, are currently underway and no one is going to stop the government from going ahead with them.

References: Bangkok Post on 16 July 2004, The Nation on 12 July 2004 and Krungthep Thurakit on 11 July 2004

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