Twelve-country report on FTAs

Asia News Network

12-country report on FTA

2004-12-06

Singapore and Thailand have emerged as the two Asian countries with the highest number of completed free trade agreements (FTA), according to Asia News Network reports.

Not far behind the two are three of Asia’s largest economies - Japan, China and India - with more FTAs signed.

India, Singapore, Sri Lanka, and Thailand are those countries which are conducting negotiations with most countries presently.

The progress of FTAs in separate reports by members of Asia News Network, an alliance of 14 newspapers in 12 Asian countries, put the total FTAs completed, under negotiations, and under study at more than 80.

The number FTAs around the world rose sharply from 79 in 1995 to 208 in 2004.

Compared with America or Europe, Asians were not known to be active in creating FTAs. Asean Free Trade Area, established in 1992, was the only major regional FTA until Japan and Singapore signed FTA ten years later. Over the past few years, however, Asia is perhaps the busiest region in working on FTA deals. A Singaporean trade envoy even described the government’s decision to enter more than 10 FTA talks at one time as “promiscuous.”

The emergence of FTA interest can be attributed to various factors. In the mid 1990s when the Uruguay Round almost collapsed, the number of new regional trade arrangements has risen considerably because the governments have been impatient with the slow process of multilateral trade talks.

Besides, the FTA can open up a few lucrative markets. The Malaysian government which has been slower than Singapore and Thailand in taking up the FTA initiative has now tried to catch up the bandwagon by negotiating trade deal with the key economic partners. The Malaysian government viewed that the lack of an FTA with the US has placed Malaysia at a disadvantage in terms of access to that most important market.

Some countries also see FTA as a means to promote structural reform and deregulation in the domestic market especially after the financial crisis in 1997. Until April, South Korea was the only member of the World Trade Organisation other than Mongolia without a free trade agreement. But now, it is in a hurry to catch up. External pressures such as the FTAs are considered effective in pursuing deregulation.

Political factor also attributed to the increased interest in FTA. In spite of its initial hesitation, Japan agreed to start FTA with Asean countries for geopolitical reasons. China also agreed to negotiate free trade deals with Asean partly to ward off the latter’s uneasiness about the rapid rise of China.

Nonetheless, the devil is in the details. Each FTA context depends on the negotiations. Besides, FTAs these days extend the coverage much larger than the duty-free privileges. The business-related issues such as the intellectual property protection, the movement of labour and the human right and environment protections have become part of the negotiations.

Indian Trade Minister Kamal Nath felt that FTAs would soon be just a term in the past. “Now there will be Economic Cooperation Agreement that includes investment. This is the course for the future,” he said.


Bangladesh

By Inam Ahmed

Bangladesh has been trying to cut free trade agreement (FTA) deals both regionally and bilaterally.

On a bilateral basis, it has started talks with India, Pakistan, Sri Lanka, Nepal, Malaysia and Morocco.

Regionally, it is involved in initiatives for a South Asia Free Trade Arrangement (Safta) ; and a Bangladesh, India, Myanmar, Singapore, Thailand Economic Cooperation (Bimstec) agreement.

With Pakistan, Nepal, Sri Lanka, Malaysia and Morocco, the talks are yet to take any concrete shape. But with India, with which Bangladesh has a trade deficit of over $2 billion, things are moving at a faster pace with the formation of a committee of experts. The discussions cover rules of origin, negative and positive lists of products, a residual list and non-tariff barriers.

Bangladesh takes the FTA talks with India seriously as it feels that it can get more advantage in a bilateral arrangement than through multilateral deals such as Safta or Bimstec where benefits have to be shared all round. With India, it expects to have a smaller negative list of products, a faster pace of liberalization and more in trade facilitation.

The Indian economy, which is growing at eight percent a year, offers a greater multitude of trade opportunities to Bangladesh. With a lower wage level than its neighbour, Bangladesh can also expect a number of new India-oriented investments in apparels and agro-products.

New investment in and diversification of the garment industry will be crucial, as the international Multi-Fibre Agreement (MFA), under which Bangladesh has been receiving substantial quotas, will end on January 1st. The industry employs one-third of the country’s industrial labour force. How well the industry will fare in the pending international free-for-all is an open question.

The Indian market is also seen become even more attractive when India enters into an FTA with ASEAN. Already, Tata Group of India has shown some interest in setting up Indian market-oriented industries in Bangladesh.

However, Bangladesh has yet to complete working out a number of critical issues in its interests such as sequencing the liberalization process, tariff loss and impact on local industries. It gets around $120 million in revenue from imports from India.

On a regional scale, Bangladesh is working on a trade liberalization plan for Safta but it has yet to decide on rules of origin and non-tariff barriers. As a less developed member of the South Asian Association for Regional Development, it has to concretize its proposals for a compensation mechanism, a dispute settlement mechanism and trade facilitation possibilities. Bangladesh joined five meetings of experts and exchanged ideas on these issues and exchanged a negative list of items.

Bangladesh has also signed the framework agreement for an FTA with Bimstec members and considers it as a great chance to enter the Asean market. But this also poses a significant complexity regarding rules of origin and liberalization sequencing as India is represented in both Safta and Bimstec. Unless it can have harmonized rules on these issues, Bangladesh can land in trouble with India regarding free trade.


China

By Zhang Jin

China has embarked on free trade arrangement negotiations with a number of countries to help create diverse and sustained markets for its manufacturing products.

The Chinese government has also viewed that the FTA would help strengthenning political ties with countries which may be affected by the fast growing Chinese economy.

Officials said, for instance, the planned China-ASEAN free trade area is a major decision made by both the Chinese and ASEAN governments from a long-term and strategic viewpoint.

China and ASEAN agreed to work faster toward a free trade agreement in 2010, thus creating the world’s most populous market with nearly 2 billion consumers.

China launched an early-harvest programme with Thailand in October 2003, which eliminated or reduced most of the tariffs on fruits and vegetables. The programme was extended to other ASEAN members since the start of this year.

A substantial move was made this September when the two sides completed talks on trade of goods and agreed to implement tariff cuts beginning from 2005.

Being a member of World Trade Organisation, China hopes to promote foreign exchange earning through the diversity of its export markets. Thus, China is in negotiations with various countries which have potential for Chinese businesses.

Southern African Customs Union (ASCU) and China signed an agreement in June to start the FTA talks.

The same is taking place with GCC (Gulf Countries Council). The six GCC member states are Kuwait, the United Arab Emirates, the Kingdom of Saudi Arabia, the Kingdom of Bahrain, the Sultan State of Amen and the State of Qatar.

For South America, China and Chile launched the FTA study last year, and due to complete this year.

During Chinese President Hu Jintao’s visit to Australia in Oct, 2003, the two countries reached a trade and economic co-operation framework to kick off FTA negotiations. Australian Trade Minister Mark Vaile said the study will be completed in the first half of 2005.

New Zealand also signed an agreement with China last April to initiate the FTA feasibility study.

Along with the FTA has come the recognition of China’s market economy status in handling anti-dumping and anti-subsidy charges.

ASEAN, South Africa and New Zealand have granted China this status.

Australia will make the decision pending the study


India

By Devirupa Mitra

Four years ago at the threshold of the new millennium, India entered into its first trade agreement with its southern neighbour, Sri Lanka.

Since then, India is well and truly set on the FTA highway, having entered into FTA
trade accord with Thailand and working on an overall framework with Asean.

India is also in advanced FTA talks with China and South Korea, along with
regional groups like Gulf Co-operation Council, Mercosur and South African Customs Union.

But, there has been an increasing chorus of doubts, with the domestic industry
and leading economists raising the spectre of misuse of lowered trade barriers.

Officially, India is a strong supporter of the multilateral trading mechanism of WTO. But, the Indian government also advocates the trade liberalization fast track through regional trade agreements and preferential trade agreements.

At the Indo-Asean business summit in October, Prime Minister Manmohan Singh said that the creation of a regional trade and investment area could lead to bilateral trade reaching $30 billion by 2007.

“These are achievable if we focus on products which show a great potential for trade," Mr Singh told Asean leaders.

He coined the “Early Harvest Programme” under the India-Asean Framework Agreement for immediate tariff concessions as a "confidence building measure and harbinger of what is to follow”.

However, the independent economic think-thank, the National Council for Applied Economic Research has chided the government for failing to do its homework before entering into FTA. Their chief concern is the complicated guidelines of Rules of Origin, which lead to “misunderstanding, misinterpretation and the resulting corruption”.

Furthermore, NCAER analysis claimed that Early Harvest scheme was “not compatible” with WTO rules. For example, the 82 six-digit items in the Indo-Thai FTA did not pass the test of “substantially all trade” under GATT.

The critics of the government’s FTA policy were, however, pooh-poohed by another group, Research and Information System for non-aligned and other developing countries, who are providing research inputs in several RTA and PTA negotiations that India is currently conducting.

“India’s trade policy is on a sound track. It is based on serious cost-benefit analysis. And moreover, the FTA with Thailand was in furtherance of the “Look-East” policy,” the RIS director-general, Mr Nagesh Kumar said.

There have certainly been pitfalls. For example, Indian businessman had set up factories in Sri Lanka to produce products like vanaspati, which were not considered “sensitive” and therefore, were ignored in the negative list. These products were then imported from the island nation duty-free.

But, the Indian government has learnt its lessons. It is planning to change the guidelines for inclusion of items in the negative list from export volumes to tariff barriers.

It effectively signals that Indian government will be looking carefully at excluding items which have higher tariffs compared to the partner country. Not only will Rules of Origins be strictly enforced, but that it would like duty-free products coming into India to have at least 35-40 per cent of local content.

An FTA cell will also be set up in the Commerce Ministry to look into complaints of misuse by Indian businessmen.

Recently, Indian Commerce Minister Kamal Nath admitted that there would be some misuse of free trade agreements.

“There will be some problems posed by the FTAs in the initial stages that will have to be ironed out,” Mr Nath said at a seminar.

In fact, Mr Nath felt that FTAs would soon be just a term in the past. “Now there will be Economic Cooperation Agreement that includes investment. This is the course for the future,” he said.


Indonesia

By Zakki P. Hakim

Indonesia is pursuing one FTA negotiation - arguably with one of the toughest country to negotiate in the world - the United States.

But the perception from the US is that Indonesia as half-hearted in its commitment to establishing a free-trade agreement (FTA) between the two countries, thus leaving talks in limbo.

US Agency for International Development (USAID) economic consultant Stephen Wendel suggested that Indonesia should accelerate the talk otherwise it would face the risk of losing market share in the US.

"Indonesia is not serious. If both are serious, it is possible for an agreement," he said.

According to Wendel, the US was highly concerned about the violation of intellectual property rights, and if the government remained passive in tackling the issue, the US would be highly reluctant to pursue the talks further.

The two countries have yet started any formal negotiations as they are still studying the benefit of establishing a FTA.

Wendel went on that it was important for Indonesia to pursue a FTA deal with the US ; otherwise, Indonesia’s market share could shrink, as other countries make grounds on FTA.

For example, he said that Thailand was now closer to establishing an FTA with the US, creating a possibility that might threaten half of Indonesia’s exports to the US.

Under the FTA with Thailand, the US is to cut significantly import tariffs for several of Thailand’s export items, which would make them more competitive than similar products from Indonesia.

Wendel said the tariff cut, for instance, would make Thai footwear products about 20 percent cheaper than Indonesian, while Thai-made women’s and girls’ clothing would be 12 percent lower.

Indonesia exported about US$1.1 billion worth in women’s and girls’ clothing to the U.S. last year, and $602 million in footwear exports. According to latest data at the Ministry of Trade, the country’s total exports to the U.S. reached $6.4 billion from January to November in 2003.

USAID senior economist, William E. James, said Indonesia had a lot to gain and less to lose in establishing an FTA with the US.

On other hand, U.S. exports would not experience much of a boost, as most key American products have entered Indonesia with low tariffs. Only cars and other motor vehicles, which only accounted for 0.3 percent of US exports to Indonesia, reached $2.4 billion in the first 11 months of last year.

Wendel added that since the US might not gain much from the trade deal in terms of its exports of products, it would propose wider market access for its services including transportation, travel and commercial services.

According to a study by a research institution at the University of Indonesia, some 50 groups of goods had the potential to be included in the planned FTA with the US, including textiles and apparel, furniture, sound recorders, natural rubber latex, telecommunication equipment and mollusks and fish.

"It was however still a preliminary study, we need to find more both the advantage and disadvantage in trading each commodity," Ministry of Trade’s director of bilateral cooperation Sondang Anggraini said.


Japan

Japan and the Philippines have reached a basic agreement on a bilateral free trade agreement after striking a deal on steel tariffs at the sideline of a two-day ministerial meeting of the Asia-Pacific Economic Cooperation forum in Santiago.

The free trade agreement with the Philippines would be the third FTA for Japan following the deals with Singapore and Mexico. Observers said that the agreement with the Philippines would give momentum to ongoing FTA talks with South Korea, Malaysia and Thailand.

The agreement is likely to be endorsed by Prime Minister Junichiro Koizumi and Philippine President Gloria Macapagal-Arroyo on the sideline of the summit talks of the Association of Southeast Asian Nations-plus-three — Japan, China and South Korea — to be held at the end of November, in Laos.

Whether or not to accept Philippine nurses and care-givers to Japan was also a focal point of the FTA negotiations between the two countries. During talks in Manila late last month, however, the two countries reached an agreement that those licensed in the Philippines will be allowed to work in Japan if they pass Japanese qualification tests.

Japan also agreed to lower tariffs on bananas and pineapples from the Philippines. But the two countries postponed a decision on sugar imports, a politically sensitive product, by agreeing to resume talks four years after the FTA takes effect between them.

As for Malaysia and Thailand, Japan would like to conclude FTA negotiations within this year and plans to do so with South Korea next year. Tokyo also aims at starting negotiations for a free trade pact with ASEAN itself in April 2005. Japan is also likely to agree soon with Chile to establish a joint study panel on FTA, which will be comprised of government officials, business leaders and others.

In the talks with Malaysia, the main point is Japan’s demand for the elimination of automobile tariffs. But Malaysia’s policy of fostering and protecting its domestic automobile industry has been an obstacle.

In the bilateral talks held since January, Japan has demanded automobile tariffs be eliminated as soon as possible, but Malaysia has insisted that automobiles be exempted in principle from tariff cuts.

One factor in Japan’s favour is that Malaysian Prime Minister Abdullah Ahmad Badawi, who took office in autumn last year, appears to broadly support opening up the country’s markets. Abdullah plans to review the automobile industry policy within the year, eyeing some measures to liberalize the car market.

An Economy, Trade and Industry Ministry insider predicted that Malaysia’s policy review would benefit the FTA talks, saying, "It’s possible for the two sides to reach a basic agreement by the end of the year."

In talks with Thailand, the main focus has been on whether Japan will liberalize its controls on agricultural imports. Japan and Thailand already have agreed that rice----which was considered as the main obstacle in the negotiations—will not be subject to tariff cuts. But many hurdles still remain as Thailand continues to strongly demand the elimination of Japan’s tariffs on chicken, sugar and starch.

A diplomatic source said, "Thai Prime Minister Thaksin Shinawatra can’t make a bold decision until the country’s general election next February."

As a result, the future of the negotiations with Thailand remains uncertain, the source said.


Malaysia

By Ronie Tan Choo Seng

A firm supporter, and often promoter of the Asean Free Trade Area (AFTA), Malaysia is in discussions to extend its free trade arrangements with a host of other countries.

Malaysia has started negotiations or has expressed an intention to explore the feasibility of free trade agreements (FTAs) with the US, Australia, China, Japan, South Korea and India.

In a way, this will help to place Malaysia on an equal footing with its immediate neighbours - Thailand and Singapore - that have either signed or are in more advanced discussions for FTA, according to officials.

But they also conceded that ack of an FTA with the US, the world’s largest importer of a wide range of goods, for example, has placed Malaysia at a disadvantage in terms of access to that most important market.

There are companies that are moving their manufacturing operations from Malaysia to those countries that have FTAs or have preferential tariffs with the US. A case in point is public-listed Tong Herr Resources Bhd, a manufacturer of nuts and bolts. It had announced in May that it will set up a plant in Thailand.

Tong Herr has said there is an import duty of 8.6% in the US for stainless steel screws and bolts exported from Malaysia but there is no duty for Thailand. The tariff advantages that Thailand has would increase further after it concludes its advanced negotiations for an FTA with the US.

The likelihood of a Malaysian FTA with the US is good as Prime Minister Datuk Seri Abdullah Ahmad Badawi has fostered an amicable relationship with the US government.

The view of the Malaysian government leans towards FTAs as it has consistently supported the development of AFTA.

Since low tariffs started to take effect in the AFTA area in 2003, Malaysian companies have found they have free access into the regional market. As tariff barriers have been lowered, Malaysian companies are limited in their regional exports by their marketing capabilities only.

Malaysia has been slower than Singapore, which has an FTA with the US, and Thailand as Malaysia initially preferred that the AFTA countries negotiate for a collective FTA with other countries. It has now come to realise that in some instances, it may be necessary for each AFTA member country to negotiate on its own terms.

The intention and the negotiations have started or will soon start, and the next one or two years should see Malaysia signing a number of FTAs with its important trading partners.


Philippines

By Ronnel W. Domingo

As more and more countries take to the negotiating table on possible bilateral free trade agreements, the Philippines is seeking to secure greater access to markets along side others.

Ramon V. Kabigting, director of the Department of Trade and Industry’s Bureau of International Trade Relations (BITR), said the country’s overall strategy was to stick with Asean.

“Most of our initiatives on this respect are being done with and through the Asean,” Kabigting said. “For us, this is the most convenient way and probably the most effective.”

Asean FTA initiatives provide the Philippines the opportunity for greater access to the vast markets of China and India as well as the more advanced markets of Australia and New Zealand, and even South Korea.

Even then, the country was the last among the 10 Asean members to enter into China’s Early Harvest Programme. To take effect on Jan. 1, 2005, the Philippine-China EHP was clinched in September after earlier disagreements on which tariff lines should be included.

As far as bilateral arrangements are concerned, the Philippines is so far engaging only with Japan. Negotiations on an Economic Partnership Agreement have reached a fifth round, which was held in Manila last October.

There have been talks on pushing for a free trade pact with the United States, but this has gone only as far as lobby efforts from business groups in both countries.

Also, while the government rides the wave of worldwide trade liberalization, there are business sectors and advocacy groups who either push for the retention of tariffs and duties or demand for increased rates.

For instance, the Philippines had to compensate Singapore at least $4 million for not reducing tariffs on certain petrochemical products in support of local industry players. Despite that, the petrochemical firms repeated its urge on the government to delay further the reduction of tariffs for another six years.

In turn, advocacy groups insist that Philippine industries remained on the losing end of trade liberalization. One such group, the Free Trade Alliance, want the extension of quota systems and the retention if not the increase of existing tariffs.

Still, Philippine trade officials are tagging along with their Asean colleagues to more negotiations.

In a summit to be held in Lao PDR this November, Asean leaders were expected to agree on starting free trade talks with South Korea. The Philippines, along with Malaysia, is expected to benefit the most in an Asean-Korea FTA-with exports seen to grow by $500 million to $1 billion a year.

Asked about bilateral agreements, the BITR’s Kabigting said the government does not reject any opportunity to engage in such pacts. “(But) by being part of a group, the Philippines can be more attractive to possible free trade partners,” he explained.

The country’s population represents 16 percent of the regions’ 500 million people and roughly 10 percent of Asean’s total trade of about $720 billion.


Singapore

By Audrey Tan

Staid, business-like Singapore seldom invites a description as scandalous as "promiscuous" but this was exactly the accusation thrown at the city-state more than two years ago.

Singapore was then negotiating Free Trade Agreements (FTAs) with the United States, Australia and the European Free Trade Association (EFTA), after concluding similar deals with Japan and New Zealand.

This flurry of FTA activity with various different partners led some to describe Singapore’s trade policy as promiscuous.

But there is nothing morally wrong about trade promiscuity, argued Professor Tommy Koh, Singapore’s chief negotiator for the US-Singapore FTA.

"To be faithful to one’s spouse is a virtue. But this Singapore promiscuity is a virtue, especially for a small country," was how he memorably defended Singapore.

Today, Singapore’s strategy of pursuing FTAs continues to thrive in an environment where multilateral trade talks continue to be bogged down by a lack of consensus.

Besides the Asean Free Trade Area (AFTA), Singapore has inked FTAs with New Zealand, Japan, EFTA, Australia, the US and most recently, Jordan.

It is also currently negotiating FTAs with Canada, India, South Korea, Panama and the Pacific Three (New Zealand, Singapore and Chile).

The list of countries with which Singapore has agreed to negotiate or explore FTAs is even longer : China, Bahrain, Egypt, Kuwait, Pakistan, Iran, Qatar, Oman and Sri Lanka.

Two years back, this list could have earned Singapore accusations of unbridled promiscuity.

But as many other countries - some of which were the harshest critics of Singapore’s trade policy - jumped on the FTA wagon, Singapore has found that it is not alone in believing that bilateral trade deals can add to the multilateral trade process.

Singapore’s philosophy on FTAs is spelt out clearly by the Ministry of Trade and Industry (MTI).

"While we are unequivocal supporters of the World Trade Organisation, we also strongly believe that trade efforts undertaken in regional forum, as well as under bilateral FTAs can accelerate the momentum of trade liberalisation and strengthen the multilateral trading system," the ministry says on its own website which carries a link to a government website dedicated to FTAs (www.fta.gov.sg).

For trade-dependent Singapore, FTAs enhance the flow of trade and investment flows by providing lower tariffs for bilateral market access.

But Singapore’s FTAs have also gone beyond mere tariff-cutting. The agreements address issues such as investment protection and facilitation, government procurement, movement of people and even intellectual property rights protection.

All these are important considerations for companies doing business in foreign markets.

The India-Singapore Comprehensive Economic Cooperation Agreement, for example, will address how bilateral investments are treated as well as the movement of people between the two countries. The agreements also play a wider role in helping Singapore’s business community to move up the value chain, MTI said.

For example, the US-Singapore FTA commits Singapore to raising its standard of IP protection to a level similar to the developed countries’. Greater cooperation in areas of science and technology also help boost research and development in Singapore, MTI said.

Singapore is now hoping to wrap up negotiations on the FTA with India by the end of November and to conclude an FTA with South Korea by the end of this year.

Dr Chua Hak Bin, senior regional economist at DBS Bank in Singapore, says that the USSFTA - which came into force this year - has been the most significant FTA for Singapore so far as the US is one of Singapore’s largest tradingpartners.

"The Asean-China FTA will bethe next bigdealbutthe Singapore-India FTA is also significant as India is a huge, growing market," he said.

So far, Singapore has seen some improvement in trade flows with the countries it has concluded FTAs with, he said.

But more importantly, these FTAs put Singapore on the map for businessmen overseas. "For example, the USSFTA raised awareness in the US about Singapore as an investment location," said Dr Chua.


Sri Lanka

By Zacki Jabbar

Despite Sri Lanka’s trade policy reform coming much earlier than the rest of Asia and on average its tariffs are by far the lowest in the region, with exception of high taxes protecting its import substitution agricultural sector, the country has not been able to finalise as many Free Trade Agreement (FTA), it would have liked to.

This could largely be attributed to the protection of national interests - mainly the farmers, coming in the wake of a renewed interest in global trade in agriculture.

Sri Lanka was once known as the "Granary of the East" ,but in the last decade or so incomes generated from the textile sector and foreign exchange remittances of Sri Lankans working in the Middle East, resulted in the agriculture taking a back seat.

In between changes of market-oriented and left of centre governments taking office, Sri Lanka has been able to finalise an FTA with its giant neighbour, India, though the reserve list remains a contentious issue.

The FTA with India provides for an exchange of traditional items such as rice, tea, spices, handicrafts, garment, industrial products and computer technology services.

The balance of trade is in favour of India which is a much bigger economy.

Sri Lanka is continuing FTA discussions with America, Pakistan, Egypt, Bangladesh, Nepal, Italy and France.

An FTA with America would be significant in the light of considerable volumes of Sri Lankan garment being exported to that country and the quota system coming to an end in January 2005.

The FTA with Pakistan is almost compete but for the issue of rice and flour imports with both countries trying to protect their farm sectors.

Pakistan’s High Commissioner to Sri Lanka, Bashir Wali Mohammed expressed a wish for a deadline for the FTA to be finalised.

The November 15, deadline has lapsed and a Sri Lankan delegation is scheduled to visit Islamabad shortly to continue further discussions.

Wali Mohammed has made an interesting proposition where by Pakistan would export its mangoes to Sri Lanka for about two months of the year and Sri Lanka in turn could send its mangoes to Pakistan for the rest of the year.

Talks with Egypt are at a delicate stage with its Assistant Foreign Minister for Asian Affairs, Ezaat Saad El Sayed who was in Sri Lanka said that trade volumes between the two countries were decreasing ’radically’.

This he said has prompted both sides to remedy the situation by fixing the third session of the Joint Commission on Economic and Technical Cooperation (JCETC), for early next year.

Sayed observed that Egypt used to import 80% of its tea needs from Sri Lanka but now most of it is got from Kenya.

"We could work towards redressing the balance at the next JCETC meeting", he added.


Thailand

By Jeerawat na Thalang

The initiation of bilateral free trade agreements with countries around the world has become is one of the cornerstones to the foreign policy of the Thai government headed by Prime Minister Thaksin Shinawatra.

Impatient with the slow trade liberalisation progress at the World Trade Organisation, the Thai government has over the few years pursued a number of free trade deals to aid Thai exporters with new opportunities.

Thailand is the the world’s 23rd largest exporter with the export value topping US$80.23 billion. The Thaksin government believes that FTA could be the best option to link Thailand with strategic partners such as the US, Japan, China, Japan, India, Australia and Middle East.

"(Every one is engaged to FTA)...The only country that doesn’t have the FTA is Mongolia," said Thai Trade Representative Kantathi Suphamongkhon, who is responsible for Thai-Peru FTA talks.

The government didn’t set the deadline for FTA, even though they hope that each FTA talk should take around 18 months to complete. The Thai-Australian FTA took just one year to conclude.

After the two rounds of talks, the most-watched Thai-US FTA negotiation however is expected to take much longer period due to a number of sensitive issues involved such as labour, intellectual property and environment. “The government didn’t give us the deadline but is prepared to wait for the best (possible) agreement,” said Nitya Pibulsongkram, chief of the negotiator for Thai-US FTA and former Thai ambassador to Washington DC.

FTA has also blended into the political agenda especially when it involves trading of agricultural products. Thai dairy farmers earlier staged a protest against Thai-Australian FTA by saying that they will suffer from the flood of cheaper diary products from Australia in 2020.

Thai rice farmers meanwhile expressed their strong disappointment when the Thai government decided to drop rice from the Thai-Japanese FTA talks. Not to mention the US-Thai FTA which already created the nationalistic sentiment from some quarters with regard to the possible set-up of the international dispute settlement panel which might supersede the local courts.

FTA does not have only the economic implications. Thai-US FTA could not have taken place without the long-standing security relations between the two countries. Thailand’s FTA with China is set up under the broad context of China-Asean FTA. Thailand’s desire for a FTA with Japan is also based more on certain strategic relations other than economic incentives. The next round of talks is scheduled in December.

“FTA with Japan is not just a question of trade but also a matter of logistics and strategy for Japanese leaders,” said Pisan Manawapat, chief negotiator of Thai-Japanese FTA, said.

The FTA with India is taking shape, with both sides agreeing to reap an early harvest by agreeing to cut tariffs on more than 80 items from Sept this year. In spite of some concerns from the Indian side over the possible influx of Thai vehicles to the Indian market, Indian and Thai leaders decided to proceed with FTA to support Indian “Look East” policy and vice versa.

The Thai-Peruvian and Thai-New Zealand FTAs are set to be concluded this year. Thai-Bahrain FTA may sound less significant compared to others but it marks the kingdom’s effort to enter into the Middle East.

The FTA with Australia is probably the most comprehensive of all, covering all sectors and services. It is the first FTA that Thailand signed. The FTA with Australia also serves as a model for Thai-New Zealand FTA talks.


Vietnam

Nearly a decade after the lifting of the trade embargo with the United States, Vietnam has almost fully integrated into the orld trading system. Following the pattern of other East Asian nations, Hanoihas pursued export-oriented economic strategy.

Although not yet a member of the World Trade Organisation, the Vietnamese government has planned to work on the access to new markets through the bilateral trade agreements.

Apart from the tax privileges that Vietnam already enjoys under the Asean Free Trade Area (Afta), Vietnam will start its first round of free trade agreement (FTA) negotiations with Japan and South Korea next year, as well as prepare for negotiations with Australia and New Zealand in the near future, according to Vietnamese trade officials.

Under AFTA, more developed ASEAN economies like Thailand and Singapore started applying tariff reductions in 1993 and effectively reduced rates to 0-5 per cent in 2003, Vietnam received a three-year phase-in period and special treatment as a new ASEAN member. It is implementing massive tariff cuts in 1996 until 2006.

Tran Dong Phuong, deputy director of the MoT’s Multilateral Policies Department, said Vietnam, through ASEAN, is looking to sign FTA with China, Japan, South Korea, Australia, New Zealand and the European Union. The MoT reported it has recently established a research body on free trade agreements (FTAs) to devise a national strategy for future involvement in free trade deals with other countries and trade blocs. The task force, headed by Deputy Trade Minister Luong Van Tu, will comprise deputies from various ministries and will report its findings to the Prime Minister.

Asean’s negotiations with China to create FTA by 2010 are already underway under the Asean-China Comprehensive Economic Co-operation, signed at the 8th ASEAN Summit in Phnom Penh.

The average duty within the ASEAN-China FTA, if realised, will be as low as 0-5 per cent. The free trade area could possess 40 per cent of the world’s foreign exchange reserves and more than US$2 trillion in gross domestic product, 10 per cent of the world’s total. ASEAN-China trade is expected to reach $100 billion this year.

The idea of Vietnam-Japan FTA is taking shape. However, Vietnamese officials noted that they has experienced some early difficulties during the preliminary talks with Japan. In Vietnamese Foreign Minister Nguyen Dy Nien’s meeting with Japanese Foreign Minister Yoriko Kawaguchi last December, Kawaguchi said Japan wanted to deepen the discussion, with the recently signed bilateral investment deal serving as a basis.

But the Kyodo news agency cited a Japanese official as saying, "It may be too early to talk about an FTA because Vietnam has yet to enter the WTO."

source: ANN