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US in relentless bid to forge FTA with Southeast Asia

Financial Express (India) - 6 April 2006

US in relentless bid to forge FTA with Southeast Asia

WASHINGTON, Apr 5 (AFP): More than three years after President George W Bush unveiled an initiative to forge free-trade agreements with Southeast Asian nations, a deal aimed at prising open the 500-million-strong regional market remains elusive.

As negotiations with Thailand are in limbo due to political turmoil, the United States is hoping to seal a pact with Malaysia by the end of the year and with Indonesia later under the "Enterprise for ASEAN Initiative."

Lifting trade barriers in Southeast Asia has become crucial for the United States largely because of competition posed by China, which already has a free-trade deal with the Association of Southeast Asian Nations (ASEAN).

The United States remains the biggest investor in ASEAN but China’s trade with the region-now exceeding 130 billion dollars per year-could match US volume of 136 billion dollars this year, US business officials say.

The only US free-trade deal in Southeast Asia so far is with Singapore but it was concluded before Bush unveiled his initiative in October 2002.

Washington was eager to forge an agreement with Thailand to use it as a template for other Southeast Asian free-trade deals but negotiations with the key US ally were suspended in March after Prime Minister Thaksin Shinawatra became embroiled in a political crisis.

Even with Thaksin’s resignation Tuesday following snap polls, a new Thai administration is unlikely to immediately resume talks on the touchy subject, analysts say.

The talks already looked set to miss the goal of completion by spring even before the elections were called because of unresolved disputes over drug patents and intellectual property rights.
Many Thais strongly campaigned against the free-trade deal due to perceived lack of transparency as well as fears it would hurt farmers and make vital medical drugs more expensive.

With Thailand a hard nut to crack, the United States has turned its sights on Malaysia, with which it would hold the first round of FTA talks this summer and hopefully seal a pact before December.
Indonesia, the largest Southeast Asian nation, could be the next candidate.

US Trade Representative Rob Portman and Indonesian Trade Minister Mari Pangestu told reporters after talks in Washington that they were putting in place the necessary "building blocks" for the free-trade talks to be launched.

"We are going to launch a study with the Institute of International Economics (a Washington-based think tank) to study the cost benefits of a US-Indonesia FTA," Pangestu said.
She said the two nations first had to agree on various issues in such key areas as investment, customs and intellectual property rights, describing them as "important stepping stones for an FTA."

Portman said "to maximise success ultimately we have to make sure we are well-prepared when we launch discussions."

"I think the Thais had defensive and strong offensive interests but to date have not been willing to compromise," Viji Rangaswami of the Washington-based Carnegie Endowment think tank said.
She was referring to disagreements on drug patents, intellectual property issues and the liberalisation of financial services that hampered a US-Thailand deal.

"I assume that if the US is confident it could conclude negotiations, the Malaysians have indicated that either they don’t have the same sensitivities or they are not going to demand access in some of the same areas that the Thais were keen to get access," she said.

 source: AFP