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Washington insists financial services must be on agenda

Bangkok Post, 30 May 2005

Washington insists financial services must be on agenda


Financial-sector liberalisation could undermine efforts to negotiate a Thailand-US free-trade area agreement, according to Finance Ministry officials.

The Thai government has yet to commit to talks on financial liberalisation, but sources say the US position is clear _ if Thailand is unwilling to discuss the financial sector, then no free-trade deal will be possible.

``From the very start of the discussions, the US has made it clear that issues such as the financial sector, environment and labour must be placed on the table,’’ one senior ministry official said.

The US has proposed 17 areas for discussion, covering not only tariffs and market access for industrial and agricultural products, but also areas such as investment, government procurement and customs procedures.

But financial-sector liberalisation is likely to be one of the more controversial, given that Washington is likely to seek a broad expansion in market access to not only the banking sector, but also insurance, asset management and securities brokerage services.

Thai banks are adamantly opposed to full liberalisation of the local sector, given the competitive advantages in technology and capital of leading international banks.

Trade negotiators, however, say that a decision would have to be made before the next scheduled meeting between the two countries, to be held from July 11-18 in Montana, and the fourth round of talks since US President George W. Bush and Prime Minister Thaksin Shinawatra agreed to open talks in 2003.

The talks are based on a ``negative approach’’, under which both sides stipulate areas of exclusion from the agreement. This differs from a ``positive approach’’, in which an agreement will specifically outline the areas for liberalisation.

Finance Ministry officials say that with the financial sector, they hope to use an approach similar to that taken in the Thailand-Australia free trade area agreement. In the pact with Canberra, which took effect in January, both sides agreed to open talks regarding the financial sector three years after the FTA was signed.

But sources said it is unlikely that the US would agree to such a condition, given the insistence that financial services be included in the initial agreement.

Discussions could ultimately be suspended if Thailand insists on excluding the financial sector, one official said.

``Mr Thaksin has previously told Parliament that he was not in a rush to finalise the talks [with the US],’’ one official said.

``So even though the hope is to conclude the talks this year, Mr Thaksin has said clearly that if we do not benefit, then there is no need to sign the agreement.’’

Yet closing an agreement with the world’s largest economy would potentially lead to significant economic gains for Thailand. The US is one of Thailand’s most important trading partners, with Thai exports to the US totalling $15.5 billion in 2004 compared with imports of $7.2 billion.

 source: Bangkok Post