Bangkok Post

Thaksin tells businessmen to shape up for free trade

PM says Japan pact for greater public good

POST REPORTERS

7 May 2005

Prime Minister Thaksin Shinawatra yesterday took local industrialists to task for criticising the government’s efforts to forge a free trade area (FTA) agreement with Japan, even as negotiators on both sides continued working to close a deal.

In the latest development in the talks, Japan has eased its stance on the steel and auto sectors by agreeing to a phased liberalisation schedule. Thailand, however, remains opposed to opening up the auto sector at this time.

Mr Thaksin criticised local businesses for not improving their competitiveness and seeking to maintain state protection even as liberalisation would benefit the public overall.

’’It’s natural that certain industries might complain. ... It’s not that after an agreement, we won’t look after them. But they need to adjust as well,’’ he said.

’’The government has constantly urged the private sector about the need to reform. You can’t stand still in a competitive global environment.’’

The premier said the government needed to place the public benefits of trade liberalisation ahead of the interests of any one manufacturer.

’’Some businesses refuse to change, and have been comfortable their whole lives. Now, when faced with competition, they protest,’’ he said.

’’But if competition benefits the public more, we have to go in that direction, even if it affects some businesses. ... We can’t work as before. We aren’t alone in the world, and we can’t close the country just for the benefit of any one company.’’

On Thursday, members of the Board of Trade and Federation of Thai Industries said they were opposed to opening the auto and steel sectors, and urged the government not to rush to close any agreement if it did not ensure the ’’mutual benefit’’ of Thailand and Japan.

Industrialists say that opening up the auto sector would result in sharp increases in imports of Japanese cars and parts, affecting domestic producers and potentially inflating the country’s trade deficit with Japan.

According to the Bank of Thailand, the country’s exports last year to Japan were worth $13.5 billion, compared with imports of $22.4 billion.

Shoichi Nakagawa, Japan’s minister of Economy, Trade and Industry, held talks on the trade pact with Mr Thaksin and Finance Minister Somkid Jatusripitak yesterday.

Mr Nakagawa said the negotiations were moving forward, but that a number of issues would likely have to be settled by the leaders of both countries.

’’But I’m confident that we can sign the agreement in July,’’ he said.

Among the major sticking points are the scope and pace of liberalisation in the areas of steel, automobiles and parts and agriculture.

Dr Somkid said Thailand was intent on seeking a ’’win-win’’ result, but that protection for the country’s automobile and parts sector remained necessary.

For steel, Japan has agreed to soften its earlier demands for immediate tariff cuts to shift to a quota system based on domestic demand and production capacity.

’’Quotas will be based on domestic production capacity. If demand exceeds production and we will have to import, then it should not worry domestic steel producers,’’ Dr Somkid said.

But he said Thailand did not want to make any immediate reforms in the auto sector, given that the country just last year finalised sweeping tax reforms and reductions for local producers.

’’We just completed restructuring the auto sector, which benefited all local producers, and shouldn’t be too quick to make more changes,’’ Dr Somkid said.

He said the agreement should be seen as building an ’’economic partnership’’, and that Japan had pledged to help Thailand further develop its economic base, human resources and technology.

Nishiyama Keita, director of the Asia-Pacific division at the Japanese embassy in Bangkok, said Japanese negotiators yesterday submitted new proposals for the steel and auto sectors.

Tokyo had previously requested immediate tariff cuts for steel used in the auto, machinery and electronics sectors.

Mr Keita said Japan was now prepared to adopt a timeframe for tariff reductions, but declined to offer details.

Japan also submitted proposals to offer technical and training assistance for Thai manufacturers with a goal of supporting the technological base of local industries as well as promoting the country’s goal to become the ’’Detroit of Asia’’.

Mr Keita said Japan wanted Thailand to cut tariffs for the auto sector by 2010, to ensure that the Thailand-Japan FTA moved in parallel with the schedule set under the Asean-Japan trade talks.

He rebutted critics that liberalising the auto sector would result in a higher trade deficit for Thailand with Japan, as Thai producers overall would gain from shipments to other countries.

In 2003, Thailand imported $1.8 billion worth of Japanese auto parts, with domestic value-added of $800 million leading to exports of $2.6 billion.

Mr Keita said by 2010, Japan estimates, Thai auto parts imports will rise to $4.3 billion, with value-added rising to $4.4 billion and overall exports to $8.7 billion.

Japanese manufacturers have been huge investors in the Thai auto sector, particularly in light pickup trucks.

’’We do agree that this should be a win-win situation [for both countries],’’ Mr Keita said. ’’Japanese manufacturers still view Thailand as a manufacturing centre for Southeast Asia.’’

While no discussions took place on agriculture _ a politically sensitive topic in Japan _ Mr Keita said Japan was willing to promote Thai food products and support value-added creation for Thai food companies under the Thai government’s ’’Kitchen of the World’’ initiative.

Pisan Manawapat, the deputy permanent secretary of the Foreign Ministry and chief negotiator of the Thai-Japan FTA, said a new team would visit Japan soon to hold further talks on agriculture.