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30 Jul 2010


Rubber and Products: FTAs Boosting External Trade (Business Brief No.2892)

In 2010, the global rubber industry has been recovering from slowdowns in the ailing auto industry in 2009.The pickup in auto sales in China, followed by economic improvements in the USA, Japan and South Korea, has resulted in higher demand for rubber and rubber products. The Thai rubber industry has also shown improvement, particularly since 2H09, thanks largely to China's early reductions in import tariffs on rubber products per the China-ASEAN Free Trade Agreement, scheduled to take effect in 2010. Since 2H09, Thai exporters have thus shifted toward compound rubber products in lieu of block rubber, which is categorized as a primary product.Thai exports of rubber products in 2010 have also benefited from privileges per various free trade area agreements, too, e.g., the ASEAN Free Trade Agreement (AFTA), and those between ASEAN and Japan, South Korea, Australia and New Zealand.
Thai imports of rubber products this year have also been on the rise due to the FTA benefits. A major concern lies in an influx of imported rubber products, especially floor and wall rubber tiles, vulcanized rubber, pipes, miscellaneous fittings and conveyor belts that may compete head-on with local counterparts.
Meanwhile, Thailand is scheduled to cut tariffs on auto tires (especially radial bus and truck tires, as well as those for motorcycles) to 5 percent by 2018 from presently 20-30 percent, depending on the sub-category.

Looking ahead, close attention should be paid to gradual tariff reductions committed to in various FTA pacts. The Thai rubber industry should also brace for relocations of manufacturing bases into Thailand and vice versa.