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12 Jan 2006

Trading

FTA Thailand-the US, the sixth round Emphasize on stance and mutual benefits

คะแนนเฉลี่ย

Thailand and the US' negotiations on the FTA are quite comprehensive as they cover all issues, including liberalization of trade, services and investment, as well as intellectual property, the environment and labor that the US wants to bind with strict legal enforcements, inducing long-term obligations for Thailand. This case is different from the bilateral FTAs Thailand has signed with Australia and New Zealand, which are not strictly tied to intellectual property, the environment or labor. Therefore, the FTAs with these two countries did not result in Thailand having to amend its domestic laws. In addition, Thailand did not bind itself with Australia to obligations in the financial and telecommunications sectors where Thailand is still not ready for liberalization. However, Thailand and Australia will negotiate on these issues again in 2008. Meanwhile the FTA between Thailand and New Zealand does not cover liberalization of the service sector, but in 2008, this issue will also be raised by them for negotiations.

If Thailand has to accept the US' proposals in negotiations, it is expected that Thailand may have to amend its domestic laws, such as permitting American citizens to work in some careers which are reserved only for Thai citizens, at present, the proportion of foreign shareholders may have to be allowed increases in some types of businesses, and Thailand may have to impose stricter protection on intellectual property. These conditions will widely affect both entrepreneurs and general consumers. Therefore, Thailand should not hurry in negotiations with the US, and should consider the following points carefully:

- Liberating trading markets The FTA negotiations to mutually reduce tariffs and NTBs (Non-Tariff Barriers) is expected to enable Thailand to expand exports to the US more conveniently. As the US is the number one export market for Thailand, if Thailand does not establish the FTA with the US, it is possible that Thailand will be put at a disadvantage vis-เ-vis goods from other countries that have set up FTAs with the US, as their goods will enter the US easier, due to the US' reduction of tariffs and NTBs. It is projected that Thailand will gain advantages from the US' tariff reductions in some of its potential exports such as garments and textiles, automobiles, gems, jewelry and canned tuna, as well as get benefits from NTB reductions. But meanwhile, Thailand's agricultural goods are still not ready to compete with the US' goods, and would be negatively impacted, including soybeans, corn, beef, and some Thai industrial goods that the US will get immediate tariff reductions on.

From the above, the establishment of the FTA covers not only trade liberalization, but also services and investments. Particularly, the FTA negotiations with the US consist of more than 20 topics, the consequences of the obligations under the agreement could have deep repercussions.

- Service Sector At present, the Thai service sector still has many restrictions and rules and is not ready to fully compete with foreign businesses. Liberating the service sector to foreign businesses in Thailand is governed by the Foreign Business Act of B.E.2542 (A.D.1999), which sets the maximum proportion of alien shareholding in each type of service business, and the Royal Degree on Employment of Aliens, B.E.2522 (A.D.1979), which forbids aliens to work on 39 occupations reserved for Thai citizens such as accountancy, as attorneys-at-law or as licensed engineers, including specific laws for other service fields such as finance, transportation and telecommunications that define conditions for aliens to operate such businesses. Thailand's being pressured by the US to liberalize the service sector may result in Thailand having to amend these laws.

In addition, under the Treaty of Amity and Economic Relations between the Kingdom of Thailand and the United States of America signed in 1966, Thailand and the US granted rights to each other to conduct businesses freely on the same basis as Thai national except for six reserved fields/activities, including (1) communications; (2) transportation; (3) fiduciary functions; (4) banking involving depository functions; (5) exploitation of land or other natural resources; and, (6) domestic trade in indigenous agricultural products. Therefore, the negotiations for the establishment of the FTA between Thailand and the US, wherein Thailand has been requested to liberalize the above six activities are all fields that Thailand is not ready to liberalize.

- Intellectual property: Negotiations on this point must be proceeded with using caution. Thai authorities must have a clear stance, and consider this issue carefully, because it is possible that Thailand would be put at a disadvantage to the US because the US is a country that invents, conducts innovative research and owns patents on such discoveries as drugs, as well as copyrights on books, music, etc. Expanding the copyright and patent protection would result in the US getting a longer monopoly on these rights, particularly drug patents, as it would make drugs more expensive and harder to access. The US wants Thailand to extend protection on drug patents to 25 years from the former 20 years that Thailand has pledged to the WTO.

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