Pasos para un análisis cualitativo

The following trade policy recommendations of bilateral trade policy particularly within the FTA perspective are proposed to enhance the contribution to growth of Thailand’s trade. The impact of openness between Thailand and most of its major trade partners is shown to be positive but insignificant on Thailand’s growth, but this does not absolutely imply that it is impossible to obtain mutual benefits, and there is room for improvement. It can be said that these benefits have not been negotiated recently in the early 2000s and implemented for a short time, and some are even under negotiation. There are five major bilateral FTAs that are the focus of our discussion: the Thailand-Australia FTA, the Thailand-China FTA, the Thailand-India FTA, the Thailand-Japan FTA and the Thailand-US FTA included.

The negotiation and implementation of bilateral FTAs are less time- consuming, more flexible and easier to reach final agreements when compared to multilateral and regional FTAs. Moreover, it can be seen that the impact of bilateral FTAs is higher than that from multilateral and regional trade liberalisation, according to our empirical findings. However, bilateral FTA implementation has to be based on the basic agreement of the WTO, called the WTO-plus rule to assure mutual benefits (Prachason, 2007). Overall recommendations are discussed below and followed by the individual cases of the five major FTAs listed above.

1) Trade

It can be affirmed that the global trading system has become much more liberalised and world economies have become increasingly integrated. However, the slow progressive liberalisation of both traditional and new issues, such as trade in agriculture and services of the Doha Round Agreements of the WTO, motivates regional and bilateral FTA negotiations that are considered a huge advantageous step as the building blocks to multilateral trade liberalisation. This criterion reflects the current important view of Asian regionalism, resulting in the expansion of various FTA forms

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(Tran Van Hoa, 2004a, 2004b). The important desirable objectives of the FTAs are to implement a wider and deeper regional economic integration and cooperation, to enhance trade between members and to stimulate growth, as well as increase welfare.

Progress in FTA negotiation and implementation of Thailand since 2002 is evident in that it is well positioned and committed to a dual track policy. More specifically, the Thai government actively desires to transform a dual track to a fast policy later, via promoting other trade related issues such as trade and investment facilitation including services. It can be said that the major existing literature supports the positive and significant role of trade liberalisation or openness despite the fact that in some cases, it is found that the role is small. This empirical finding can be attributed to a better and advanced estimated trade-growth model combined with the use of historical time series data. Based on the empirical findings on Thailand’s trade with its major partners, the impact of trade openness on growth is positive in most cases. However, it is significant only in the case of the Thailand-Japan FTA model. In practice, the implementation of bilateral FTAs is a high priority and focus of Thailand’s recent trade policy.

Chirathivat and Mallikamas (2004) also suggest the following policy recommendations of key issues to form multiple FTAs that need to be analysed. First, trade creation and trade diversion represents the fundamental costs and benefits of regional and bilateral liberalisation and economic partnership that requires examining in depth the potential risks of opening up the market and the opportunity gains from partners’ well-prepared and efficient implementation. Second, the transportation costs among the prospective members should be lowered to contribute to trade creation and to enhance market widening. Third, the increased market access for partners leads to increasing returns to scale, and more efficiency and competitiveness in the export industries. Fourth, the issues in strict FTAs can be different from customs union and rules of origin, and can act as additional trade barriers in an FTA.

The policy recommendations of trade for Thailand’s major FTAs are discussed in sections 6.2.2.3 to 6.2.2.7 to enhance the trade flow between Thailand and its partners. It can be seen that the empirical results of impact of trade on growth are not positive and significant for all models. Nevertheless, the policy recommendations have to be discussed in relation to the role of trade openness for all models, because

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accelerating trade liberalization via a more open market and free trade is the crucial objective of FTAs.

2) FDI and Services

Like most developing countries, free trade enhances Thailand’s opportunity of growth and development through being active in bilateral trade liberalisation efforts. The removal of tariff and non-tariff barriers creates a more open trading environment. The manufacturing sector can gain results via diversifying resources and expanding its production base resulting in economies of scale, productivity and specialisation development, and increased competitiveness. Furthermore, an open and free trade policy attracts increased FDI inflows to promote growth through employment, technology and knowledge diffusion. Trade in services liberalisation is also strongly required by developed countries in FTAs. However, this process is time-consuming in developing countries mainly because of their uncompetitive and protected services sector. Efficient and proper preparation, adjustment, reform and deeper cooperation are all essential to solve the negative impact. More specifically, these schemes protect Thailand from losing not only trade and expanded markets, but also exclude it from an enormous integrated pool of global resources and capital needed for economic development (Department of Trade Negotiation, 2008a).

3) FTA Negotiation Strategy

In relation to our findings, the negotiating strategy for Thailand’s FTAs and the preparations and adjustments needed to ensure Thailand’s national interests are protected, and the business sector benefits from the FTAs are achieved, can be developed as follows (Department of Trade Negotiation, 2008a).

Thailand’s FTA negotiating strategy

 FTAs must cover a comprehensive scope of trade in goods, services and

investment as well as participate in non-tariff barriers elimination and facilitation in trade and development cooperation.

 FTAs need to be concerned with reciprocity, taking into account the different levels of development of partners and flexibility (such as a longer liberalisation period required accommodating necessary adjustments).

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 WTO rules and conditions have to be asserted in FTAs to incorporate efficient mechanisms preventing negative effects on domestic industries, e.g. anti- dumping (AD), countervailing duty (CVD), safeguards and dispute settlement mechanisms (DSM).

FTA preparations and adjustment

 Set up of FTA Negotiation Committee that consists of experts from the public and private sectors to coordinate service and enhance the implementation, adjustment and restructuring processes of the Thai economy.

 Required trade facilitation to lower trade and business costs with tax and tariff structures reforms, customs procedures simplification and harmonisation, finance and credit facilities expansion.

 Promotion of more intensive trade and economic relationships between

Thailand and its FTA partners via the formation of joint business councils, working committees, official visiting and trade fairs and exhibitions.

 Strengthening of small and medium enterprises (SMEs) and grassroots

economy sectors through training of entrepreneurship marketing skills development to increase productivity, efficiency and international competitiveness.

 Develop transportation infrastructure to facilitate trade and promotion of a productive and innovative workforce, by training in knowledge and skill improvement, as well as the establishment of social safety nets.

In addition, Thailand also need to enhance and extend the implementation process of signed Asia neighborhood FTAs such as the Thailand-China FTA and the Thailand-Japan FTA, as these partners are more powerful in the Asian and global economy. The MFN and elimination of anti-damping and countervailing duties must be negotiated and the coverage must be extended to include trade in services and investment to guarantee the mutual benefits of FTAs. In addition, the variety of potential outcomes of FTAs depends on the breadth of products, depth of liberalisation, facilitation procedures, time frame and adjustment costs. Generally, the most important concern is to negotiate and implement bilateral FTAs compatible with the two paths of regional and multilateral trade liberalisation. Thailand’s FTA policy strategy can be

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improved by the following according to the suggestion by Sally (2008): first explicitly relate FTA policy options to domestic reforms policy to mutually enhance growth; and efficiently coordinate with non-government organisations (longer time-lines should be compatible with fewer negotiations).

Some additional considerations should be focused on when negotiating FTAs with different partners (Montreevat, 2003). Discriminatory preferences can be used to force utilised products to be excluded from the international markets. The rules of origin implementation complexity are difficult issues to solve. The compatible implementation of the various FTAs with multilateral and regional agreements is also an important issue. Besides, the FTAs should include high potential competitive export industries to assure the benefits of FTAs. The research and development, production cost reduction, and logistic improvements to decrease transportation costs are examples of issues that increase industry competitiveness. Thailand has to be forceful in its negotiations to implement the requirements of rules of origin, competition policy, and protection of intellectual property rights as well as labour and environment standards, particularly with developed partners.

The readiness of Thailand to accept numerous condition set up by large and powerful negotiating partners under the context of bilateral trade agreements is an important consideration. Some examples of this issue are the low sanitary standards in the case of Thailand and Australia, an exclusion of agriculture in the case of Thailand and Japan, and the service liberalisation in the case of Thailand and Australia and between the US. The US-Singapore FTA can be used as an example to study and prepare the Thai delegation for FTA negotiations with the US. Nevertheless, the difference in both economic structure and development of all partners needs to be taken into account. Another crucial issue that needs to be solved effectively is the allocation of resources and a fair income distribution from the FTAs.

The improvement of competitiveness and productivity is also crucial for the Thai agriculture sector, because it is the country’s major export sector. The fair income distribution between farmers, producers and exporters should be recognised. The government should implement policies to increase the quality of agricultural products, the value added of final products, as well as the low price guarantee and appropriate subsidies to farmers. Concerning FTAs, the priority of the Thai government to enhance

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more enhance its negotiation skills and insist on the incorporation of WTO rules and conditions both when negotiating new FTAs and when renegotiating to more effectively implement and extend the scopes of signed FTAs. This is an ample task to gain benefits from trade creation, and to avoid trade diversion and possible added costs from the trade liberalsation competition of neighbouring countries FTAs and with Thailand’s other major trade partners.

According to Prachason (2007), there are many lessons to be learned concerning trade liberalisation by FTAs: first, it can stimulate faster and greater imports of food that adversely affect Thai farmers; second, it can affect different economic sectors in different ways, the agricultural sector tends to be loser because of remaining non-tariff barriers and limited gains are available only in a few commodities covered particularly in the Thailand-China FTA; third, the agriculture sector also has less adjustment capacity than the industrial sector; and fourth is the simplification and harmonisation of rules of origin in Thailand’s FTAs to decrease trade diversion and costs.

4) Relevance to Policy Reform

The above FTA strategy policy requires the transformation of trade policy tracks (Sally, 2008). It is important to simultaneously implement the wave ofasserted unilateral liberalisation and regulatory reform to avoid misguided government intervention and to enhance competition. The focus and priority of Thailand’s FTA policy has to be compatible with the WTO fundamental agreements. Besides, the efficient adjustment to assist small rural farmers that are adversely affected by the country’s market opening and massive imports of cheap goods has to be implemented. Therefore, the Thai government must strongly commit to implementing an efficient dual policy of domestic liberalisation under FTAs and regulatory reforms agenda.

The priority of liberalisation policy under both regional and bilateral FTAs to enhance benefits is recommended by the following. The first priority is trade in goods liberalisation particularly in agricultural goods, followed by manufactured goods. The second priority is trade in services, especially in financial services liberalisation. The third priority is trade related investment liberalisation. Other important aspects to support this aim are human resource and infrastructure development cooperation.

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Furthermore, a unilateral liberalisation without discrimination needs to be implemented with all countries, including transparency competition policy reform. In addition, capacity building policies to increase competitiveness of potential industries under FTAs and adjustment assistance policy for affected small farmers are necessary.

In summary, there is no doubt that Thailand has encountered many restructuring and adjustment process difficulties under its competitive trade liberalisation environment. An appropriate strategy and efficient adjustment preparation would contribute to more gains in terms of an increased resource base, market expansion opportunities and technology know-how acquisition needed for further development and growth. Thailand has to accelerate to achieve full economic cooperation with all of its FTA partners. This suggested approach is called dual track approach, to assure continual successful growth and to secure Thailand’s position to benefit in the global trading system arena.