As Thailand negotiates trade deals with some of the world's most robust economies, perhaps it is the time to ask exactly what sort of benefits the country can expect from giving global powers easy access to its markets by WORANUJ MANEERUNGSEE

There are several answers to the question. But the simplest is that FTAs provide the tools and mechanisms to expand export markets, and force local manufacturers to improve efficiency.

They can also turn a country into a marketing centre, like Singapore, where goods freely trade regardless of their origin. Or FTAs might be about image, a symbol that distinguishes one country from another. They also might provide a training ground for countries with small economies to improve competitiveness before expanding into larger multilateral agreements.

FTAs can also serve other political purposes. For example, when the United States entered free trade talks with Latin American countries, the need for measures to prevent drug trafficking were high on the agenda.

Free trade has been a cornerstone of Thai Prime Minister Thaksin Shinawatra's trade policy. But why? What are Thailand's reasons for pursuing FTAs?
Some Thai observers say FTAs will lead to expanding the selection of cheap, highquality imported goods. This, they say, will not only increase the purchasing power of Thai consumers but also expand markets and allow for increased specialisation by producers.

FTAs, particularly those signed with developed countries, will drive domestic reform. As well, they provide an external catalyst for restructuring when domestic political interests might otherwise block such dramatic changes, some analysts say.

Somkiat Tangkitvanich, the research director of the Thailand Development Research Institute, which has been monitoring FTAs, takes a different view. He said the Thaksin administration had failed to clearly make a case for where it thinks FTAs will take the country, economically and socially.

"Consumers will not be able to maximise the benefits of FTAs as long as influential businessmen pressure the government to protect their interests, such as in the telecommunications sector," said Dr Somkiat.

He was apparently referring to allegations of conflict of interest in Mr Thaksin's cabinet, which includes a handful of businessmencumpoliticians who dominate the telecom industry. The government has no stated policy to open this sector to foreign competition under FTAs.

Without clear direction from policymakers, the negotiating process is causing controversy and confusion in business communities, said Dr Somkiat.
The ThaiJapanese FTA negotiations last March turned into confusion when Commerce Minister Thanong Bidaya signalled Thailand would include highquality steel, cars and auto parts in the negotiations. This was totally different from the position that had been taken by Thailand's civilservice negotiating team.

Intellectual property is among the sensitive, but unavoidable, issues in FTA talks.

European carmakers, who dominate the luxury car market in Thailand, were also concerned since opening the market to Japanese car imports would affect their sales.
Somkid Jatusripitak, the deputy prime minister in charge of economic policy, has set July as the deadline to conclude discussions with Japan, but both sides seem to want further discussions on sensitive issues such as agriculture, steel, automobiles and textiles.

But the bottom line is that both governments have the political will to conclude a deal for political and economic reasons. Japan regards Asean as a safe place to do business. Its souring political relationship with China has driven it to seek closer links with Asean nations through bilateral and regional FTAs.

Tokyo sees Thailand as a leader in Asean, and hopes that by concluding negotiations successfully with Bangkok it will make similar deals with the Philippines and Indonesia easier.

"Without the government goahead, I didn't know what would be on the table," says Mr Nitya (left).

Dr Somkid, also the finance minister, said a ThaiJapanese FTA would ensure Thailand would not lose Japan's already huge investments.

"Japan has already invested in Thailand. They are making automobiles here, but we need to sustain it," he said. Referring to Japan's request for further liberalisation on imports of highquality steel, he added "If we cannot make something locally, why shut the door?"

Japanese officials want Thailand to lower import tariffs on steel to increase the competitiveness of Japanese products made here, Dr Somkid said, suggesting it was a winwin situation for Thailand.

The government has tried to respond to criticism that its freetrade policy is confusing and directionless by creating a permanent office to oversee FTAs. It is also expected to name a Thai trade representative patterned after the US trade representative.

Negotiations for a ThaiUS FTA are the most complex. Nitya Pibulsonggram, the head of Thailand's negotiating team, was relieved when Dr Somkid at last gave Thai negotiators the goahead for the fourth round of talks in Montana, coming in July.
The Thai government will open negotiations in all sectors, but sensitive goods and services will only be liberalised over time, giving domestic producers a chance to prepare and make adjustments, said Dr Somkid.

"Without the government goahead, I didn't know what would be on the table. I couldn't delay the critical substance of the talks any longer. We know each other and have exchanged a lot of information over the first three rounds," Mr Nitya said.

The government must decide how it will deal with sensitive, but unavoidable, issues such as labour, the environment, intellectual property rights and financial services _ areas in which Thailand, a developing country, lags behind the US.

Mr Nitya earlier said Washington was keen to pursue trade talks with Thailand, but was willing to wait until the country was ready. He said then the negotiations could take years to complete.

Dr Somkiat said the Thai government appeared defensive in its negotiations with Tokyo and Washington, focusing on issues that would illaffect Thai businesses as little as possible.

Dr Somkid is unlikely to argue. He said Thailand should consider all proposals put on the table, but must be very careful. And Thailand's business and industry should be given a period of adjustment to cope with any significant changes, he said.

The FTAs are aimed at resolving years without direction on trade, Dr Somkid said, adding Thailand had never really had a clear trade and investment policy. The current trade deficit is partly due to that lack of a policy, he said.

Narongchai Akrasanee, an adviser to the finance minister, admits government policy has been unclear, but believes FTAs will now lead to specialisation in certain sectors such as automobiles, food and textiles. Agriculture is unlikely to benefit as much as manufacturing, he said.

The FTA with Australia has widened the market for Thai automotive products, Mr Narongchai said, but created uncertainty among dairy and beef cattle farmers.
Dr Somkiat said Thailand's proliferation of bilateral FTAs could strain relationships with other Asean countries.

A Malaysian Institute of Economic Research report supports his view. It said trade agreements with the US, Japan and China reached by individual Asean countries would likely be in conflict with Asean rules concerning coverage, regulations and tariff reductions.

It said the pacts also would not be consistent with FTAs negotiated by the Asean bloc with other countries or blocs. In other words, there is no consistent road map for all FTAs.

To confuse matters, the report said, Washington has ruled out bilateral FTAs with Cambodia and Laos for not being members of the World Trade Organisation.

As well, specific guidelines in the SingaporeUS FTA discriminate against Malaysia. Certain products produced in Indonesia's Batam and Bintam would be allowed under the FTA, while products produced in Malaysia's Johore by Singaporean companies are not given preferential treatment.

This will not only create problems for Asean managing its external trade relationships, but also add to the cost of doing business because investors and traders will have to deal with assorted tariffs, rules and regulations.

Asean should now decide on the type of relationship it wants to reach with prospective partners _ whether FTAs, economic partnerships or simply closer economic cooperation _ but it must be consistent and suit all members.

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