Thailand needs Pacific trade treaty
published : 1 May 2020 at 04:00
newspaper section: Oped
Here we go again. As if nothing has changed over the past two decades, the government of the day has once again botched and bungled Thailand's trade policy by riding roughshod over civil society groups and the public at large. The unceremonious withdrawal of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership from cabinet deliberations earlier this week was regrettable and unnecessary. Because of adverse geopolitical and geo-economic trends on the horizon, Thailand needs to consider joining the CPTPP. But it has to do so the hard way, with public participation, bargaining and negotiations among domestic interest groups to reach a consensus.
Since the early 2000s, Thailand's trade policy and strategy has become politicised and opposed by civil society groups, led by FTA Watch, because of potential conflicts of interest and a lack of public participation. The government at the time, under Thaksin Shinawatra and the Thai Rak Thai Party, negotiated a raft of free-trade agreements with countries including Australia, Bahrain, China, New Zealand and Peru. These FTA negotiations became a plank in Thailand's foreign policy outlook, and the Thaksin government tried to ram them through by using its strong parliamentary majority.
The Australia and New Zealand FTAs got through but the rest, especially that with the US, was bogged down and ended up as ammunition for the 2005-06 anti-Thaksin protests. Civil society mistrust of the Thaksin regime's ulterior motives for the FTAs was so deep that the 2007 Constitution created Article 190 to scrutinise FTAs from the outset, thereby shifting power from the executive branch to the legislature.
It was democratic accountability that came at a high price, because Thai trade policy has made little headway since. Thailand's last major FTA was the Japan-Thailand Economic Partnership Agreement from 2007. Overall, Thailand's FTA agreements have thus far been favourable. For example, Thailand holds trade surpluses with both Australia and New Zealand.
As Thailand reached middle-income status, the Generalised System of Preferences that benefited developing countries became outdated and phased out. After more than two decades of trying, the multilateral trading system has become moribund in the absence of a successful completion of the Doha Round under the World Trade Organization. All countries have had to resort to other sources of international trade for economic growth. Many rely on bilateral free-trade agreements and regional trade liberalisation.
The CPTPP, which the US abandoned after President Donald Trump took office in 2017, is a first-rate freer-trade platform. Had it included the US, while China was excluded, the CPTPP would have been more politicised and controversial for countries like Thailand. But the CPTPP is led by middle powers -- namely Japan, Australia and Canada -- apart from Brunei, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Accounting for one sixth of global output, it began with the four smaller economies of Brunei, Chile, New Zealand and Singapore, before expanding into the TPP that Mr Trump ditched to enable the current CPTPP.
CPTPP needs to be understood as something more than just a trade liberalisation scheme. Rather, it's a much more comprehensive regional integration mechanism that could spur domestic economic reforms, which are necessary for Thailand to remain active and competitive in the rough and tumble economic era after the coronavirus crisis, when value chains will become more regionalised.
Spanning 30 chapters, CPTPP covers more than just trade liberalisation. It establishes regulatory frameworks on a range of issues, from intellectual property rights, trade in services, competition policy to labour standards. It requires countries to rewrite many of their domestic regulations on issues that are beyond trade liberalisation and tariff reductions. FTA opponents are right to be concerned but a full debate is needed involving all stakeholders.
Vietnam and Malaysia, Thailand's Asean neighbours and at the same time competitors, stand to benefit crucially from CPTPP. For Vietnam, CPTPP is a pretext for domestic economic reforms that would otherwise not be workable. In addition, CPTPP is important because it would allow Thailand to stay in the supply-chain game and not lose out in view of the relocation of firms away from China and the move toward regionalisation of supply chains.
Global trade has increasingly been driven by intermediate products within global value chains, accounting for around 60% of total trade, according to the World Bank. This means that for many products, even ones as simple as textiles to a more sophisticated one like an iPhone, the raw materials and components that make up each product can be imported from various different countries, making it necessary for trade liberalisation schemes to pay attention to ways to facilitate these processes. Joining the CPTPP would allow Thailand to capitalise on supply-chain opportunities to climb up global value chains.
What Thailand needs is to do the kind of homework that other countries like Australia and New Zealand have done before negotiating FTAs. These countries educate their people with countless studies and reports. Industry and business groups are consulted, and people become stakeholders, as their governments act as guides, brokers and intermediaries before final decisions are reached.
What went wrong with Thailand's recent attempt to consider CPTPP was a complete disregard for the Thai public, an effort led by no less than Deputy Prime Minister Somkid Jatusripitak, who happened to be instrumental in the Thaksin-era first-generation FTAs. The NGOs were right to call out the government's sneaky effort to get a free-trade scheme through without proper consultations.
The senior bureaucrats involved were also ignorant and haughty for thinking they know best over people's concerns. At the same time, while they are needed to voice and protect the public interest, the NGOs must not be allowed to hold Thai trade policy hostage.
Thailand needs to break out from its trade policy cul-de-sac. The domestic polarisation has cost the country dearly. It should seek both bilateral and regional routes to freer trade, within the Asean mix and beyond, not only for economic growth but more importantly for domestic economic reforms from stiffer competition and for better prospects in value- and supply-chains in the post-virus era.
Pavida Pananond, PhD, is an Associate Professor of International Business at Thammasat Business School, Thammasat University and Thitinan Pongsudhirak, PhD, teaches at the Faculty of Political Science and directs the Institute of Security and International Studies at Chulalongkorn University.