The US Generalised System of Preferences (GSP) for Thailand, which provides low tariffs for Thai exports, might not be renewed when it expires in October, according to US economics expert Howard Rosen.

Thailand, as a developing nation, reaps substantial benefits from the exceptionally low tariffs provided under the US's GSP. Only Brazil enjoys more benefits. But as the Kingdom's per-capita income now exceeds almost US$850 (Bt32,580) a year, and its exports are becoming more competitive, Rosen said he was not very optimistic of the chances for Thai exports to continue to enjoy GSP privileges.

Rosen, who is based in Washington, has been in Thailand discussing the prospects of Thai-US trade relations with a wide range of stakeholders in order to get first-hand knowledge about their views.

Apart from conducting international economics research, he has also worked as executive director for the Trade Adjustment Assistance Coalition in the United States, a programme which provides retraining to US workers adversely affected by free-trade agreements (FTAs).

Thailand and the US have held six rounds of negotiations on an FTA. The talks were met with demonstrations by Thai civic groups and activists objecting to issues concerning pharmaceuticals and farm products.

Besides, the general atmosphere of political instability has made it impossible to proceed to the final stage of the FTA talks. With the uncertain outlook over new elections and the next government, the Thai-US FTA negotiations have been indefinitely put on hold.

"Thai traders are optimistic that, in spite of a delay in the FTA, Thai exports to the US should not drop as long as there is the GSP. However, I am less optimistic because Thailand may lose its GSP," Rosen said.

After the expiration of Thai benefits under the GSP, the US might instead consider extending the GSP benefits to other countries that are more competitive than Thailand, he added.

According to a US Embassy report, Thailand enjoys the most GSP benefits from its exports to the US after only Brazil. At the same time, other less-developed countries like Vietnam and new members to the World Trade Organisation do not receive GSP benefits, although they are candidates to do so.

Rosen urged the Thai government to signal that it is committed to concluding the FTA with the US.

There are fears in Thailand that it would be left behind in the international trade arena once the US signs FTAs with Malaysia and South Korea. The US has already signed an FTA with Singapore.

Another casualty from the political problems in the Kingdom is the Thai-Japan FTA, which has been agreed upon but not concluded. It cannot be signed due to the political situation here. If that FTA is not signed by September, as approved by the Japanese parliament, the deal will collapse.

During a private meeting on Tuesday, Rosen also discussed FTA prospects with Jon Ungpakorn, an outgoing senator from Bangkok, and Twatchai Yongkittikul, secretary-general of the Thai Bankers' Association.

Jon said he and his coalition had reservations about the FTA because it might result in higher prices of pharmaceutical products for Thai consumers. He said if the drug sector were exempted from the FTA, there would be more breathing room for the pact to move ahead.

Twatchai said the Thai financial services sector was not ready to embrace more players since there are already too many in the market. He would like to see an exemption for the financial services sector for five years in an eventual Thai-US FTA.

The US has been maintaining that it would like to have a comprehensive FTA without any sectors left off the table.

Rosen suggested it was possible for the Thai-US FTA to follow the model set by the US-Israeli FTA, which is being implemented in three phases.

Another hindrance to the Thai-US FTA is the expiration of President Bush's fast-track authority in July 2007, which might be extended by another one or two years at most. Also the US will hold congressional elections this year, which might bring in more Democrats, who generally are not in favour of the FTAs.

Rosen said Thailand would benefit hugely from the FTA because it would not only increase exports to the US market but also increase the efficiency of the Thai economy.

Petchanet Pratruangkrai,

Thanong Khanthong

The Nation