Political mistrust a prime obstacle to the FTA

17 January 2006

Weisel: FTA is good for US and for Thailand.

When will the next Thailand-US free trade agreement talks take place? No one is quite sure at the moment.

The US is feeling anxious that the FTA talks might not be concluded by April this year.

Normally, it takes about a year for the US to conclude a FTA deal with its partner. The Thailand-US FTA negotiations, which have been going on over the past 18 months, cannot drag on forever.

The sentiment in Thailand and the US is not good for the FTA. In Thailand, the anti-FTA movement have succeeded in contaminating the sixth round of the negotiations, which ended last week in Chiang Mai. In the US, the Republicans and Democrats are heading into a mid-term election this year. The political climate is not appropriate for US politicians to discuss an FTA with any foreign country.

You could sense that Thai-US FTA deal might be facing the same fate as that of the stalled privatisation of Egat Plc. The underlying message from the NGOs and other activists is that they don’t trust Prime Minister Thaksin Shinawatra to handle the FTA in the best interests of the country. They also claim that the Thai negotiating team has not been transparent enough with the public about the details of the talks.

There is little anti-US sentiment this time, save for the criticism that the US is trying to take advantage over Thailand on patent protection for pharmaceutical products. The NGOs and other activists have focused their attack largely on the Thai negotiating team or the Thai government. If this is the case, it is the responsibility of the Thai government to have a dialogue with the protestors.

Assistant US Trade Representative Barbara Weisel said at the Friday press conference after the meting that when she returned to Washington next week, she would discuss with US Trade Representative Bob Portman the next steps to take after the sixth round of talks. She added that the FTA’s new market access would not only increase trade in the future.

Once the FTA is in place, no other country will have better access to the US market. So the FTA will not only help maintain the important trade relationship but also further boost it. Without the FTA, Thailand’s exporters would lose the competitive advantage they would gain against some of their fiercest competitors in the region.

There’s a serious question whether the US Trade Promotion Authority, set to expire in June 2007, will be renewed because Congress will have a midyear election. If both sides miss the deadline, chances are the talks will be delayed for couple of years until the next election in 2008.

Weisel said the USTR would not propose any trade act to the Congress without the TPA because it would be more complicated if the US congressmen can go chapter by chapter without the fast track process.

The Thai Foreign Ministry said at the meeting that both sides agreed on market access. The US has agreed to end tariffs on 74 per cent of products totalling US$12.8 billion (Bt508 billion) under the FTA. This would cover 8,100 Thai export items out of a total of 10,500 immediately. The rest would progress proportionately in later years.

Thailand has proposed to end tariffs on 71 per cent of US imports totalling US$5 billion (Bt198.9 billion). The US also proposed to open up the market for government procurement totalling US$300 billion to Thai businesses.

Before, the Thaksin government could slam through any FTA deals with little public resistance. It did not have to consult any domestic constituencies because of Thaksin’s high popularity. But the situation now has changed. NGOs along with civic and democracy groups sense that the government has been losing its popularity, so they have declared an all-out war against the FTA. In retrospect, if the Thaksin government had held public hearings, consulted MPs or other parliamentary committees and brought business groups and local constituencies aboard, it would not have paid such a dear price.

Another big stumbling block to the FTA is a growing call for the Thaksin government to let Parliament approve the final pact. Before, the Thaksin government could get away with an FTA deal with only the need for his signature. Now the broader public would like his government to take the package for parliamentary approval. Since Thaksin controls 377 MPs, he should be able to win over Parliament if he takes the package to the vote. But will he do so?

Even among the Thai negotiators, there was a lack of a unified stance. More often than not, they differed among themselves on key positions of the FTA negotiations. Making negotiations more transparent will hold the key to winning broader public support. Again, if Thaksin’s political popularity is dwindling, it will be tough for the FTA to turn successful.