Wednesday, January 09, 2008

Thai firms failing to tap Asean-China FTA potential


Thai firms failing to tap Asean-China FTA potential


Thai businesses have failed to take advantage of favourable tariffs under the Asean-China free trade agreement (ACFTA) to build up their presence in one of the world's fastest growing economies, according to a study by the Thailand Development Research Institute. Somkiat Tangkitvanich, a TDRI research director, said Chinese imports under the ACFTA with certificates of origin totalled just $251 million, or 1.76% of Thailand's total imports from China.

The figures suggest that Thai companies did not take advantage of the opportunity to import raw materials at preferential tariffs from China, he said.

The trade pact took effect between the 10-member Asean bloc and China in July 2005, covering both farm and industrial goods.

The agreement, covering an economic region with nearly 1.8 billion consumers, represents the largest free-trade agreement area in terms of population, with annual trade estimated at $1.23 trillion.

Thai exporters had been more active in taking advantage of benefits offered under ACFTA, Mr Somkiat said, based on data on certificates of origin issued by Thailand's Foreign Trade Department.

''But the figures are still relatively small, accounting for just 12.3% of Thailand's total exports to China,'' he said.

The TDRI study was commissioned by the Office of Industrial Economics for use as a framework for regional trade negotiations covering industrial products with other trade partners, including India and the European Union.

The study did not consider the question of which country benefited the most from ACFTA.

Mr Somkiat noted that the actual figures for export values might be less than those reported in the certificates of origin, as not all shipments were made for the certificates issued.

A certificate of origin is used to certify that goods were actually produced in the country eligible for preferential trade benefits.

Tariff quotas on farm products have been another constraint on greater use of ACFTA. Chinese exporters also may not be fully aware of the benefits offered under the pact, or may face complications in securing certificates of origin in their own country to receive benefits.

One Commerce Ministry official said it was actually a relief that low-priced Chinese products had not flooded the local market as earlier feared by local producers, and acknowledged that greater protections were needed to guard against possible price-dumping. Both parties have scheduled to renegotiate the pact this year.

''I think the ACFTA is still quite new for many Thai businesses. In any case, tariffs will continue to decline next year in line with the plan,'' the official said.

The TDRI's Mr Somkiat said that within Asean, the Asean Free Trade Area (Afta) had shown clear benefits, with intra-regional trade increasing four-fold over the 15 years since the agreement was first signed.

Archanun Kohpaiboon, another TDRI researcher, said that in Thailand, the automobile industry had benefited the most from Afta.

''Every single car exported [from Thailand] to other Asean countries uses tariff privileges under Afta,'' Mr Archanun said.

Asean comprises Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

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