Thailand, Japan reach free trade agreement in principle
(Xinhua)
Updated: 2005-08-02 14:05

Thailand and Japan have reached a free trade agreement (FTA) in principle, with controversy rising over its concession on automobile and steel tariffs.

"We have reached a conclusion on a policy level," the Bangkok Post Tuesday quoted the Thai chief negotiator Pisan Manavapat as saying.

Thailand will cut down tariffs from 80 percent to 60 percent for Japanese cars with engines over 3,000 cc by 2009, while tariffs for auto parts will be reduced to zero by 2011.

Under the FTA framework announced Monday by both sides, Thailand also immediately waived tariffs for steel unavailable or in short storage on local market and planned to realize duty free for other steel products in eight to 10 years.

In return, Japan cut down tariffs over processed chicken by half to 3 percent and immediately liberalized trade in processed shrimp, fresh vegetable and fruit, canned fruit and juice.

A formal agreement will be signed in April next year following the approval by the Japanese parliament and related terms will take effect in next September.

So far, trade officials of both countries are still negotiating details of the free trade agreement, trying to include more items under the FTA framework, such as cars with small engine, Thai textile and shoes etc.

The Thai-Japanese FTA framework completed over years of negotiation is expected to boost bilateral trade, which totalled 36 billion US dollars in last year and some 20.5 billion dollars in the first half of this year.

Critics, however, predicted that the FTA will deteriorate Thailand's trade deficit with Japan, since agriculture products make smaller profit than industrial goods.

Thailand's trade deficit with Japan amounted to 5.7 billion dollars in the first half of this year and 8.9 billion dollars in the whole 2004, according to Bangkok Post.

Local automobile producers complained that tariff reduction of automobile parts will hurt Thailand's small parts producers.

The concession over automobile and steel tariffs has also worried non-Japanese automakers and steel producers, who believe the FTA will enhance Japanese carmakers' competitiveness in luxury segment on Thai market.

Japanese carmakers have long majored in producing light trucks and small passenger cars in Thailand.

Still, the Thai government insisted the FTA will benefit the kingdom in the long run.

Thailand would enjoy greater competitiveness in the Thai market, with 95 percent of all product categories covered by the agreement, said Pisan.

The Thai government has actively pushing forward free trade in recent years, with FTA signed or being negotiated with world major economies including Australia, New Zealand, the United States, China and India.

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