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9 Apr 2009

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ASEAN+3, ASEAN+6 Summits: Withstanding Global Recession and Protectionism, Promoting Free Trade (Current Issue No.2152)

The ASEAN+3 summit (with China, South Korea and Japan attending) and ASEAN+6 forum (with China, South Korea, Japan, Australia, New Zealand and India in attendance) are slated for April 10-12, 2009, in Pattaya. If these talks can aid closer ties and stimulate broader trade liberalization as well as coordinated monetary and fiscal policies for their economies and domestic consumption, the East Asian and ASEAN economies are likely to withstand the harm of the global recession this year. Moreover, their economies may be able to return to normalcy over a shorter period of time, especially with the global revival expected to be seen in 2010.
It may take some time before conclusions are reached on the development of trade and investment among ASEAN+3 and ASEAN+6 nations and to finalize FTA pacts under the ASEAN+3 and ASEAN+6 frameworks. Nonetheless, ASEAN liberalization in trade, services and investment through the establishment of the ASEAN Economic Community (AEC) and trade liberalization under the auspices of the ASEAN+1 forum have seen considerable progress, which would enable Thai exporters to take advantage of tariff benefits and Cumulative Rules of Origin (ROOs). Thailand is thus expected to benefit from increased export trade in rice, jewelry, automobiles and parts, etc., with our dialogue partners. However, more time may be needed for further negotiations and cooperation on other trade-related measures, especially on tariff quotas, trade subsidies and other trade barriers.
Meanwhile, Sanitary and Phytosanitary Standards (SPS) and environmental measures are expected to be adopted to various degrees on a variety of products. Better product quality will help reduce protectionism in export markets. In addition, Mutual Recognition Agreements (MRAs) in FTA agreements may help mitigate the impact of high product standards imposed by trade partners, especially the SPS controls on food products.
Thai Export Opportunities within ASEAN+1 Framework
Negotiating Partners
Thai exports that are expected to benefit from liberalization
China
Refined petroleum products, vegetable oil and animal fat, refrigerators, rubber products, paper products
Japan
Aviation equipment, rice, meat/processed meat, frozen/chilled shrimp, processed chicken
South Korea
Molasses, yarn, chilled/frozen shrimp, tapioca flour, fresh cuttlefish/squid, gems
India
Refined petroleum products, integrated circuits, canned fish, juices, machinery, electrical/electronic equipment
Australia
Electrical transformers and parts, gems/jewelry, iron and steel, washing machines and parts, refrigerators/freezers, garments, auto parts, textiles and footwear
New Zealand
Iron and steel, pharmaceutical products, textiles, washing machines and parts, pet food, plastics, auto parts and machinery
Source: Compiled by KResearch based on the information of the Ministry of Commerce
Thai businesses should benefit from the trade, service and investment opportunities extended by the ASEAN+1 FTA framework to be signed in 2009. It is expected that four agreements – the ASEAN-China FTA for Investment, ASEAN-Japan FTA, ASEAN-South Korea FTA for Trade and Services, ASEAN-Australia-New Zealand FTA – will be enforced this year; thus, they should be helpful toward reducing trade barriers and easing regulatory requirements on investment.
The ASEAN-China FTA (for trade and services) is already in effect. Other bilateral FTAs with Thailand that are being enforced include the Thailand-Japan, Thailand-India, Thailand-Australia and Thailand-New Zealand FTAs. Trade has grown healthily, thanks to better export and import opportunities with Australia, New Zealand, India, China and Japan, increasing 77.2 percent, though exports under FTA increased only 27.8 percent. Thai exporters using Thailand-India FTA privileges showed the highest utilization rate at 96.1 percent, followed by Thailand-Australia FTA privilege use at 61.6 percent; meanwhile, Thailand's imports from them in 2008 grew 124.8 percent, but imports per FTA privileges grew only 6.6 percent. Thai businesses are making extensive use of privileges for imports from New Zealand and India or 36.8 percent and 24.7 percent, respectively.

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