Thaksin has copped a lot of undeserved flak over the various FTAs Thailand has signed. NGOs such as FTAWatch have decided to oppose FTAs with emotive and dramatic arguments as shown by the following banner on their website.
A lot of the opposition to the FTAs rarely look at actual statistics, but when they do they always seem to get it completely wrong. A shocking example of this is an editorial in the Post Today which was entitled “Free trade, but not fair trade“. The Bangkok Post recently translated this editorial and it was published on the 7 December 2005.
The editorial starts:
Post Today Editorial – Early results of the free trade agreements (FTAs) Thailand made with China, Australia, New Zealand and India are quite worrying for the country.
In the first year of FTAs with China and Australia, Thailand recorded a combined trade deficit of 78 billion baht. We gained trade surpluses of 8.8 billion baht and 5.9 billion baht with New Zealand and India, respectively, but the gains were negligible when compared with the huge deficits with China and Australia.
What went wrong?
What went wrong was that the Post Today thought they could write an editorial about economic matters, but they can”t, they are inept. The Post Today thinks it is “worrying” that since Thailand has had a “FTA” with China because there is a trade deficit with China. But there was a large deficit with China before the “FTA” came into force as well (see below)!
The editorial fails to mention or provide any statistics on whether Thailand”s balance of trade with those countries has actually improved/worsened since the FTAs have come into force. That surely is one question they should have at least considered. If the Post Today had bothered to properly look at the details of the FTAs and trade statistics since the FTAs have been in force, they would have found that Thailand has actually gained from the FTAs. The FTAs are not worrying for Thailand, they are a positive development. The only thing that is worrying is that the editorial was actually published in the Thai language sister publication of The Bangkok Post.
The editorial continues:
Throughout its FTA negotiations with the four countries, the government of Prime Minister Thaksin Shinawatra insisted that they would offer new opportunities for Thailand in trade and investment. FTA agreements are necessary in a globalised world, we were told. Thailand would lag behind other countries if it failed to ink free trade pacts with trade partners.
As export and import figures show, however, many of our trade partners seem to profit from the FTAs more than we do. If this trend continues in the next 10 years, when Thailand is expected to enter into more FTAs, the country will be in trouble.
Aside from issues of a trade deficit or trade surplus, The Post Today seems to also completely ignore the fact that one of the main benefits of the trade deal with China is that Thailand has been able to import cheaper agricultural products. I guess the urban poor don”t find the cheaper, mainly Chinese produce, at the market as “worrying” as the Post Today does. Have The Post Today never heard of the benefits of increasing people’s purchasing power?
The editorial continues:
The idea for an FTA is good. But our negotiators seem to lack the expertise and skills necessary to secure a fair deal for the country. We tend to lose out to bigger countries with high bargaining powers. We should learn from our own experience and that of the countries that have fared well.
Lack of information and preparedness are two of the glaring weaknesses of our trade negotiators. When trade deals are made in haste, it is ordinary people, business operators and farmers who will have to pay the price.
I guess when they mean Thai farmers are paying the price that this includes Thai durian farmers. I am sure they are quite upset that exports to China of durian increased by 21,850% in the first year of the “FTA” with China. What a horrible price for them to pay.
The editorial continues:
It is not too late for the government to re-evaluate all the FTA deals and call for amendments to certain clauses that put us at a disadvantage. An FTA deal should offer a win-win situation for both parties. Neither side should be the loser.
One year is long enough to see the effects of our FTA deals with foreign countries. Now is the time to take stock and to take corrective measures on the basis of fairness and shared benefits.
Before I completely tear to shreds the Post Today”s whole argument, I will provide some actual information on the 4 FTAs The Post Today lists. The FTA with Australia came into force on 1 January 2005. The FTA with New Zealand came into force on 1 July 2005. The FTA with India came into force on 1 September 2004. Personally, I don”t like the term “FTA” for the agreement with China as the trade deal with China includes only fruit and vegetables which accounts for less than 2 percent of total trade between Thailand and China. The term bilateral trade agreement is more accurate and it come in force in October 2003.
The source for all the below trade statistics, unless otherwise stated, is the Royal Thai Customs website. The black line in each image signifies when the FTA agreement came into force. I have used a monthly average figure as it makes it easy to compare as trade statistics for 2005 are limited to the first 10 months. All the charts are mine and I am solely responsible for all errors (good luck in checking them!)
/>For Australia, as you can see that Thailand now has a trade deficit with Australia whereas it had a surplus before the FTA, but the surplus had already shrunk dramatically by 2004. As the chart above shows, Thai exports to Australia have already been increasing at a large rate before the FTA, but the increases since the FTA have been more dramatic. The problem for Thailand has been that over the last two years (one year before the FTA and 10 months since the FTA) that imports from Australia have increased at a faster rate than exports to Australia.
The main reason for the faster rate of growth in imports from Australia in 2004 and 2005 is that Thailand was importing more raw materials and oil from Australia. In the ten months to April 2005 (which includes 6 months before the FTA and 4 months after the FTA), the large increases in imports from Australia were in “minerals (157 per cent), fuels (107 per cent) and in manufacturing (21 per cent). However, there have also been some large increases in unusual items such as copper, non-monetary gold, and ferrous waste and scrap. This has occurred particularly in the first four months of 2005. In addition, crude petroleum has also increased by 108 per cent over the 10-month period, due to recent price hikes.” (Source ). Given the price of oil is falling, this should see a decrease in the amount of imports from Australia. Many of these imports are raw materials used in automotive manufacturing. Thailand is basically importing the raw materials at a cheaper price than before then exporting the final product to other countries. I would hardly call the small trade deficit with Australia worrying.
For New Zealand, I doubt anyone from Thailand would complain as the Thai surplus has increased since the FTA. Some of those raw materials imported from Australia have probably helped as well because in 2004, Thailand exported 3.7 billion baht worth of vehicles to New Zealand (or just over 300 million baht a month), but in the four months since the FTA has been in place, Thailand has exported 2 billion baht worth of vehicles to New Zealand (or 500 million baht a month).
For the Indian-Thailand FTA, I doubt anyone in Thailand would complain as well. Exports from India have not increased dramatically. Even though wages are higher in Thailand, Thailand has a comparative advantage with some products over India because of the low import duty on raw materials (source). Yes, that pesky FTA with Australia is roaring its ugly head again.
China is a different situation from the other 3 countries because the bilateral trade agreement between Thailand and China is limited to agricultural and fruit products which accounts for less than 2 percent of total trade between Thailand and China. The editorial fails to point out that Thailand has also always had a large trade deficit with China. In 2002, Thailand imported 211 billion baht worth of goods to China and exported 152 billion baht worth of goods. The trade deficit shrunk in 2003 when Thailand imported 251 billion baht worth of goods and exported 235 billion baht worth of goods . In 2004, Thailand imported 330 billion baht worth of goods and exported 285 billion baht worth of goods . In the first ten months of 2005, Thailand has imported 367 billion baht worth of goods from China, but has only exported 295 billion baht worth of goods. The major reason for Thailand”s large trade deficit is the increase in the number of “raw material imports, not the FTA.”
I have found it difficult to compare the pre-bilateral trade agreement statistics of fruit and vegetables with statistics since the bilateral trade agreement as the Thai Customs Department has divided the up fruit and vegetables into more than a dozen categories and the compiling the statistics would take too long. However, there is already enough evidence to show that the Post Today”s editorial on FTAs being “worrying” for Thailand and Thailand “losing out” is wrong.
Thailand actually has a trade surplus with China in the fruit and vegetable trade and that surplus has been increasing since the bilateral trade agreement came into force. The surplus for the first 8 months of 2005 stood at 8.6 billion baht, up 42.1 percent from the same period last year. The Nation on 9 November 2004 says that while Thailand has imported more garlic and onions from China, Thailand has also made its own gains since the bilateral trade agreement come into force as “fresh longan exports had increased 986 per cent, durian had exploded by 21,850 per cent, mangosteen jumped 1,911 per cent and mango surged 150 per cent“.
The Post Today have got it completely wrong. Thailand has actually benefitted from the FTA. The editorial once again shows that some elements of the Thai media fail to accurately report on economic matters. Concerns by all and sundry including both the Democrats and western activists about Thai farmers being disadvantaged from the FTA seems not only misplaced, but inaccurate.