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More Free Trade Agreements but not more free trade?

Updated On: Mar 14, 2006

The trend towards negotiating Free Trade Agreements (FTA) seems unabated. In the past week, 2 new FTAs involving countries in Southeast Asia were announced while another one involving ASEAN seems to have run into some difficulties.

Remarkably, just as the current political turmoil in Thailand has stalled the Thai-US trade talks, it seems that the Thais are willing to try another FTA- the Thai-Chile FTA. This time, there is unlikely to be as much opposition as to the FTA with the US.

During a meeting between newly elected Chilean President Michelle Bachelet and Thai Foreign Minister Kanthathi Suphamongkhon, both agreed to complete a feasibility study to pave the way for negotiations on a FTA to start. (This was part of a three Latin American countries visit by the Thai Foreign Minister. Another aim for the visit was to solicit support for the candidacy of Surakiart Sathirathai as the next Secretary General of the United Nations). As reported in the Bangkok Post, both sides regarded each other as the gateway to the respective region. (It is ironic given that Chile seems to have forgotten its two other “gateways” to the region-Singapore and Brunei, both of whom it has FTAs with). 

The Americans, on the other hand, seem to have cast their net for FTAs wider- this time to Malaysia. On Tuesday (7 March 2006), US Trade Representative Rob Portman made a formal announcement with International Trade and Industry Minister Datuk Seri Rafidah Aziz and a bipartisan group of leaders from Congress thatMalaysiaand the USwould negotiate a FTA. Formal negotiations is expected to start in about 3 months’ time and the agreement is expected to be completed by the end of next year (2007). Malaysiais likely to have some reservations over the liberalisation of the auto and banking sectors.

The ASEAN- South Korea FTA is not likely to liberalise the South Korean agricultural sector. This is confirmed by a Korean official at the Agricultural Ministry who said that, “The FTA won’t have a great impact on the local farm market since 500 items are not subject to tariff reduction and the customs duties for 40 other items will remain the same.” The final FTA will also not liberalise trade completely since the ultimate aim of the FTA is only to liberalise 97% of all the items traded.

The head of South Korea’s trade ministry’s international policy bureau, Bae Jong-Hwa said that “Both sides reached an agreement on maintaining the current tariffs on rice and 40 other item… But differed on fruit among other products.”  This disagreement might result in a delay in the implementation of the agreement. Both sides have originally pledged to conclude their negotiation on the liberalisation of trade in goods by April and implanting the agreement in July. Negotiations on the liberalisation of trade in services and investments would only start by the end of the year. 

Ultimately, it seems that there is a trade-off between the coverage of these FTAs and the speed in each they are concluded. In the case of Southeast Asia, there seems to be a penchant for more quick FTAs but not necessarily “good” comprehensive FTAs.

Sources:

ThailandChileAgree on Need for Free-Trade Pact Study, BangkokPost, 12 March 2006

S Korea, ASEAN Countries Fail to Agree on FTA Terms, Yonhap [South Korea], 11 March 2006

FTA with US will enhance Malaysia’s Profile: Envoy, Business Times [Malaysia], 10 March 2006

US Aims to Fast-track Malaysia Trade Talks- Envoy, AFX- Asia, 9 March 2006

Trade Deals We Need to Close, Washington Post, 9 March 2006(reproduced in Straits Times on 11 March 2006)