Thailand and Japan Reach Free Trade Agreement in Principle, Amidst Controversy

Strategic Insights -

Thailand and Japan have reached a free trade agreement in principle, with both countries agreeing to reduce tariffs on various goods. The agreement, reached after years of negotiation, is expected to boost bilateral trade, which reached $36 billion last year and $20.5 billion in the first half of this year. However, critics have raised concerns that the agreement will worsen Thailand's trade deficit with Japan and may harm local automobile and steel producers.

Key Takeaways:

  • The free trade agreement between Thailand and Japan will reduce tariffs on various goods, including Japanese cars, auto parts, steel, and processed food products.
  • Thailand will cut down tariffs from 80% to 60% for Japanese cars with engines over 3,000 cc by 2009, while tariffs for auto parts will be reduced to zero by 2011.
  • Japan will cut down tariffs on processed chicken from 6% to 3% and immediately liberalize trade in processed shrimp, fresh vegetable and fruit, canned fruit and juice.
  • The formal agreement will be signed in April next year, with related terms taking effect in September.
  • Critics predict that the FTA will worsen Thailand's trade deficit with Japan due to Thailand's smaller profit margins in agriculture compared to industrial goods.
  • The Thai government insists that the FTA will benefit the kingdom in the long run, citing increased competitiveness in the Thai market for 95% of all product categories.
  • Thailand has actively pursued free trade agreements with major economies, including Australia, New Zealand, the United States, China, and India.

Statistics:

  • Bilateral trade between Thailand and Japan totalled $36 billion in 2004.
  • In the first half of 2005, bilateral trade reached $20.5 billion.
  • Thailand's trade deficit with Japan amounted to $5.7 billion in the first half of 2005 and $8.9 billion in 2004.
  • Tariffs on Japanese cars with engines over 3,000 cc will be reduced from 80% to 60% by 2009.
  • Tariffs on auto parts will be reduced to zero by 2011.
  • Processed chicken tariffs will be cut from 6% to 3% by Japan under the FTA.

Sources:

  • Bangkok Post
  • Asia Pulse