Sunday, September 13, 2009

Thailand Learning Lessons from Chinese Trade Agreements

Country is determined to overcome current export problems
Shipping News Feature

THAILAND – Shippers in the country feel China have been imposing extra conditions on a mutually agreed Free Trade Agreement which was signed by the deposed former Prime Minister, Thaksin Shinawatra. The deal, concluded in 2004, was intended to open up a rich vein of trade for Thai exporters by offering zero duty rates and promising the country’s producers an opportunity to sell more of their agricultural produce to their near neighbour.

Since the agreement came into force, which is a unilateral trade declaration between the two after the collapse of multi national trade talks in 2003, the Chinese have insisted on stricter hygiene conditions for produce. The cause for this is surmised to be their own health issues with food products in the past, including export of poisonous wheat gluten and rice based pet food in 2007 plus the contamination of baby milk with melamine last year which affected up to 300,000 Chinese children.

Progress in now under way on Regional Highway Route 3 and the Thai authorities are keen to use the new route, which will cut through Laos on its way to China’s Yunnan province. The road, funded by the Asian Development Bank in cooperation with the three national governments, is designed to eliminate the Mekong river ferry crossing which is seen as a barrier to free and rapid transit of goods, with falling water levels often delaying the larger vessels, and high crossing tariffs. 

The problems have been exacerbated by the imposition of 13% VAT, which it appears the Thai’s didn’t anticipate, plus the larger nation’s insistence on sealing all cargo vehicles en route via Highway 9 after illicit shipments were seized last year. All Thai agricultural exports also have to carry Government issued certificates to show they are free from disease and pesticides etc.

The agricultural produce figures show the trade over the past four years (to 2008) has favoured Thailand with exports reaching almost 64 billion Baht against imports of 23 billion. Despite this independent observers have noted non-tariff barriers imposed by China, and Thai producers have complained cheaper Chinese produce has flooded some markets. The Thai authorities are likely to seek a Memorandum of Understanding to resolve the issues, probably at the joint meeting on phytosanitary matters between the two nations later this year.