Serious thought required on new trade proposal

Thailand cannot afford to ignore the formation of this trade agreement, which has been mooted for some time. The TPP gained a lot of momentum at the Apec meeting after Japanese Prime Minister Yoshihiko Noda said Japan would enter talks to make the deal a reality.

Washington proposed the idea of creating the TPP agreement in 2006. But the idea had received only a lukewarm reception until this last Apec meeting. Some member countries had feared the agreement would turn Apec from a non-binding forum into a trade negotiating body. Some argued that if Apec members were to create a trade bloc of their own, they would naturally pay less attention to the Doha Round under the auspices of the World Trade Organisation (WTO). 

Trade agreements have always been sensitive issues. The stalled Thai-US trade agreement talks are a case in point. Many critics point out that a smaller country tends to be at a disadvantage against a bigger economy when it comes to bilateral trade talks, because of reduced bargaining power. 

Nonetheless, the TPP is worth considering. First of all, it encompasses countries that Thailand has strong economic interests with, especially the US and Japan. Thailand can also team up with countries with a similar level of economic development, such as Vietnam and Malaysia. 

Countries already participating in the TPP talks include Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam. As well as Japan, Canada and Mexico have also said they are interested in joining the discussion.

Secondly, while it may be too early to gauge the impact of the TPP on the Thai economy, the government should consider above all whether it can afford to be left out of this proposal. If it is determined that we cannot, the government should consider joining the talks right away so that Bangkok can provide input from the Thai perspective from an early stage in order to ensure the final deal would be beneficial to Thailand. 

Bangkok may want to put on hold the bilateral trade deal with the US because it could be politically sensitive, considering that the TPP would include countries with similar economic development to Thailand. For instance, Malaysia, Singapore and Vietnam all want to promote exports and attract more foreign direct investment. This regional deal would help facilitate economic transactions among members of the club. Thus, it would be a challenge for countries outside the club to attract the attention of bigger economies inside the TPP.

In the absence of a trade agreement from the Doha Round of talks, the TPP could drive the global push for lowering tariffs and trade barriers. After all, 12 interested countries in the TPP account for almost 40 per cent of the global economy, with some 800 million consumers. China is not a member of the club yet, but its inclusion is not ruled out.

After the flood, the government will have to restore the confidence of foreign investors, if we still want to continue pushing growth via exports and FDI. Various crises in Thailand over the past few years have not put Thailand in a favourable light for investors. Some are weary of the domestic political stability, coupled with unpredictable populist policies such as wage hikes. Inclusion in this trade deal may help restore some foreign investors’ interest in Thailand.

This is not to say that the TPP will be easy to push through. In fact, it is expected that the talks will be a long and gruelling process before a final agreement is hammered out. Agricultural liberalisation, labour standards and intellectual property protection will certainly be major factors in the negotiations, meaning they will take years to conclude.

Thailand will have to seriously weigh the benefits and weaknesses of this prospective deal and formulate a strategy. The first task is to ascertain whether Thailand should join; then decide on our targets and a strategy to achieve them. But if Bangkok decides against joining, what will the country do to maintain the attention of investors? These questions are not easy to answer. But the government will have to be prepared to address them soon.