IN THAILAND: RIGHT DIRECTION TOWARDS
FAIR TRADE LIBERALIZATION*
Dr. Suthiphon Thaveechaiyagarn**
Despite the 1997 financial crash resulting the severe
recession, the Thai government had resisted protectionist pressures.
Instead, the government has taken steps to reinforce its already increasingly
outward-oriented trade and investment policies so as to foster economic
recovery(1). These steps include progressively streamlining
and liberalizing Thailand's trade regime. The large number of legislative
changes has been implemented to improve transparency and accountability
as well as to ensure adequate supervision of the financial system. The
steps go along the line with the objectives of the World Trade Organization
(WTO) to promote free trade by minimizing trade barriers.
Thailand had been actively involved in the Uruguay
Round negotiations. From the start, its negotiating objectives include:
1. To assure greater trade liberalization of Thailand's trading partners
with the aim to reduce or eliminate tariff and non-tariff measures;
2. To improve the effectiveness of the rules governing international
trade to bring about fairness and transparency in the world market;
3. To prevent any new trade barrier that could obstruct Thailand's international
At the WTO's Singapore Ministerial Conference in 1995,
working groups were established to study the feasibility and desirability
of WTO rules on a range of issues including investment which became
known as the "Singapore Issues". These issues are considered
by many developing nations as venturing beyond the traditional market
access scope of the WTO into a wider scope of domestic rule - making
which seems to encroach on the sovereign rights of nations. The Singapore
issues led to unsuccessful result at the 5th WTO Ministerial Conference
in Cancun due to the concerted opposition by more than 70 countries.
This failure creates doubts in the viability of the WTO and stagnancy
to the WTO process. Many countries including Thailand have become frustrated
by the slow pace of the WTO's multilateral approach and have turned
instead to bilateral free-trade agreements (FTAs).
Currently, Thailand has undertaken a pro-active approach
in strengthening the bilateral trade and economic relationship with
the trading partners in an FTA framework. The Thai government has already
concluded the FTAs with both China and Australia and has recently engaged
in FTA negotiations with the U.S. government. While the Thai government
insists that Thailand benefits from its bilateral FTAs, Thai activists
have challenged the government's view. The author supports the view
that the FTA path should not be conducted to replace the WTO route.
While FTA is believed to bring a faster rate of trade liberalization
among smaller group of countries, the WTO liberalizes trade in a much
larger scale as it deals with 148 nations around the world. The WTO
is a safeguard organization to protect nations with weak bargaining
power against bilateral pressures. Therefore, FTA should be used merely
to supplement the WTO mechanisms to speed up trade and investment liberalization
among particular region. Since FTA leads to WTO-plus commitments, Thailand
must be very careful when it conducts FTA negotiations with countries
that have much stronger bargaining power like the U.S.
This article emphasizes the significance of the WTO
to assist Thailand to overcome problems of trade barriers against more
powerful trading partners. Experiences regarding the application of
the WTO in Thailand will be examined to review whether Thailand has
properly utilized the WTO mechanisms.
I. MAIN OBLIGATIONS OF THAILAND UNDER THE WTO
As an original member of the WTO, the obligations of.Thailand include
the WTO main principles, i.e. MFN(2), national treatment(3),
transparency(4), protection through tariff only(5),
promotion of fair trades(6) and prohibition of quantitative
restrictions as well as the specific obligations in accordance with
the schedules of concessions and the other agreements and rules administered
by the WTO. The main obligations of Thailand under the WTO which have
affected Thai legislation can be summarized as follows:
1.1 Market Access
For the agricultural products, Thailand has obligated to reduce the
tariff rates for all 740 items (6-7 digit Harmonized System) by equal
rate reduction each year within ten years(7). Also,
the non-tariff measures, for example, the quantitative restrictions
of imports, the Thai government had applied to 23 agricultural products
such as coffee bean, tea, garlic, pepper, rice, corn, soybean, sugar
and some vegetable oil was to be under the tariffication process, namely,
converting non-tariff measures into tariff measures(8).
Beginning from 1995, the domestic subsidy for the agricultural sector
has been subject to decrease equally each year from Baht 22,126.18 million
to no more than Baht 19,028.48 million by the year of 2004(9).
For industrial products in general, Thailand was bound
to reduce equally each year the tariff rates for 3,153 items (6-7 digit
Harmonized System) for five years by the year 1999(10).
However, in practice, the tariff rates collected by the Thai government
for most items were below the rates announced. Thus, there were only
854 items needed to lower the tariff rates consistently with the binding
1.2 Trade-Related Investment Measures
Thailand applied certain investment measures such as measures which
require particular levels of local procurement by an enterprise ("local
content requirements"). Such measures can restrict and distort
trade. The commitments of Thailand under the Agreement on 'Trade-Related
Investment Measures (TRIMs) include the elimination of local content
requirement within five years (by 1999)(11).
1.3 Customs Valuation
Thailand was bound to legislate the law applying the valuation system
according to the WTO principles, i.e., the GATT Valuation Agreement
or the WTO Customs Valuation Agreement(12). Under
Article VII: 2(a) of the GATT 1994, the value for customs purposes of
imported merchandise should be based on the actual value of the imported
merchandise on which duty is assessed, or of like merchandise, and should
not be based on the value of merchandise of national origin or on arbitrary
or fictitious values. Thailand, however, invoked the five-year transitional
period to implement the provisions of the WTO Customs Valuation Agreement(13).
1.4 Trade-Related Aspects of Intellectual Property
The issue of intellectual property is connected to the economic interest
of trading countries because EP becomes an indispensable element of
goods and services. The inadequate protection of intellectual property
rights may illegitimately increase the competitive edge and unfairly
compete with the products of competitors because the cost of research
and development is not incurred(14). Before the establishment
of the WTO, Thailand was under pressure from some trading partners to
substantially eliminate the copyright piracy and to bring up its overall
protection and enforcement of IPRs to the accepted international standards.
With the establishment of the WTO, the protection of IPRs is completely
elevated to international level when the issue is made related to international
trade. Thailand had obligations under the Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPs) to amend the Patent
Act and the Trademark Act and to legislate new laws such as Geographical
Indication, Trade Secret, and Layout-Design of Integrated Circuit(15).
1.5 Trade in Services
Under the General Agreement on Trade in Services (GATS), Thailand was
bound to market access and national treatment in ten sectors of services,
namely, business, communication, construction and related engineering,
distribution, environment, finance, education, recreation, culture and
sport, tourism and transport(16). In selecting the
service sector to be bound with, the Thai government took into account
of the following factors(17):
(1) being the service already open for foreign market access under Thai
law by registering jointly with Thai partners as the juristic person
in the proportion of 49:51;
(2) applying the law at the present level without requiring additional
conditions or legislating new law neither restricting market access
nor limiting national treatment to foreign services;
(3) having not so high in value of service at present and in the future;
(4) being the service that Thai people have little potential.
The commitments of Thailand under the GATS emphasized
in maintaining the present status. Thus, the Schedule of Specific Commitments
the Thai government proposed were at the level which the relevant Thai
law at that time had permitted foreigners to perform the services(18).
At the time when Thailand became the WTO Member, Thailand had no obligation
under the GATS to amend any existing laws(19). However,
the GATS requires Thailand to enter into successive rounds of negotiations
with a view to further liberalize trade in beyond the initial commitments
made(20). The level of liberalization, nevertheless,
depends on the outcome of the negotiations. National policy objectives
and the level of development of individual Members will be taken into
account in the process of liberalization(21).
1.6 Anti-dumping and Countervailing Measures
The General Agreement on Tariffs and Trade (GATT), the WTO predecessor,
has developed two principles that encourage fair international trade.
The first principle is that prohibiting dumping which is imports of
a product with an export price below its "normal value" causing
injury to a domestic industry in the territory of the importing countries(22).
The general anti-dumping provisions are found in Article VI of the GATT.
The second principle is to prohibit the payment of unfair subsidies
by opposing attempts of governments to distort the world market by specifically
subsidizing exports(23). Article XVI of the GATT contains
general provisions on subsidies.
Both principles allow the relevant authority to investigate
dumping or subsidy and to impose a dumping duty or a countervailing
duty in an amount to offset the amount of the dumping or the subsidy.
At present, the Agreement on Implementation of Article VI of the GATT
and the Agreement on Subsidies and Countervailing Measures under the
WTO provide for greater clarity and more -detailed rules in dealing
with dumping and subsidy(24).
In 1964, Thailand enacted the Anti-dumping Act B.E.
2507 to protect and promote the domestic industry. The legislation,
however, did not have provisions dealing with subsidy and enough details
on how to proceed in each stage of practices. Thus, in 1991, the Ministry
of Commerce issued the Ministry of Commerce Announcement on Principles
and Procedures for Imposing Special Duties on Goods Imported in Unfair
Price and on Subsidized Goods Imported into Thailand B.E. 2534. However,
later in 1995, the Committee on Anti-Dumping Practice and the Committee
on Countervailing Measures under the WTO reviewed such Announcement
and commented that the Announcement did not cover the details appeared
in the WTO Agreements. In addition, interpretation in the investigation
depended only on the discretion of the investigating committee. Consequently,
Thailand was bound to revise or enact the law on anti-dumping and countervailing
measures to be consistent with the WTO Agreements(25).
This article is adapted from the author's workshop paper presented at
the 8th ASEAN Law Association General Assembly and Conference on November
29, 2003 to December 2, 2003, Singapore
** LL.B. (Hons) Thammasat, Barrister-at-Law (of Thai
Bar), LL.M (Harvard), LL.M., SJD. (University of Pennsylvania); Judge
and Secretary of the Civil Court of Thailand
(1) Trde Policy Review Body: Review of Thailand, WTO
Press/TPRB/123, 17 December, 1999 at 2.
(2) GATT, Article I.
(3) GATT, Article III.
GATT, Article X.
(5) GATT, Article XL.
(6) GATT, Article VI.
(7) WTO and Thai Agricultural Products, a distribution
document of the Department of Business Economics, May 2000, at 4 (in
(9) Id. at 5.
(10) ASEAN Economics Division, Department of Business
Economics, Market Access of Thailand under the WTO, at 4 (November 1995)
(11) Chaiwoot Chaipan, Regional Collaboration
in ASEAN and APEC: A Thai Perspective. Occasional Papers, Center for
International Economics, Faculty of Economics. Chulalongkom University.
(12) Trade Policy Review: Thailand, Report by the Government,
WT/TPR/G/63, 17 November 1999, at 11.1
(13) Id. at 16.
(14) Dhajjai Subhaholsiri, Intellectual Property System
of Thailand 4 (2001).
(15) Trade Policy Review: Thailand, supra note 12.
(17) Multilateral Trade Division. Department of Business
Economics, General Agreement on Trade in Services, at 7 (August 1994)
(18) Id. at 8.
(20) See GATS, Article XIX.
(22) For good background and the development of the
antidumping laws under GATT and the WTO. see Michael J. Trebilcock &
Robert Howse. The Regulation of International Trade 97-124 (1995).
(23) For good background and the development of subsidies
and countervailing duties under GATT and the WTO, see id. at 125-61.
(24) WTO Information and Media Relations Division.
Trading into the Future: WTO World Made Organization 28-29 (1995).
(25) Trade Policy Review: Thailand, supra note 12.