BANGKOK – Japan and Thailand have reached a basic accord on a free-trade agreement, overcoming differences on automobile trade, trade minister Shoichi Nakagawa said Monday in Bangkok.
A Thai negotiator confirmed an agreement has been reached but said a signing ceremony for the pact is unlikely to come before next April.
The FTA with Thailand is the fifth for Japan, which has FTAs with Singapore and Mexico and struck basic deals with the Philippines last November and Malaysia in May.
After months of negotiations, Economy, Trade and Industry Minister Nakagawa and Thai Deputy Prime Minister Somkid Jatusripitak, who is also the finance minister, met to resolve the final stumbling bloc over the tariff elimination of finished car imports from Japan, deciding to reduce tariffs gradually to a certain point and then renegotiate the matter.
The sticking point involved a Japanese request that Thailand remove tariffs on finished car imports at an early date, which Thailand had been reluctant to meet because European and U.S. makers of luxury cars could be at a disadvantage in the Thai market if Japanese automakers had a special concession.
The two countries began formal FTA talks in February 2004 and reached accords on the agricultural sector and the liberalization of steel within the industrial sector before finally resolving the auto question.
“Thailand has agreed to reduce tariffs for Japanese automobiles that are larger than 3,000cc in stages from the current tariff set at 80 percent,” said Pisan Manawapat, the chief Thai negotiator. “The rate will be lowered 5 percentage points each year until 2009, when the tariff would be 60 percent.
“Then Thailand and Japan will renegotiate the tariff line for this sector in the year 2010.”
For completely built automobiles with engines smaller than 3,000cc, there would be no tariff cuts in the next five years “because Thailand needs to preserve the competitiveness of domestic carmakers in this sector,” Pisan said.
He indicated that “renegotiation” on the matter will take place five years from now.
Thailand will completely abolish tariff barriers on auto parts in the sixth year after the agreement comes into effect, which is now seen as being 2011, he added.
In 2011, Thailand will open up the auto parts market for Japan except for five sensitive items — mainly engines — that will remain protected until 2013.
Japan had asked for the same treatment on auto parts as will be given to manufacturers within the Association of Southeast Asian Nations, which plans to bring down tariffs to zero percent starting in 2010, but Thailand insisted Japan must wait another year.
The ASEAN members are Thailand, Malaysia, Indonesia, the Philippines, Singapore, Brunei, Cambodia, Vietnam, Laos and Myanmar.
On steel, Pisan said the two sides agreed Thailand will give Japan a tariff-free quota on hot-rolled steel for items that Thai steelmakers are unable to meet demand for, but that the overall Thai steel industry will remain protected for up to 10 years, depending on product.
On agriculture, Thailand will get tariff-free export to Japan of vegetables and fruit, cooked chicken, processed shrimp and starch, and also on textiles and jewelry, Pisan said.
The top trade negotiators from Japan and Thailand are to sign off on the discussions within the next few weeks to pave the way for the legal text to be ready for official signing, most likely by their prime ministers, by April.
In addition, Thai officials said, Thai Prime Minister Thaksin Shinawatra plans to go to Japan later this month to formally announce the basic FTA along with Junichiro Koizumi.
Shortly before the final conclusion, Thaksin told reporters that “in principle, we have political willingness to have renegotiations on automobiles. It is several more years to come and we need to take care of our auto industry (so) that we will be the Detroit of Asia.”
“We have to make sure that this (FTA) will not be harmful to our plan.”
In Tokyo, Hideji Sugiyama, vice minister of the Ministry of Economy, Trade and Industry, hailed the framework accord struck between the two countries, especially referring to steps agreed upon toward reducing tariffs in Thailand on Japan’s large vehicles with an engine capacity of more than 3,000cc.
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