Pakistan and Thailand have agreed to start negotiations on Free Trade Agreement (FTA) which will be held on September 27-28 in Thailand.
Commerce Minister Khurram Dastgir Khan announced this at a joint press briefing after holding talks with Thai Commerce Minister General Chatchai Sarikulya on Thursday.
The two ministers led their respective delegations to the third session of the Pakistan-Thailand joint trade committee meeting. A large business delegation accompanied the Thai minister which took part in the meeting of joint business council and held direct meetings with Pakistani businessmen.
During the high-level visits in 2013, leadership of both the countries desired to double the volume of bilateral trade by 2018. This translated into formulation of a joint trade committee for government-to-government consultations and a joint business council for interactions between the two private sectors. It was mutually decided by the ministries of commerce of both the countries to commission feasibility studies for Pakistan-Thailand FTA.
Studies show that there is considerable scope for expansion of bilateral trade which can be double in the short-run as a result of FTA. At the product level, Thailand has comparative advantage in electrical and electronic appliances, machinery and components, and automobiles/parts. Pakistan, on the other hand, has comparative advantage mainly in cotton yarn and woven textiles, ready-made garments, leather products and other miscellaneous manufactured items such as surgical instruments and sports goods.
In addition, there exists potential for boosting intra-industry trade between the two countries in several product segments most notably knitted or crocheted fabrics, articles of apparel and clothing accessories, made up textiles, and leather products. Both types of trade can bring benefits for the two countries in terms of enhanced competition and efficiency, lower prices, and improved product quality and variety.
The findings of this study show that at the product level, Thailand has comparative advantage in more than 1000 commodities which constitute about 21 percent of Pakistan’s total imports which amounts to about $9 billion. Pakistan, on the other hand, has comparative advantage in 684 commodities that constitute about 3 percent of Thailand’s total imports which amounts to about US$7 billion.
The past few decades have witnessed a phenomenal rise in global production sharing arrangement due to technological advancements that have made geographical fragmentation of production activities, an increasingly viable option. Asia has emerged as global hub of manufacturing with increasing integration of east and Southeast Asian economies in global production networks. Pakistan due to its geographic location, better connectivity and Central Asia, reasonable physical infrastructure, state-of-the-art telecommunication services and well-developed finance and insurance sector is better positioned to become part of global manufacturing chain.
Within the ASEAN region, Thailand is a key player in global value chains especially in automobiles and parts, electrical appliances, and electronics. By facilitating cross border movement of goods and services, a free trade regime between the two countries can encourage original equipment manufacturers to base their manufacturing operations in Pakistan to take advantage of cheap labor while relying on Thailand’s technological edge in higher-end product design and manufacturing. Furthermore, the FTA with Thailand will be a stepping stone towards Pakistan’s greater integration with ASEAN, a dynamic market of 600 million people with a combined GDP of US$2.4 trillion.
In light of the likely benefits that both countries are expected to accrue, Pakistan and Thailand have agreed to launch negotiations for a comprehensive free trade agreement which will cover trade in goods initially and subsequently trade in services . The initiative is part of Pakistan’s strategy to deepen its trade and investment linkages with Southeast Asian economies which are among the fastest growing in the world.
