THAILAND SETS PROCESS FOR APPROVAL OF FTA WITH

C O N F I D E N T I A L SECTION 01 OF 02 BANGKOK 006696

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E.O. 12958: DECL: 11/06/2016
TAGS: ETRD PGOV PREL ECON TH JA
SUBJECT: THAILAND SETS PROCESS FOR APPROVAL OF FTA WITH
JAPAN

REF: BANGKOK 003354

BANGKOK 00006696 001.4 OF 002


Classified By: Economic Counselor Michael J. Delaney; Reason: 1.4 (b) a
nd (d)


1. (C) Summary: The Thai Government looks to be moving
ahead with the complete-but-unsigned Japan-Thailand FTA.
Assuming no big problems crop up during the planned public
hearings and legislative review, we believe the FTA with
Japan will be signed in early 2007. The signing of the FTA
with Japan, coupled with no progress on our own FTA with
Thailand, is likely to create large trade diversion effects,
resulting in significant adverse impact on U.S. exports to
Thailand. End Summary.


2. (C) RTG and Japanese Embassy officials have confirmed
local media reports that a process has been devised for
moving the long-delayed Japan-Thailand Free Trade Agreement
(FTA) forward to the implementation phase. The text of the
Thai-Japan FTA was initialed by both governments' chief
negotiators in mid-2005, but implementation has been delayed
in Thailand owing to (first) the Thaksin government's
political difficulties and (subsequently) the September 19
military coup in Thailand. Japan has long signaled its
intention to ratify the FTA and begin implementation
(reportedly, according to the still-confidential FTA text,
implementation was originally scheduled to begin January
2006). All that legally remains is for the two governments'
foreign ministers to sign the FTA; once that is done,
implementation can begin.


3. (C) Shortly after the September 19 coup, Thai Deputy
Prime Minister/Finance Minister Pridiyathorn announced a
review of Thailand's pending trade agreements, including
those with both Japan and the U.S. While stopping short of
panning the FTAs per se, Pridiyathorn echoed the views of
earlier critics of the Thaksin government's approach to FTAs
and cited the need for greater consultation with the
parliament and civil society. Last week, the Thai government
announced a concrete plan for considering the FTA with Japan.
On the basis of Pridiyathorn's statements, our talks with
other RTG officials, and meetings with Japanese Embassy
officials (both MFA and JETRO) in Bangkok, we believe the
Thai Government will take the following sequential steps:

-- A research institute (probably the RTG-funded Thai
Development and Research Institute -- TDRI) will be
commissioned to undertake an assessment of the FTA's effect
on the Thai economy, with a particular emphasis on costs and
benefits and its sectoral impact.

-- The FTA will be considered by the full RTG Cabinet.

-- The FTA text will be sent to the National Legislative
Assembly (the current stand-in for a parliament) for review.
The review will include public hearings.

-- Following completion of these steps, the Prime Minister
will decide whether to authorize the Foreign Minister to sign
the FTA, bringing it into legal effect and allowing
implementation to begin.


4. (C) Japanese Embassy officials believe this process will
take several months, (hopefully) allowing the FTA to be
signed in early 2007. The Japanese are optimistic that the
FTA eventually will be given the go-ahead; Embassy officials
point out (correctly, in our view) that the FTA with Japan
has been relatively uncontroversial in Thailand. Their only
concern is the possibility that the NLA might press for
textual changes in the FTA; the Thai government has been
unclear on whether this would be allowed.

Embassy Comment

5. (C) We agree with our Japanese colleagues -- there is a

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very good chance that Thailand's FTA with Japan will move
ahead and be implemented in 2007. Several things distinguish
Thailand's FTA with Japan from that of the U.S.: first, it is
already completed; all that remains is to sign it. (The U.S.
FTA text is far from finished.) Second, it has not attracted
much controversy here, mainly because it concentrates on
market access (tariff reductions) for industrial and some
agricultural goods. (The U.S. FTA text encompasses
hot-button issues such as financial services, pharmaceuticals
IPR, and government procurement, and the negotiating process
has been highly controversial here.)


6. (C) As noted in previous Embassy reporting, Thailand's
high tariffs create a high potential for large trade
diversion effects. The signing of the FTA with Japan,
coupled with no progress on our own FTA with Thailand, is
likely to create large trade diversion effects, resulting in
significant adverse impact on U.S. exports to Thailand. (See
06 Bangkok 003354 for a detailed assessment.)

ARVIZU