Chapter 11: Comparative Advantage in Thailand and Indonesia and Potential Free Trade Agreements: Implications for Trade Diversion
William E. James INTRODUCTION The recent trend for Thailand to enter into bilateral free trade agreements (FTAs) with major trade partners outside of the Association for South East Asian Nations (ASEAN) such as Australia is in marked contrast to Indonesia. The Thai Government is second only to Singapore among the ten South East Asian nations in the vigorous pursuit of free trade agreements on a bilateral basis with numerous trading partners.1 The proclivity to negotiate bilateral preferential trade agreements by Thailand is of possibly greater concern to ASEAN partners like Indonesia than is the case with Singapore. Thailand’s average MFN tariﬀ for WTO members is 14.6 per cent and its average manufacturing tariﬀ (also for WTO members) is 16.5 per cent (WTO 2003b). Thailand has bound 74 per cent of its 5505 tariﬀ lines with the simple average bound rate of 28.4 per cent in 2003.2 Thailand also maintains tariﬀ quotas on 23 agricultural products (WTO 2003a, pp. 38–9). In contrast, 99.9 per cent of Singapore’s tariﬀ lines are duty-free, with only four tariﬀ lines subject to speciﬁc duties (WTO 2000). Singapore has bound 70.5 per cent of its tariﬀ lines with an average bound tariﬀ rate of 9.7 per cent.3 The high levels of protection in Thailand compared with Singapore imply larger potential for trade diversion in the Thai case. Preferential agreements between Thailand and major markets for Indonesian exports like the US and Japan are also of concern because of the potential for such agreements to...
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