Pakistan and Thailand have agreed to start negotiations on Free Trade Agreement (FTA) and the first session of the negotiations would take place in Thailand on September 27-28 this year.
This was said by Commerce Minister Khurram Dastgir Khan in a joint press briefing after meeting with Thailand Commerce Minister General Chatchai Sarikulya in Islamabad on Thursday.
The two ministers lead their respective delegations to the third session of the Pakistan-Thailand Joint Trade Committee (JTC) meeting. The Thai minister was accompanied by a large business delegation, which took part in the meeting of the 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 JTC 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 both countries to commission feasibility studies for Pakistan-Thailand FTA.
Studies show that there is considerable scope for expansion of bilateral trade that can double as a result of FTA. At the product level, Thailand has comparative advantage in electrical and electronic appliances, machinery and automobiles. 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 a 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 1,000 commodities, which constitute about 21% of Pakistan’s total imports that amounts to about $9 billion. Pakistan, on the other hand, has comparative advantage in 684 commodities that constitute about 3% of Thailand’s total imports that amounts to about $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, 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 the 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 labour while relying on Thailand’s technological edge in higher-end product design and manufacturing. Furthermore, the FTA with Thailand would be a stepping stone towards Pakistan’s greater integration with ASEAN, a dynamic market of 600 million people with a combined GDP of $2.4 trillion.