Pakistan and Thailand have agreed to start negotiations on Free Trade Agreement and the first session of the negotiations will take place in Thailand on 27-28 September this year.
This was stated by the Minister for Commerce Engr. Khurram Dastgir Khan in a joint press briefing after meeting with the Minister for Commerce of Kingdom of Thailand H. E. General Chatchai Sarikulya in Islamabad.
The two Ministers lead 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 Paksitani 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 was considerable scope for expansion of bilateral trade, which can more than 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.
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 importswhich 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.
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 was 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.
The initiative was 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.