The Thai-Chinese Free Trade Agreement

The Thai-Chinese Free Trade Agreement (FTA) has made significant differences to the livestyles of many Bangkok residents and, indeed, people in all the large towns of Thailand. The combination of the reduction of tariffs on various agricultural products (fruit and vegetables – especially apples, garlic and onions) together with improved road links within the Kingdom and connecting with Kunming in Yunnan and the spread of large retail outlets such as Tesco-Lotus means that consumers have been enjoying the availability of cheaper, better quality produce in various categories. However, we live in a capitalist system and capitalism always leads to endless acts of creative destruction in which some are winners and some are losers. On the whole, FTAs tend to increase overall levels of wealth by reducing tariffs, which in general terms lead to inefficient uses of resources. The winners from the FTAs can look after themselves – the losers are the ones about which government should be concerned. In this case, it is the garlic and onion farmers of Chiang Rai in the north who used to produce these goods for the country but who cannot compete with Chinese farmers who need help. Younger, more educated farmers are more likely to be willing to switch their production methods or their job or their location (so would be receptive to government support in retraining and so forth which are active labour market policies); on the other hand, the older and less well-educated farmers tend to be those less willing or able to change their lifestyles and so need more government assistance in the form of unemployment benefits and the like (which are passive labour market policies). It is usually better to plan for these changes in advance but TIT (This is Thailand). This FTA is not perfect – these things rarely are and, because it was signed on a bilateral basis (a larger, ASEAN-China FTA will come into force later) it is more susceptible to the relative power of both sides. That is, the power of Chinese negotiators compared to Thai negotiators (my market is bigger than your market so your farmers can jump through more hoops to gain access) is much higher. However, in a win-win situation there is no need for both sides to gain exactly 50% of the benefit. It should not be seen as a context with China in which Thailand either wins or loses.

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JW has been one of the first contributors to this blog before he gave up on it all in April 2010, during a time when Thai society got more and more polarized about political matters because of red-shirt protesters.

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