One Hundred Days of AFTA

In an article that reminds me why I still plan to re-subscribe to The Bangkok Post, despite its thoroughly disgraceful treatment of the pro-democracy protests, evidence is presented of the positive aspects of the ASEAN Free Trade Agreement (AFTA), which came into force at the beginning of the year and has just passed its first one hundred days.

Many tariffs have been reduced or eliminated (although plenty still remain in the case of so-called ‘sensitive’ products) and so cross-border trade will increase and, as subsidies are reduced or removed, industry will have to become more competitive or fold. One longstanding problem with ASEAN has been the low level of intra-country trade and reliance (by the larger economies) on trading with distant, western markets. Of course, there are powerful political reasons behind this but lack of economic partnership perpetuates political difficulties.

On the whole, there are more winners than losers, especially since most countries have governments willing to intervene in their economies to support local industries and, now that we have reached 2010, a lot of people now realise how to make this kind of arrangement work. However, this being a capitalist world, there are inevitably winners and losers and, while winners can be left to get on with it by and large, the losers are the ones who need additional assistance from government. As ever, it is the vulnerable who need most consideration. Women, in particular, are facing the worst of the ongoing global economic crisis, with many manufacturing jobs (often women-dominated) replaced by stimulus package construction jobs (male-dominated), for example, while reductions in family income mean more women and girls face reduced opportunities for education and social mobility – i.e., once you are poor, you stay poor with poor social mobility. This also has negative effects on quality of life – in practical terms, women are more likely to be stuck at home, especially in rural areas. Then again, when women want to replace lost jobs, they may be forced into the informal economy, where working conditions are insecure. This is not necessarily the karaoke industry but street vending and petty trading, where no protection is available from bullying by officials or gangsters.

Winners and Losers

Free trade agreements (FTAs) make winners and losers – it is the nature of capitalism after all. The role of government is to take care of the losers, especially those vulnerable people who find it difficult to help themselves (by, for example, retraining in a different field or moving or growing different types of crops).

The new ASEAN-wide FTA is set to liberalise (i.e. reduce trade barriers) for 23 products, including rice, garlic, onions, maize and tobacco. The winners from this should be consumers, because of lower prices (and the products can be distributed through improved roads in the Kingdom by the multiple retail chains), retailers and those farmers whose products can now be competitive in international as well as domestic markets. The losers, clearly, are those farmers who are unable to provide goods of the same quality or at the same price of new competitors. Many of the farmers have little in the way of education and so find it difficult to understand what is going on and why – of course, there are plenty more farmers who do understand what they need to do and are already adjusting their methods accordingly.

The government is now being required to help those affected farmers as the FTA is scheduled to come into effect in the New Year. Erecting alternative trade barriers (as is possible the case with inspections for genetically modified organisms or some other generally spurious quality control mechanism) is contrary to the spirit of the agreement and can, presumably be punished legally. These measures will presumably be tested in courts in due course – let us hope ill-intentioned people (e.g. among the leadership of the PAD) do not use this as a spur for more nationalism and xenophobia.

A mixture of policies will be required – Thai agriculture is of course a very strong industry but one in which very few productivity gains have been made over the years. More incentives to become productive and to specialise will be necessary.