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World Trade Organization |
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WT/TPR/S/123 15 October 2003 | |
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(03-5280) |
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Trade Policy Review Body |
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TRADE POLICY REVIEW THAILAND Report by the Secretariat |
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This report, prepared for the fourth Trade Policy Review of Thailand, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from the Government of Thailand on its trade policies and practices. Any technical questions arising from this report may be addressed to Mr. Masahiro Hayafuji (tel.: 022 739 5873) and Mr. Michael Daly (tel.: 022 739 5077). Document WT/TPR/G/123 contains the policy statement submitted by the Government of Thailand. |
Note: This report is subject to restricted circulation and press embargo until the end of the meeting of the Trade Policy Review Body on Thailand.
CONTENTS
Page
summary observations vii
(1) Economic Environment vii
(2) Trade and Foreign Investment Regime vii
(3) Policies and Measures Affecting Trade and Foreign
Investment viii
(4) Sectoral Trade Policies ix
(5) Outlook x
I. economic environment 1
(1) Recent Economic Performance 1
(2) Main Economic Developments 4
(i) Macroeconomic policies 4
(ii) Structural policies 5
(3) Developments in Trade and Foreign Investment 7
(i) Trade in goods 7
(ii) Trade in services 8
(4) Foreign Investment Patterns 11
(5) Outlook 12
II. trade policy regime: Framework and objectiveS 14
(1) Overview 14
(2) General Constitutional and Institutional Framework 14
(3) Structure of Trade Policy Formulation 15
(i) Executive branches of government 15
(ii) Advisory, planning, and other bodies 16
(4) Trade Policy Objectives 18
(5) Trade Laws and Regulations 18
(6) Trade Agreements and Arrangements 20
(i) Thailand and the WTO 20
(ii) Preferential, regional, and bilateral arrangements 22
(7) Trade Disputes and Consultations 26
(i) Dispute settlement under the GATT/WTO 26
(ii) Other 26
(8) Foreign Investment Regime 27
(i) Recent performance and developments 27
(ii) Basic framework 27
(iii) International agreements 30
III. trade policies and practices by measure 32
(1) Introduction 32
(2) Measures Directly Affecting Imports 33
(i) Customs procedures 33
(ii) Tariffs 35
Page
(iii) Non-tariff border measures 44
(iv) Contingency measures 47
(v) Government procurement and countertrade 49
(3) Measures Directly Affecting Exports 51
(i) Registration and documentation procedures 51
(ii) Export taxes, charges, and levies 51
(iii) Export prohibitions, restrictions, and licensing 51
(iv) Export assistance 54
(4) Measures Affecting Production and Trade 55
(i) Taxation 55
(ii) Investment incentives 58
(iii) Trade-related investment measures 60
(iv) Standards and other technical requirements 60
(v) Intellectual property rights 63
(vi) Involvement of state-owned enterprises in production and trade 67
(vii) Regulation of corporate practices 69
IV. trade policies by sector 72
(1) introduction 72
(2) agriculture 72
(3) Policy Developments in The Energy Sector 74
(i) Petroleum and petroleum products 74
(ii) Other energy 75
4) Policy Developments in Selected Manufacturing Sectors 75
(i) Textiles and clothing 76
(ii) Steel products 77
(iii) Motor vehicles 77
5) Services 77
(i) Financial services 78
(ii) Telecommunications 84
(iii) Transportation 86
(iv) Tourism 88
REFERENCES 89
APPENDIX TABLES 91
Page
CHARTS
I. ECONOMIC ENVIRONMENT
I.1 Product composition of merchandise trade, 1999 and 2001 9
I.2 Direction of merchandise trade, 1999 and 2001 10
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
II.1 Thailand's new bureaucratic structure, effective October 2002 17
III. TRADE POLICIES AND PRACTICES BY MEASURE
III.1 Share of non-ad valorem duties, by HS section, 2003 38
III.2 Simple average applied MFN tariff rates, by HS section, 1999 and 2003 40
III.3 Frequency distribution of MFN tariff rates, 2003 41
III.4 Composition of tax revenue, fiscal year 2001 55
TABLES
I. ECONOMIC ENVIRONMENT
I.1 Main economic and social indicators 2
I.2 Selected macroeconomic indicators, 1997-02 2
I.3 Net inflows of foreign direct investment by sector, 1998-02 11
I.4 Net inflows of foreign direct investment by country, 1998-02 12
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
II.1 Main trade-related legislation, as at May 2003 18
II.2 Status of notifications to the WTO, as at May 2003 20
II.3 Involvement in the WTO Dispute Settlement mechanism, as at August 2003 27
II.4 Business activities restricted for foreign investment 28
III. TRADE POLICIES AND PRACTICES BY MEASURE
III.1 Structure of MFN tariffs in Thailand 35
III.2 Tariff quota commitments, actual imports under tariff quotas, and MFN/bound tariffs, 1999-03 38
III.3 Products subject to import licensing in Thailand, 2002 44
III.4 Anti-dumping measures, as at 31 May 2003 48
III.5 Export duties in Thailand, 2003 51
III.6 Products subject to export licensing in Thailand, 2002 52
III.7 Corporate income tax in Thailand, June 2003 56
III.8 Thai industrial standards (TISs), 1999-02 61
III.9 "Specific-controlled" food products administered by the Ministry of Public Health, 2002 62
III.10 Trade mark and patent statistics for Thailand, 1998-02 65
III.11 Activities against intellectual property rights violation, 1998-02 67
III.12 Selected publicly owned commercial companies, 2002 68
IV. TRADE POLICIES BY SECTOR
IV.1 Share of GDP by sector, 1999-02 73
IV.2 Share of employment by sector, 1999-02 73
Page
APPENDIX TABLES
III. TRADE POLICIES AND PRACTICES BY MEASURE
AIII.1 Applied tariff escalation and tariff ranges, 1999 and 2003 93
AIII.2 Thailand's technical regulations (mandatory standards), 2001 96
IV. TRADE POLICIES BY SECTOR
AIV.1 Thailand's textile and clothing quota utilization: Canada, European Union, and United States 97
(1) Economic Environment
1. Since its previous Trade Policy Review in 1999, Thailand has pursued its economic reform programme to revive growth after the 1997 Asian financial crisis. The Thai Government has, by and large, resisted protectionist pressures, opting instead for measures aimed at reinforcing its already increasingly outward-oriented trade and investment policies. Trade plays an ever more important role in the economy; the shares of exports and imports in GDP have each risen to over 50%, compared with around 40% in 1997.
2. During the period under review (1999 to 2003), Thailand's economy recovered steadily, and by 2002 real GDP had been restored to its pre-crisis level. Although real GDP growth slowed in 2001, it rebounded in 2002 to 5.3%, perhaps aided by a more stable currency, low inflation, and early signs of fiscal consolidation in the Central Government. Thailand’s steady progress towards macro stabilization and key structural reforms, including financial-sector rehabilitation and trade and investment liberalization, have promoted growth in the face of unfavourable global factors, such as weaker exports in some key markets (except in China) owing to heightened prospects of recession.
3. While international factors will continue to heavily influence Thailand’s growth prospects through export performance and capital inflows, continued macroeconomic stability and fiscal consolidation are also essential. Accelerated structural reforms would help restore the still fragile corporate and financial sectors burdened by debt and non-performing loans left after the crisis. Further opening of the economy would raise productivity, and thus competitiveness, and attract much needed foreign direct investment, which slumped in 2002. The Government has renewed its efforts for macroeconomic and structural reforms to meet these formidable challenges.
4. Thailand’s economic vulnerability to external factors has declined. In particular, the current account has recorded sizeable surpluses since Thailand's previous Review; for example, it reached 6.1% of GDP in 2002, comprising positive trade and services balances. The current account surplus reflects excess national savings over domestic investment; it also corresponds to capital outflows, and increased international reserves. Total external debt has declined substantially (from 93.2% of GDP in 1998 to 47.0% in 2002), and the debt service ratio has also fallen. Private external debt, which comprises mainly long term debt, has also declined.
5. The real effective exchange rate of the Baht has declined slightly since 1999; this may have added a competitive edge to Thai exporters and producers competing with imports on the domestic market. While Thailand’s overall share in major export markets is relatively stable, competition from lower-priced exports, particularly from China, is intensifying.
6. Manufacturing has contributed substantially to growth. The sector’s share of GDP rose from 32.7% in 1999 to 33.8% in 2002. Nevertheless, substantial, albeit declining, excess capacity remains, reflecting past over-investment. Domestic spending, especially private consumption on motor vehicles and other durables, encouraged by lower bank lending rates and rising consumer credit levels, was the main stimulus for higher production in 2002. Unemployment has fallen continuously, from 4.4% in 1998 to 2.4% in 2002, with job growth most pronounced in manufacturing, construction, wholesale and retail trade, hotel and restaurants.
(2) Trade and Foreign Investment Regime
7. The structure of trade policy formulation in Thailand has not changed substantially since its previous Trade Policy Review in 1999. The Government has introduced measures to improve bureaucratic efficiency and governance, including establishment of the independent National Counter Corruption Commission, and has continued to restructure the public sector.
8. Thailand accords at least MFN treatment to all WTO Members. During the period under review, it has been an active participant in WTO activities. Under the WTO dispute settlement mechanism, it has been a party to six disputes, one as respondent and five as complainant. It participates in the WTO Working Groups on Trade and Investment, Transparency in Government Procurement, and Trade and Competition Policy.
9. Thailand is committed to trade and investment liberalization as a means of improving competitiveness and thereby promoting sustainable economic growth and alleviating poverty. Such reforms are an important part of the Government’s "dual track" development approach of strengthening the domestic economy while integrating Thailand more into the global economy. Export growth, including diversification of markets and moving into higher-valued products, is a major thrust of trade policy.
10. The Government supports free trade, and is committed to multilateral liberalization especially in agriculture. As an APEC member, Thailand is also committed to "open regionalism" as a means of achieving free and open trade and investment by 2020. It also engages in regional trade liberalization and, in addition to AFTA, is now actively seeking to negotiate a network of bilateral preferential trading arrangements. Thailand is also pursuing greater regional trade links within ASEAN, including the establishment of an ASEAN-China Free Trade Area within ten years, the formation of an East Asia Free Trade Area between ASEAN members, China, Japan and Korea ("ASEAN plus Three"), and an ASEAN-Japan Economic Partnership. Thailand believes regional FTAs can be an effective catalyst for free trade and complementary to multilateralism.
11. Thailand continues to operate a generally liberal foreign investment regime. Negative lists restricting foreign direct investment in some activities have been reduced. U.S. investors receive preferential treatment, being exempt from most FDI restrictions under a 1966 Treaty.
(3) Policies and Measures Affecting Trade and Foreign Investment
12. The general thrust of Thailand’s trade and investment policy has remained liberal, and new efforts have been made to facilitate trade and improve market access. Such efforts have been particularly noticeable in the areas of customs valuation and foreign direct investment.
13. The tariff remains a main instrument of Thailand's trade policy. Its structure is rather complex owing to the multiplicity of rates applicable to each of the 5,505 tariff lines; with a simple average applied MFN rate of 14.7% in 2003, the tariff affords a relatively high level of protection. Moreover, with about a quarter of all tariff lines unbound, and bound rates often considerably exceeding applied MFN rates, the authorities have considerable scope to raise tariffs at any time, by means of Royal decrees or ministerial regulations and notifications, with Cabinet approval. Nevertheless, during the period under review, Thailand raised tariffs in only a few instances (concerning mainly food products and automobiles). Thailand has taken several anti-dumping actions during the period under review.
14. Import licensing for various items remains opaque and appears in some cases to be equivalent to quantitative restrictions. Most import licensing requirements are for national security, health, and environment reasons. A number of other non-tariff border measures remain for other reasons, for example to protect infant industries; the effectiveness of these measures is questionable.
15. Thailand has not acceded to the Agreement on Government Procurement. Government procurement continues to be used as an instrument of economic policy, with preferences being accorded to domestic suppliers.
16. The authorities recognize the need to remove impediments to investment rather than relying on tax-based incentives, which have been used widely. Thus, various subsidies tied to exports have been removed and investment incentives have been streamlined. On the other hand, the Government appears to be taking a more proactive approach to industrial policy and the pursuit of improved competitiveness, with measures apparently targeted at certain industries, such as agri-industry, automobiles, textiles, electronics, and high-valued services. Most local-content and export performance-requirements, including those attached to incentives for new investments, were abolished during the period under review.
17. Considerable progress has been made to corporatize state-owned enterprises in preparation for their eventual privatization, but the privatization programme as a whole seems behind schedule. However, in 2003 the Government established the "Vaynpak Fund", a mutual fund, with some B 100 billion in capital; the fund will invest in industries believed to show bright prospects.
18. The number of Thai industrial standards based on international "norms" has increased since the previous Review of Thailand. Various laws related to quarantine requirements have also been amended.
19. Intellectual property legislation has also been strengthened and the Government has taken various actions to enforce protection.
20. The implementation of competition policy appears to be weak; since its inauguration in 1999, the Office of Trade Competition Commission has issued decisions in only three cases. This apparent weakness may reflect institutional, procedural, legal or resource limitations. The authorities believe that enforcement of the Trade Competition Act will be more effective following ongoing institutional and human resource development as well as experience gained from international cooperation.
21. An efficient capital market capable of mobilizing and channelling savings into productive uses is essential for Thailand's successful economic restructuring and long-term development. This requires good governance Improving corporate governance through better transparency and disclosure requirements and enforcement of accounting rules is a government priority as many corporations face weak balance sheets.
(4) Sectoral Trade Policies
22. Agriculture continues to present a contrasting policy between the "Cairns Group" liberalizing approach to agricultural trade and the relatively high tariff protection in favour of selected food stuffs.
23. The authorities consider that there is little incentive for state-owned enterprises with monopoly power, to improve productivity; recognizing that this results in an inefficient use of resources, Thailand has been promoting privatization of various state-owned enterprises. While private participation in the energy sectors – gas, electricity, and petroleum products – has increased gradually through the corporatization of state-owned companies and partial deregulation. These sectors continue to be heavily dominated by influential state-owned providers (including statutory monopolies).
24. Most local-content requirements in manufacturing have been eliminated. Tariffs on certain industrial goods, such as automobiles and motorcycles have been increased. In 2002 and 2003, Thailand introduced provisional anti-dumping measures on certain steel products. Under-utilization of Thailand's quotas for textiles and clothing exports suggest that the sector's international competitiveness may be weak in certain products.
25. Thailand has unilaterally reformed some services, including higher foreign equity limits in banking. Majority Thai ownership is nevertheless required in many services, and must be at least 70% in domestic shipping and aviation. While the financial sector has been restructured substantially, the slow pace of corporate rehabilitation has constrained economic recovery. The sector is being gradually deregulated and prudential controls enhanced. The Thai Asset Management Corporation was formed in 2001 to restructure non-performing loans, which remain high. Bank privatization, after some initial success, has waned. The basic telecommunications market is to be fully liberalized in 2006. However, other planned deregulation in the sector has slowed, mainly due to delays in establishing the independent regulator. State monopolies over basic domestic and international telephone services remain. By contrast, more competition in mobile telephones has triggered greatly improved productivity. Greater private-sector involvement in transport, including the sale of 23% equity in Thai Airways International, is envisaged. Majority foreign investment in hotels, including accommodation and restaurant activities, and guided tour and travel services, requires approval under the 1999 Foreign Business Act.
(5) Outlook
26. Thailand’s economic prospects appear to be favourable. Growth in early 2002 was strong, despite the uncertain international climate and the adverse effects on tourism of the SARS outbreak. The Government forecasts about 4.5%-5.5% growth in 2003. The Bank of Thailand's growth projection for 2004 is between 4.5%-6%. It has readjusted downwards forecasts for core inflation, of less than 1% in 2003, but slightly higher headline inflation, of 1% to 2%, caused by the rise in world prices of oil and commodities. Both core and headline inflation are expected to average around 1%-2% in 2004. Aggregate demand, buoyed by exports and low real interest rates, is expected to remain strong and a major source of non-inflationary growth, given substantial excess capacity in production and low cost-push pressures.
27. Robust growth will depend upon continued structural reforms and macroeconomic stabilization, especially fiscal consolidation and sound public debt management. The high public-sector debt and substantial contingent liabilities associated with financial sector rehabilitation remain a significant downside risk, as does the large overhang of corporate debt and non-performing loans after the crisis. The maintenance of fiscal discipline, notably ensuring that the balanced budget objective is met, would enhance future growth prospects. Further improvement in market access as well as progress in privatization and regulatory reforms to make domestic markets more competitive, would also assist a sustained recovery. Prospects also hinge on international economic developments and their impact on Thai exports and inward foreign investment, both of which are vital for Thai growth. Expanding export shares in major markets, especially as competition from Chinese products intensifies, and rekindling foreign direct investment, especially after the sharp fall in 2002, will be key factors influencing Thailand’s economic performance.
