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January 11, 2019

A lopsided FTA to widen trade deficit with Thailand: TDAP

Business

January 11, 2019

KARACHI: A poorly negotiated free trade agreement (FTA) with Thailand runs the risk of further yawning Pakistan’s trade deficit with the Southeast Asian country, as the former’s exports are ten times higher than the latter, a report by government’s premier trade promotion agency said on Thursday, advising caution.

“Currently, Pakistan is facing very hefty tariff rates in Thailand. A free trade agreement can be helpful to make Pakistani products competitive,” Trade Development Authority of Pakistan (TDAP) said in its country report on the 8th largest economy of Asia.

The TDAP report notes Pakistan can enhance its exports to Thailand by improving price competitiveness of its products as Thai consumers are price conscious and usually prefer local goods as compared to the imported ones.

Moreover, revising its previous stance, Pakistan Business Council (PBC), in the report, said Pakistan needed to safeguard its manufacturing jobs.

“A country of 207 million at Pakistan’s stage of development, can ill-afford to outsource jobs especially in the low-end of the manufacturing sector, thus an free trade agreement with Thailand, or for that matter with any country, should only be signed if it leads to incremental jobs, exports and additional revenue for the government,” the PBC noted.

In order to capture market share, Pakistani industry needs to be efficient in terms of cost, while the government can help exporters by reducing the cost of utilities and tariff on inputs, used to produce exportable items, it said. Bilateral trade between Pakistan and Thailand is improving consistently and has recently crossed $1.4 billion and currently, a free trade agreement to boost mutual trade is being negotiated between the two countries .

However, the increment in bilateral trade is due to an increase in imports by Pakistan that resulted from high imports of motorcars and its parts.

The PBC added that under the current terms which were being negotiated, Pakistan would import $35 from Thailand against its $1 export. It can hurt the local industry of Pakistan. Experts say there was a lot of difference between the economies of both countries as Pakistan’s was still an agro-based economy, while Thailand’s a highly industrialised.

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