The advantages of FTA agreements should be supported by solid evidence, writes KRIENGSAK CHAREONWONGSAK

Prime Minister Thaksin Shinawatra: Caution is needed on Thai-Japan FTA.

On September 9, 2005, a seminar entitled "What Thai People Gain from Thailand-Japan FTA" was held in Bangkok, organised by the Parliamentary Sub-Committee on Macroeconomic and International Economics. As chairman and moderator of the seminar, I shared seven suggestions on beneficial ways in which to negotiate and establish strategies for free trade.

First of all, conceptual conclusions should be reached by discussion, for example, on the topic of, "Should trade be free, or not?"

If free trade is allowed, the next question could be, "To what extent should trade be free?"

If free trade proves to be unquestioningly very beneficial for the country, the government should then let the principle of free trade operate on a unilateral basis. However, if the government continues to engage in negotiation, it implies free trade should be embarked upon carefully.

As the government hurries to negotiate free trade agreements, which may vastly impact society, society itself has reached no conceptual conclusions as to the advantages of unqualified free trade. Thus, the government has aroused much suspicion against itself, with the possibility of disputes with the government also arising.

Secondly, business and workers' adjustments should be taken into consideration. Human beings normally remain inert to change, finding that quick personal adaptations will most likely lead to pain; thus, opening up free trade in a rapid manner will have severe impacts on people. The government should therefore understand human inability in the face of personal adjustment requirements, and so brace for the changes.

The government should also beware of treating people as robots that can be forced into rapid change via structural shift.

The government always says that the "benefits which will be derived from negotiation are up to the readiness of government organisations, business owners, and society in general." For the use of benefits derived from the agreement on free trade territory between Thailand and Japan, the most important question is: "How will the government measure the readiness, or lack thereof, of organisations and Thai society in general to harvest the benefits from an FTA agreement?"

And "What plans will prepare each sector to be ready for free trade modus operandi in the next five years, especially in the production sectors?"

Third, the advantages of FTA agreements should be supported by solid evidence. Though the government is trying to confirm that Thailand will gain benefits from this kind of negotiation, it cannot confirm it with solid evidence, for example, the value of many kinds of benefit and the total net gain.

Considering the benefit of free trade to the service sector, the government's source of information on the service sector is suspicious, as Thailand still lacks a good information base on this sector. Therefore, the government's negotiations are assumed to be too subjective, or else reliant on the black box decision process; but certainly lacking clear, scientifically studied empirical evidence.

Fourth, the participation of every stakeholder should be encouraged. This is a very important point because, in general, members of civil society and those in the general public have no strong sense of unified organisation in negotiation and do not participate in any process to exercise their negotiating power. Thus, they always lose out on trade negotiations. The government should establish a strategy to encourage civil society participation in the negotiation process.

Fifth, inequality between large enterprises and small ones should be carefully considered. Though free trade negotiations will result in similar impacts on business owners in the same industrial area, the benefits to be gained by each will not be equal. The greatest anxiety shows in how benefits are to be brought to the agricultural sector, and also to small and medium enterprise (SME) owners.

While Japan holds to a very high standard for imported goods, the majority of Thai businesses, especially, in the agriculture sector, are only small enterprises, in which production standards are poor. Businesses that meet with international standards are big enterprises, and rarely found, being less than 5% in percentage to the total. These problems are very challenging, as the government needs to find solutions to relieve the problems of disadvantaged small enterprises and small-scale farmers.

Sixth, the appropriateness of production must be considered both for normal and critical, emergency situations. According to the nature of free trade, Thailand will become a country that has expertise in some areas of productions. Therefore, production variety will decrease, which means that Thailand will stop or reduce some types of production, such as the production of sensitive products that will affect the food security of our country.

The consequences of free trade production restructuring may not show under normal conditions, but during critical emergency periods, for example, in time of war, it may lead to troublesome times for people in a country. For example, Japan tried to protect its rice and sugar production after experiencing troubles during World War II.

Lastly, the management of benefit must be considered. Because both good and bad results can be expected after trade negotiations, a "trade-off" will result that should be managed properly. The government needs to consider spin-offs in many dimensions, such as various industrial benefits and impacts amongst groups, the benefits derived from importing cheaper imported consumer products and the impact of price-increased exportable products within a country, etc.

A strategy should also be found to "compensate" those who have been impacted by loss on account of those who have gained benefits. However, information on the negative impact of Thai-Japan FTA is still very limited, thus the government should provide information on this important data as quickly as possible to those who are impacted by it, and should also clearly announce to them the compensation plan.

The process of free trade negotiation needs to be studied and argued both conceptually and factually. Good lessons can then be learnt for future negotiations. All seven of these suggestions should provide some useful strategic framework to enable Thailand to wisely and circumspectly step up onto the international stage of competition.

Dr Kriengsak Chareonwongsak is a Democrat MP for Bangkok and president of the Social Science Association of Thailand.