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62 Bill Paterson and Sawanit Kongsiri 5 Thailand–Australia Free Trade Agreement Bill Paterson and Sawanit Kongsiri THE AUSTRALIAN PERSPECTIVE Bill Paterson It falls to me to present perhaps the driest presentation of this conference, but also perhaps the most significant development in recent history of Thai– Australia relations. Let me offer some context and a personal view. I think there is some risk of the Association of Southeast Asian Nations (ASEAN) going off in different directions in terms of growth strategies and, possibly, related outlooks and interests. Southeast Asia could become, at least, a two-track region. With the addition of Vietnam, Cambodia, Laos and Burma, ASEAN became an organization which includes fast-developing, newly-industrializing countries (Singapore, Malaysia and Thailand) and four developing countries. The fast developers are aggressively open to international trade, embracing globalization, liberalizing and progressively operating to international standards including those of governance. As a general proposition, that is overall not true of the developing four. In between these two broad groups, some others are potentially making the wrong choices, becoming increasingly economically nationalist, anti-globalization, protectionist, and, in some cases, anti-American. 05 ThaiEcoRecovery Ch 5 5/5/06, 10:01 AM 62 Reproduced from Thailand's Economic Recovery edited by Cavan Hogue (Singapore: Institute of Southeast Asian Studies, 2006). This version was obtained electronically direct from the publisher on condition that copyright is not infringed. No part of this publication may be reproduced without the prior permission of the Institute of Southeast Asian Studies. Individual articles are available at Thailand–Australia Free Trade Agreement 63 Their systems of governance await determined processes of reform despite the shock delivered by the Asian financial crisis of 1997–98. And in an unforgiving globalized world they reap the consequences: Foreign direct investment (FDI) avoids them, and their approach affects perceptions of the whole region. In turn, this retards growth: Domestic consumption-led growth in a number of ASEAN countries is simply insufficient to match population and labour force growth. So even at, say, four per cent Gross Domestic Product (GDP) growth, these countries are sliding backwards and are vulnerable. Thailand is not one of these. It has opted for pro-growth, pro-business policies. It has embraced the discipline of the market and decided to seek development through accepting globalization rather than opposing it. It is sometimes an imperfect process, but it is delivering results — results which are delivering impressive levels of growth and improved standards of living beyond the Bangkok commercial elite. This approach has laid the basis for much closer cooperation with Thailand’s developed partners. While both Thailand and Australia are robust supporters of multilateral trade negotiations through the World Trade Organization (WTO), both are also pillars of the Cairns Group, frustrated by the snail’s pace in carrying forward the Doha Round and denied access to a level-playing field for agriculture. Pro-growth governments cannot await the outcome of lengthy rounds and inconclusive negotiations. To do so will be to lose popular support, slow improvements in living standards and fall behind those embracing globalization. Hence Thai and Australian shared interest in exploring a bilateral free trade agreement (FTA). Introduction: TAFTA — An Important Milestone in the Bilateral Relationship Formal negotiations on a free trade agreement with Thailand began in May 2002 and were recently completed. The Thailand-Australia Free Trade Agreement (TAFTA) will be Australia’s third free trade agreement, following the Singapore-Australia FreeTrade Agreement and the Australia-New Zealand Closer Economic Relations Trade Agreement, and the first comprehensive free trade agreement concluded by Thailand, its first with an OECD country. It is also a prelude to Thai negotiations with the United States. This is a major step towards greater economic integration with the second largest and perhaps the fastest growing economy in Southeast Asia. Consensus economics estimates put Thailand’s growth at 6.3 per cent in 2003, its strongest performance since the financial crisis. High growth is expected to continue for the foreseeable future. 05 ThaiEcoRecovery Ch 5 5/5/06, 10:01 AM 63 64 Bill Paterson and Sawanit Kongsiri Bilateral trade is growing. Thailand was our twelfth largest source of exports and thirteenth largest source of imports last year. Two-way trade in 2003 was worth US$5.9 billion, four per cent more than the previous year. The balance of trade remains in Thailand’s favour by US$1.36 billion. We expect the FTA will substantially improve the environment for investment.Two-way investment flows...


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