The share of agriculture in Thailand's GDP has declined rapidly in recent decades and now stands at only 12 percent. Agriculture still accounts for over 25 percent of total export earnings, but labour productivity is relatively low and the sector still accounts for as much as 46 percent of total employment. Agricultural products make up 15 percent of total exports (including invisibles) but their share in imports is much smaller (less than 5 percent), largely a reflection of the country's abundant supplies of food from local production. In these circumstances, a global system of trade free of distortions and consistent with market principles can be expected to generate considerable benefits for Thailand.
As one of the world's major food exporters, Thailand was an active participant in the Uruguay Round negotiations on agriculture. It had two main objectives. First, it sought to strengthen the rules governing international trade so that its trade interests were not subdued by more powerful trading nations. It consequently sought an effective trade dispute settlement mechanism as an integral part of this system. Second, it sought restraints on export subsidization by others, notably the EU and the United States, which were prejudicial to its own exports. Thailand was also keen to ensure that domestic policies of these major traders, which were responsible for much of the distortions in world markets (e.g. the Common Agricultural Policy of EU and the Farm Acts of the United States), were brought under international discipline.
It should, however, be added that some of the effects of both the CAP and of policies in the United States were beneficial for Thailand. For example, the CAP helped boost Thai exports of cassava to the EU as a result of high cereal prices in that market. Similarly, Thailand derived some benefit from certain policies in the United States that lowered export prices, e.g. of cotton, tobacco and soybeans. However, these export gains were considerably offset by the unfavourable impact on most other agricultural exports, e.g. rice, sugar, poultry products, and fruit and vegetables. The Rice Title of the United States Farm Act of 1985 was the source of a major controversy between Thailand and the United States. The increase in subsidies to domestic rice producers in the latter country inflicted huge costs on Thai exporters, in terms of both depressed world markets and reduced market share.
Following the UR negotiations, there was an intense debate in Thailand on potential gains and losses from the AoA. For example, a 1996 study by the Thailand Development Research Institute (TDRI) estimated that there could be a net gain of about US$482 million in terms of higher trade.2 Another study, by the Thai Office of Agricultural Economics, suggested that while the production and export of rice might decline somewhat, those of other major products, such as poultry, other meat, milk, vegetables and fruit, were likely to increase.3
Despite rapid industrialization in recent years, the agricultural sector is still very important for Thailand. This was also evident during the recent financial crisis, when the sector was able to absorb a large number of displaced workers, thus relieving much of the social cost entailed. Current national objectives for agriculture include:
2.1 Market Access
Although Thailand has been a major food exporter, the Government has tended to protect the agricultural sector4. Prior to the establishment of WTO, imports were regulated and/or restricted through a number of trade instruments which included high ad valorem tariffs, complex tariffs made up of ad valorem and specific duties, surcharges, non-automatic import licensing and local content requirements. For example, skimmed milk powder and soybean cake were subject to domestic content requirements as well as surcharges, while sugar, copra, fresh milk, soybean seeds oil, coffee dried logan, garlic and coconuts were subject to non-automatic import licensing. In addition, imports of coffee beans and rice were prohibited. The net result was that border protection was not only high but also complex for many agricultural products.
In the UR, Thailand bound tariffs on 994 agricultural products and made a commitment to reduce the average tariff rate by 24 percent over a 10-year period (1995-2004), with a minimum reduction of 10 percent on all tariff lines. Tariff rates on 741 products at the HS 6-7 digit level were slated for reduction by a total of 27 percent, from the previous simple average rate of 49 percent to the final bound rate of 36 percent (Table 1). Tariff rate quotas (TRQs) were opened for 23 of these products with in-quota tariff rates ranging from 20 to 65 percent. (See Annex Table 1 for details). Thailand also reserved the right to resort to the special safeguard (SSG) provision of the AoA for 111 products, or about 11 percent of the 994 agricultural tariff lines.
As regards the experience with these commitments, Thailand has had little difficulty in "living with" the new, and mostly tariff-only, import regime, largely because the tariffication process resulted in high bound rates for most of Thailand's sensitive products and because in general bound tariffs have been higher than applied rates. For many products, applied rates since 1995 have ranged from zero to 15 percent and bound rates from 20 to 30 percent. The gap between bound and applied rates has been relatively large for some products, such as maize, low-fat milk powder, potatoes, soybean cakes, and onion seeds5.
Table 1: Overview of agricultural tariff bindings
|
Product |
Tariff pre-UR |
UR-bound rate (2004) |
Average rate of decrease (%) | ||
(percent, ad valorem) |
|||||
All agricultural products |
49 |
36 |
27 | ||
Frozen meat and beef |
60 |
50 |
17 | ||
Milk, cream, powder milk and fat |
240 |
216 |
10 | ||
Common wheat |
71 |
27 |
62 | ||
Rice |
58 |
52 |
10 | ||
Food preparations |
60 |
20 |
67 | ||
Source: Thailand's UR Tariff Schedule. | |||||
Experience in respect of TRQs has been less satisfactory. For example, the "fill rates" for several products have been low, which has caused a number of questions to be raised by trading partners at the WTO Committee on Agriculture (discussed in Section 2.4 below). One reason given by Thailand to explain the low rates was that there was no market demand and so the quotas were not filled, but there were other reasons too. For example, the in-quota tariff rates were relatively high for several products, such as sugar (65 percent), tobacco leaves (60 percent) and instant coffee (40 percent).
The relatively high tariff bindings, together with the right reserved (noted above) to resort to safeguard measures for 111 products, has provided adequate border protection for most sensitive products. However, recourse to the safeguard provision has not so far proved necessary.
Prior to the UR, some primary commodities, such as soybean and dairy products, were highly protected and supported, essentially on the grounds that it was necessary to assist the rural poor and small farmers. Support has mainly taken the form of border protection, rather than direct assistance. During the UR negotiations, the question of support for the farm sector was keenly debated in Thailand, with many farm groups and politicians expressing concern over the possible adverse effect of any reduction of the level of support.
Table 2 provides an overview of the support measures in force in 1995-97, as notified to WTO. Green box measures accounted for 60-70 percent of the total support, AMS outlays for between 20-30 percent and SDT measures the remaining 10-20 percent. Total support outlays increased by 29 percent from 1995 to 1997, most of the increase being in the green box category.
Table 3 shows further details for the AMS category. Thailand declared a base Total AMS of 22 126 million baht, mainly in the form of market price support, and covered four measures: paddy pledging scheme; soft loan measure; market price intervention; and market price support.
Since the green box and SDT outlays are exempted from reduction commitments, it is mainly the situation with the AMS outlays that indicates whether or not domestic policy measures were constrained by the AoA. Thailand's AMS outlays in 1995-97 ranged from 60 to 80 percent of the committed maximum levels, and hence the outlays could still be increased by 20-40 percent without any breach of commitments. Consequently, during this period Thailand was not constrained in providing trade-distorting support to agriculture.
Whether it might be so in the future depends upon developments in a number of areas. There is a long tradition of farmers and farm groups looking to the Government for additional support in times of economic difficulty and also a strong feeling that the Government has the necessary means to that end. The current level of flexibility, of 20-40 percent, may not prove adequate to meet the possible demand for increased support. Moreover, the current provisions of the AoA on support measures may themselves be changed in the new round of negotiations. Consequently, Thailand needs to assess its situation carefully, by analyzing current and prospective support needs and taking up an appropriate stance in negotiations.
Table 2: Overview of domestic support measures during 1995-97
1995 |
1996 |
1997 | |||||
Type of support |
Measures/ Projects |
million baht |
% of total support |
million baht |
% of total support |
million baht |
% of total support |
Total AMS |
Paddy pledging scheme; soft loan measure; market price intervention; market price support |
15 773 |
28.8 |
12 932 |
19.5 |
16 757 |
23.5 |
Green Box |
See note 1 |
33 716 |
61.5 |
41 145 |
62.1 |
47 596 |
66.8 |
Special and Differential Treatment |
Soft-loan for agricultural investment; farming input assistance program |
5 363 |
9.8 |
12 217 |
18.4 |
6 902 |
9.7 |
Total Domestic Support |
54 852 |
100 |
66 295 |
100 |
71 254 |
100 | |
Note 1 Agricultural research and development; pest and disease control project; national extension and advisory services; agricultural training services; infrastructure services; environmental promotion programs; inspection services; marketing and promotion of Farmers' Organization Program; public school nutritional supplement program.
Source: Notifications to WTO
Table 3: Products involved in AMS outlays, 1995-97
Year |
Total AMS commitment (million baht) |
Actual subsidy (million baht)1 |
Products involved (and percentage of total subsidy) |
1995 |
21 816 |
15 773 (72) |
Rice (87.5), fresh milk (5.6), garlic (2.3), onion (0.6), soya bean seed (4.1) |
1996 |
21 507 |
12 933 (60) |
Rice (98.2), onion (1.8) |
1997 |
21 197 |
16 757 (79) |
Rice (72.4), tapioca (20.4), garlic (1.8), onion (1.1), onion (2.5), coffee bean (1.8) |
1 Figures in parentheses are the percentage of actual subsidy of the amount committed.
Source: Department of Business Economics.
Indeed, the issue of support continues to attract much attention, sometimes leading to conflicts between the Ministry of Agriculture and Cooperatives (MAC) and the Ministry of Commerce (MoC). The latter is the main agency for WTO negotiations and often pushes for a more liberal trade regime, while the MAC sees the issue differently and feels strongly about providing adequate support and protection to agriculture. On several occasions, the MoC was blamed by farm groups as well as agricultural traders for not giving sufficient attention to agricultural support issues. For instance, during the ASEAN Free Trade negotiations, it was accused of failing to open up the "closed" Indonesian and Philippine markets for Thai sugar, while at the same time making commitments to open the Thai market for palm oil. However, such tensions are not expected to heighten as long as Thailand is able to keep within the 20-40 percent margin of flexibility noted above.
Thailand did not declare any export subsidies on agricultural products in its WTO Schedule and thus cannot provide such subsidies in the future. This is consistent with Thailand's position as a member of the Cairns Group, which leads the call for prohibiting all forms of export subsidy. As a developing country, however, it is still eligible to provide subsidies to lower internal transport and marketing costs and external freight costs.
Most export prohibitions and taxes on agricultural products have now been eliminated. For example, export duties on raw silk and silk yarn were lifted in 1991, while export quotas and monopoly export arrangements for sugar were cancelled in 1994. Minimum export prices on canned pineapples, maintained to prevent price undercutting by exporters, were removed in 1992. In the post-UR period, some export measures remained. Export duties in the range of 3-10 percent were continued on raw animal hides and export surcharges were levied on raw coffee beans. A notable export restraint that previously existed was the voluntary export restraint on tapioca pellets (cassava) to the EU market, which was removed in 1995 following the tariffication of the product in that market. The EU currently grants Thailand an import quota of 5.5 million tonnes of cassava at the in-quota rate of 6 percent, subject to maximum imports of 21 million tonnes over each four-year period. The Government also used to tax exports of rice and rubber and to implicitly subsidize the export of sugar6
Like many other developing countries, Thailand provides some export incentives of the types listed in Annex I of the Agreement on Subsidies and Countervailing Measures. For example, export-oriented investment projects receive tax concessions and some other benefits. In another scheme, tax rebates are granted on a selective basis to export-oriented industries. Export financing is yet another scheme aimed at export promotion. These measures are implemented by the Export Import Bank of Thailand. The Bank also operates a Packing Credit Scheme, which is the main export refinancing facility for supplying export credit through commercial banks. Given the surge in Thai exports as a whole in recent years and the limited funds at the disposal of these agencies, the rate of assistance is considered to be declining and to be scarcely significant.
As noted above, Thailand opened TRQs for 23 agricultural products. It was not expected that this would have any great effect on imports of the products concerned for two main reasons: the high in-quota tariffs and the strong competitive advantage of Thai exporters in most cases. Nor was it considered likely that the increase in imports would hurt the domestic competing sectors; rather, the imports could be beneficial for the many agro-industries that use these products as raw materials.
In the CoA questions have been raised about the administration of the TRQs, which it has been alleged was responsible for low "fill rates" of the quotas. Experience with the fill rate over the past five years has been mixed. For several products the rate was low because of low domestic prices compared with import prices, high in-quota tariffs, and Thailand's comparative advantage where the product was also exported in-quota. For nine of the 23 products, the fill rates were zero, i.e. there were no imports. These products include dried longan, coconut oil, copra, raw silk, garlic, coffee, milk (not concentrated) and sugar. Coconut oil, rice, and dried longan are exportable products with domestic prices lower than import prices. As for garlic, onions and raw silk, the TRQ was ineffective because of the local content requirement. In the case of instant coffee, no TRQ imports took place until 1998 mainly because access to TRQs was a monopoly of one company, Nescafe.
The local content requirement was also seen as a problem area, notably for raw silk and milk. For instance, importers of pasteurized milk powder are required to purchase "natural and unprocessed" milk locally, at a ratio of 2:1. Similarly, importers of unconcentrated milk for further production must buy natural milk locally, at a ratio of 20:1. These measures, however, were to be eliminated by the end of 1999, in accordance with commitments to WTO. It was also alleged in the CoA that Thailand sought to protect import-competing sectors by granting all quotas to producers' associations or state enterprises, e.g. on coffee beans, milk, garlic, onion and sugar. In other cases, the policy of allocating quotas based on previous import performance and domestic purchase requirements was also faulted.
At the same time, there have also been instances where fill rates exceeded quota levels, e.g. milk (concentrated), soybean cake and maize. Sometimes the Government even allowed above-quota imports at the lower in-quota rate, rather than charging the higher MFN rate, in order to cater to the surging demand of food processors in the animal feed industry. Given the overall beneficial effects, it is unlikely that this policy will be reversed.
These issues and problems related to the administration of TRQs are not unique to Thailand: they have been raised in the CoA with respect to other WTO members also. Some Thai researchers feel that in any event it is necessary to improve the country's administration of the TRQs in order to attain greater transparency and resource-use efficiency. For example, it is maintained that the current system discriminates against new importers in favour of the "large and historic importers," and thus gives rise to rent-seeking behaviour by lobbyists and politicians. 7 The resulting monopoly or monopolistic behaviour and artificially higher prices raise resource costs and undermine potential welfare gains.
Like many other developing countries, Thailand is facing many challenges regarding food quality and standards. According to one commentator, the SPS Agreement is problematic for developing countries such as Thailand for the following reasons: 8
As the SPS measures are becoming increasingly important, some Thai products are facing tougher requirements in international markets. Some major trading partners have claimed that several Thai products, notably poultry meat, vegetables and fresh fruit, suffer from high insecticide remnants, insects and possible diseases and bacteria. Thailand considered it to be unreasonable that Australia required chickens imported from Thailand to be boiled at 120°C, a temperature that would destroy not only the nutrients but also the taste. Furthermore, Australia has banned the import of fragrant dried flower from Thailand, claiming that the insecticide remnant in the product is too high.
On the positive side, it has been observed that the enforcement of these high standards has also obliged Thai farmers to upgrade their production methods and quality control. Moreover, Thailand has also successfully negotiated with its trading partners, within the formal and informal WTO arrangements, the re-examination of the cases or the revision of SPS rules that it considered excessively restrictive.
The strengthening of the WTO dispute settlement system is considered to be an important outcome of the UR. Thailand has made good use of the mechanism. For example, it won a trade dispute with the United States on the export of shrimps.
Before examining the post-UR record of agricultural trade, it is fitting to briefly review some ex ante assessments of the impact of the AoA on Thai agriculture and the economy in general. As a net food-exporter, the major benefit to Thailand of reforms in world agricultural trade was expected to be improved access to world markets. Most studies carried out in Thailand indicated that the potential gains were large. For example, a 1994 study by the Department of Agricultural Economics estimated that agricultural exports would rise by 2.3 percent and imports by 1 percent, and that per caput income would rise by 0.2 percent, with a slight improvement in income distribution. The impact on domestic production and prices of agricultural products would come more from the rise in world agricultural prices than from Thailand's own commitments on domestic support measures, which showed little impact on production.
Another study9 estimated that Thai welfare would increase by a total of US$482 million (in 1992 prices) as a result of the implementation of the UR reform package (i.e. also including quantifiable components of Agreements other than the AoA). It concluded that most of this overall gain would come from agricultural reforms, since welfare losses were expected in other areas, mainly textiles and clothing.
In other studies, the bulk of the estimated gains were premised on substantial improvements in the access to world markets for agricultural products, especially for rice in the markets of Japan, Republic of Korea, Indonesia, Philippines and the EU; poultry in the markets of Japan, Republic of Korea, the EU and Malaysia; sugar in the EU, Malaysia and Philippines and tapioca pellet in the Republic of Korea.
Improved access to the Japanese and Korean markets was indeed one of the major outcomes for Thailand of the UR. Although there is a preference in those markets for short- and medium-grain rice, while Thailand mainly produces long-grain rice, the Thai economy was expected to benefit indirectly. One study concluded that production of long-grain rice in the United States could be expected to fall as farmers switched to rice for these two markets, thus driving up the price of long-grain rice to Thailand's advantage.
The extent to which these potential gains to Thailand are actually realized depends also on policy reforms in major importing countries. The UR initiated such reforms, but in the view of Thailand implementation has been weak. The main external impediments to achieving the potential gains from trade in agriculture for Thailand, which the Government wishes to see addressed in future negotiations, are the following:
The major agricultural products exported by Thailand, notably rice, poultry meat, sugar and fruits, are also produced in the major industrialized countries, where they enjoy high levels of protection. Typically, post-UR MFN tariffs on these products range from 100 to 200 percent. Nor is the tariff simple: for some products there is a combination of ad valorem and specific tariffs and for others tariffs are variable.
Since tariffs are so high, TRQs are extremely important for market access. Thailand's experience in this respect since 1995 has not been positive for a number of reasons, some related to how quotas were established initially and others to how they were administered. A good example of the quota-setting problem is that of the EU quota for boneless chicken. Deviating from a commonly followed method, EU committed a minimum access quota of only 29 000 tonnes of poultry meat, rather than the minimum of 27 000 tonnes (and current access of 830 000 tonnes). It argued that its calculation was based on domestic consumption as a percentage of domestic production, thus excluding imports. Accordingly, its current quota on meat and poultry of 519 000 tonnes does not include poultry imports. Its calculation of minimum access is thus based on 5 percent of average domestic consumption minus average imports of meat and poultry (124 600 tonnes), but including imports under the previous oilseed compensation scheme. The resultant figure of minimum access of poultry of 29 000 tonnes, within a minimum access of 124 600 tonnes for all kinds of meat, was much lower than what would have resulted if the correct method had been followed.
The high level of domestic support in developed countries for products of export interest to Thailand is well documented for OECD countries, but needs to be stressed in view of its detrimental role in world trade. In those countries, the Producer Support Estimate (PSE) for rice, for example, averaged 74 percent of the value of rice production in 1998 the highest rate for any of the commodities covered by the OECD study - while the nominal rate of border protection was as high as 3.8. (i.e. import prices were 3.8 times domestic prices).10 In previous rounds of multilateral trade negotiations, Thailand had tried hard to negotiate the reduction of these excessive rates of protection through bilateral negotiations with major distorting countries, but to no avail. Similar efforts were made in the UR, but with only limited success.
The situation is similar for sugar, fruit and vegetables and meat products. While the AoA legitimized some US$200 billion of trade-distorting support measures, it also exempted many other forms of support that in reality are hardly decoupled from production, as claimed. Thailand feels strongly about the rising trend of direct income payments in some OECD countries, including but not limited to "blue box" outlays. These payments have the effect of lowering the cost of production, increasing output and making exports artificially competitive. These issues need to be on the agenda of the new round of negotiations.
Although few WTO Members have reserved the right to resort to this option, the scope for subsidizing exports remains large for three of the main export products of Thailand - rice, sugar and poultry meat. Fortunately for Thailand, export subsidies were not used much during 1995-98 and thus the potential damage was minimized. However, now that world market prices have been falling, export subsidies can be expected to increase. That is why Thailand and other Cairns Group members feel very strongly that in the new round of negotiations export subsidies should be totally prohibited.
The above discussion shows that a number of changes have taken place in both the domestic and the international policy environment facing Thai agriculture as a result of the implementation of the AoA. How have they affected Thai food and agricultural trade? In reviewing recent trade performance, it is important to note that although the UR has played a role, it is difficult to isolate its impact as there were several significant developments during the same period, notably the Asian financial crisis. Mainly as a result of that crisis, Thai agricultural exports declined by over 25 percent in 1998 from the previous year, after reaching peak levels in 1995 and 1996. Similarly, agricultural imports, after doubling from 1991 to 1996, declined sharply in 1997 and 1998.
Figure 1 shows annual and trend data of agricultural exports and imports during 1985-94, summarized in Table 4. During 1995-98, the average annual value of agricultural exports of US$8.4 billion was 35 percent higher than in 1990-94, despite the effects of the Asian financial crisis. Measured against the extrapolated trend values for 1995-98, the rise in exports was only 3 percent, since the trend was positive. Much of this increase was due to rice and sugar. Exports of rice in 1995-98 were 54 percent higher than in 1990-94, well above the 35 percent average. There was rapid export growth in a variety of non-traditional products, such as shrimps, processed fish and canned pineapple.
Agricultural imports, corresponding to only one third of the value of agricultural exports, grew steadily during most of 1985-98, but fell in the last two years of that period, respectively by 23 percent and 9 percent. At US$2.7 billion, their average value in 1995-98 was 34 percent higher than in 1990-94, but 9 percent lower than the extrapolated trend value for 1995-98, since the trend was strongly positive. A striking feature of agricultural imports is their high degree of product concentration: the bulk was constituted by oilseeds, dairy products and miscellaneous processed foodstuffs.
The behaviour of net agricultural exports was similar to that of gross exports. Net exports in 1995-98 were on average 36 percent higher than in 1990-94 and 11 percent higher than the extrapolated trend values for 1995-98, both indicating positive experiences for Thailand.
Table 4: Agricultural trade in 1990-94 and 1995-98 (average annual value, in billion US$, and percentage change)
Period |
Exports |
Imports |
Net exports |
1990-94 actual (a) 1995-98 actual (b) 1995-98 extrapolated (c) 1 (b) - (a) 2 (b) - (c) 2 |
6.2 8.4 8.1 2.22 (35%) 0.26 (3%) |
2.0 2.7 3.0 0.69 (34%) - 0.28 (-9%) |
4.2 5.7 5.0 1.51 (36%) 0.54 (11%) |
1 Extrapolated value based on 1985-94 trend. 2 Numbers in parentheses are percentage changes over (a) and (c) respectively. Source: Computed from FAOSTAT data. Agriculture excludes fishery and forestry products. | |||
Figure 1: Agricultural trade, 1995-98 (in billion US$; thick lines are actual values, thin lines are trends for 1985-94 extrapolated to 1998)
Source: FAOSTAT
Since food accounted for 63 percent of total agricultural exports (and 41 percent of total agricultural imports) in 1995-98, the behaviour of food exports was similar to that of total agricultural exports: food exports in 1995-98 were 41 percent higher than in 1990-94. The corresponding increase for food imports was 71 percent, which was also higher than the extrapolated trend value (Table 5).
Table 5: Food trade in 1990-94 and 1995-98 (average annual value, in billion US$, and percentage change)
Period |
Food exports |
Food imports |
Net food exports |
1990-94 actual (a) 1995-98 actual (b) 1995-98 extrapolated (c) 1 (b) - (a) 2 (b) - (c) 2 |
3.8 5.3 5.0 1.54 (41%) 0.32 (7%) |
0.6 1.1 1.0 0.45 (71%) 0.12 (12% |
3.1 4.2 4.0 1.10 (35%) 0.20 (5%) |
1 See note 1 to table 4. 2 Numbers in parentheses are percentage changes over (a) and (c) respectively. Source: Computed from FAOSTAT data, which exclude fishery products. | |||
The preceding sections have brought out a number of issues and concerns that Thailand needs to pursue in the context of the new WTO negotiations on agriculture. They are briefly summarized in the present section, which also takes up some additional issues as well as the approach which Thailand could consider pursuing in the negotiations.
On the three main areas covered by the AoA, Thailand shares the objective of the Cairns Group of pushing agricultural trade towards a "fair and market-oriented agricultural trading system" and in particular seeking "to eliminate and to prohibit all forms of export subsidies and to lower domestic support for agriculture." 11 Consequently it seeks to achieve the following in further negotiations:
On market access, creation of a more liberal environment for agricultural trade, mainly through further reductions in MFN tariffs, establishment of fair and clear guidelines for quota administration and gradual removal of the tariff-quota system.
As regards domestic support measures, in view of the indirect benefits to Thai exports of domestic support measures, the list of subsidy measures in the green box should be reviewed, blue box measures eliminated and amber box support reduced. Thailand is also concerned with the rising trend in direct payments which are not decoupled from production as often claimed. Thailand will probably also prefer to continue the current approach of reducing total AMS rather than on a product-by-product basis.
Elimination of all forms of export subsidy, both direct and indirect (e.g. export credits). Export credits should be used only in times of emergency. The Peace Clause should also be eliminated.
In addition to trading barriers, Thailand would need to address new issues on agriculture, the most important of which relate to multifunctionality and other non-trade concerns and the controversial trade in biotechnology products.
On multifunctionality, Thailand, along with other Cairns Group members, seeks to incorporate into the green box considerations of food security and the environment. Measures undertaken under these headings would need to be transparently applied and in strict adherence to what is authorized in order to avoid their being used as a means of subsidy to production and trade.
As for trade in genetically modified organisms (GM products or GMOs), Thailand would need to consider its position in the "substantive review" of the TRIPS Agreement and on the proposal by the United States to incorporate the patentability of biotechnology products. This issue is especially important given the continuous pressure of the United States, together with other countries exporting GM products, to include trade in such products in the new WTO negotiations. Trade in these products is of growing importance to Thailand. With the leak of the GM cottonseed imported by Monsanto for a field experiment during 1997-99, an intense debate was sparked off on the GMO issue among government agencies, NGOs, private companies, scientists and academics12. The Government has not so far adopted a clear stand on GMOs, perhaps due to the difficulty of balancing potential benefits and risks. In addition to the risk of monopolistic behaviour by business corporations and its influence on production and trade in GMOs, there are likely to be additional costs for a country like Thailand. For example, shipment inspection, DNA testing and product labelling would before long become a standard national requirement for agricultural imports, involving a huge investment in biotechnology test centres. More importantly, the inception of the genetic engineering technology could run counter to consumers' growing rejection of GM foods, resulting in lost export opportunities. For the time being, Thailand seems justified in adopting a "wait and see" attitude, as described by the Deputy Agriculture Minister, Mr. Newin Chidchob.13
In order to best deal with the new negotiations on agriculture, Thailand needs to act on two fronts: i) developing domestic negotiating capacities; and ii) coordinating positions with like-minded countries.
Improving its negotiating capacity is crucial if Thailand is to exercise its full rights and pursue its objectives in further negotiations. Because it was not well prepared during the UR negotiations, it is now generally accepted by many policy makers in Thailand that they missed opportunities during that Round. A good example is the failure to have noticed the EU's usage of a method for establishing a poultry quota which turned out to be different from what appeared to have been previously agreed with Thailand.14 Similarly, the Thai negotiators failed to identify the setting of the Japanese differential tariffs on chicken - 11.9 percent on boneless chicken (an important export of Thailand) and only 8.5 percent on boned chicken (prime exports of the United States). This differential is believed to have impacted negatively on Thai chicken exports.
Besides, there is a need to incorporate the views of all stakeholders as well as to educate them on WTO issues. For one thing, the lack of careful preparation and coordination among relevant state agencies meant that the issues were relatively unknown to almost all stakeholders, namely the farmers, NGOs and private traders, as well as to the state agencies themselves. Recognizing these weaknesses, the Department of Business and Economics has initiated a process of developing a negotiating strategy based on a national consensus. In 1997, it established a Commission on Agricultural Negotiations to direct the preparatory process as well as to establish the country's negotiating position. It has subsequently organized several round-table seminars aimed at disseminating information, increasing awareness of the AoA and assisting in the exchange of views among all concerned on the best position to be taken by Thailand. Furthermore, to increase public awareness, the Department has published and distributed information on the subject and provided some detailed information on WTO-related agricultural issues in its web-site.
To develop domestic capacities, there is also a need for enhancing economic research capabilities. Thailand still needs further improvement in its back-up research and development in order to be able to make a sounder assessment of the impact of trade liberalization and various WTO negotiating proposals on its agricultural sector and the economy as a whole. It would also be harder to establish a solid negotiating position without being informed fully of the pros and cons of various negotiating proposals made by trading partners.
Coordinating positions with like-minded countries is a matter on which Thailand has good recent experience in the context of the Cairns Group. However, joining forces with the Cairns Group alone is not enough, as the harmonization of members' interests necessitates some losses at the margin. Thailand must attempt to achieve a wider coalition involving other countries also, and must continue to cooperate with net food-importing developing countries to ensure the benefits of agricultural liberalization.
On the whole, the experience of Thailand has shown that, although the AoA holds out much promise and deserves full support, there are several inconsistencies between the spirit of the Agreement, on the one hand, and the way in which its provisions are being implemented, on the other. Removing these inconsistencies, although challenging, is necessary for the smooth functioning of the global trading environment as well as for the beneficial integration of Thai agriculture into world trade.
Annex Table 1: Agricultural products under Tariff Rate Quota commitments
No. |
Product |
In-quota tariff rate |
Quota (tonnes) |
Out-quota tariff rate (%) | ||
(%) |
1995 |
2004 |
1995 |
2004 | ||
1. |
Milk, not concentrated |
20.0 |
2 286 |
2 400 |
45.5 |
41.0 |
2. |
Milk, concentrated |
20.0 |
45 000 |
55 000 |
237.6 |
216.0 |
3. |
Potatoes |
27.0 |
288 |
302 |
137.6 |
125.0 |
4. |
Onions |
27.0 |
348 |
365 |
156.4 |
142.0 |
5. |
Garlic |
27.0 |
62 |
65 |
62.4 |
57.0 |
6. |
Coconut |
20.0 |
2 312 |
2 427 |
59.4 |
54.0 |
7. |
Copra |
20.0 |
694 |
1 157 |
39.6 |
36.0 |
8. |
Coffee |
30.0 |
5 |
5 |
99.0 |
90.0 |
9. |
Tea |
30.0 |
596 |
625 |
99.0 |
90.0 |
10. |
Pepper |
27.0 |
43 |
45 |
56.4 |
51.0 |
11. |
Maize |
20.0 |
52 096 |
54 700 |
80.2 |
73.0 |
12. |
Rice |
30.0 |
237 863 |
249 757 |
57.4 |
52.0 |
13. |
Soybean |
20.0 |
10 402 |
10 922 |
88.1 |
80.0 |
14. |
Onion seeds |
30.0 |
3 |
3 |
239.6 |
218.0 |
15. |
Soybean oil |
20.0 |
2 173 |
2 281 |
160.4 |
146.0 |
16. |
Palm oil |
20.0 |
4 629 |
4 860 |
157.4 |
143.0 |
17. |
Coconut oil |
20.0 |
382 |
401 |
57.4 |
52.0 |
18. |
Cane or beet sugar |
65.0 |
13 105 |
13 760 |
103.0 |
94.0 |
19. |
Instant coffee |
40.0 |
128 |
134 |
54.4 |
49.0 |
20. |
Soybean cake |
20.0 |
13 105 |
13 760 |
103.0 |
94.0 |
21. |
Tobacco leaves |
60.0 |
219 580 |
230 559 |
146.5 |
133.0 |
22. |
Raw silk |
30.0 |
6 129 |
6 435 |
79.2 |
72.0 |
23. |
Longan, dried |
30.0 |
5 |
8 |
58.4 |
53.0 |
Source: Department of Business Economics.
1 Based on a background study prepared for the FAO Commodities and Trade Division by Nipon Poapongsakorn, Bangkok.
2 Poapongsakorn, Nipon, "Impact of the Uruguay Round of Negotiations on the World Agriculture and Thai Agricultural Sector", TDRI document, Bangkok, 1996.
3 Office of Agricultural Economics, Thailand. "Thailand: Agriculture Sector Needs Assessment Study." Report of TA 3002-THA, 1998
4 Siamwalla, Ammar, Setboonsrang, Suthad and Patamasiriwat, Direk. "Thai Agriculture in the World Economy", TDRI Year-End Conference Document. Bangkok, 1989.
5 For instance, the applied rate on maize in 1995 was 7.5 percent, against the bound rate of 20 percent.
6 Siamwalla, Ammar, Setboonsrang, Suthad and Patamasiriwat, Direk. "The Response of Thai Agriculture to the World Economy". TDRI Document, Bangkok, 1990.
8 Aileen Kwa, "Negotiating Strategies for Developing Countries." Focus on the Global South, Bangkok, 1997.
9 G.Harrison, T. Rutherford and D. Tarr, "Quantifying the Uruguay Round" in W. Martin and L.A. Winten (eds), The Uruguay Round and the Developing Countries, Cambridge University Press, 1996.
10 OECD, Agricultural Policies in OECD countries: Monitoring and Evaluation, Paris, 1999.
11 Communication to the WTO General Council on behalf of the Cairns Group (WT/GC/W156), 1999.
12 The experimental plantation of genetically modified BT cotton in Thailand turned out to be relatively favourable. For example, the BT cotton required insecticide spraying only twice, compared with more than 10 sprayings for the local seed. The test report, however, showed that the GM cotton seed remained vulnerable to the leaf roll disease and intolerant to the boll-worm. In some cases, the application of the GM cotton seed did not lead to improved yields.
13 Mr. Chidchob stated that: "We would neither take the US nor the EU side, until the global community and the WTO determine their stances on the GMOs. But sooner or later, Thailand must determine its position regarding TRIPS and trade in biotechnology products. And as long as the issue of GM remains inconclusive at the international level, the best solution that Thailand can think of now is to introduce the inspection requirement of imported seeds and agricultural products for the GM ingredients". (Source: Third World Network website, July-November 1999, quoting information obtained from the Nation newspaper.)
