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Awareness Seminar onThailand-India FTA

10 September 2004 – Bangkok

Organized by

Department of Trade NegotiationsMinistry of Commerce, Thailand

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Thailand-India FTA : Indian Private Sector

PerspectivesPresented by

Manab Majumdar

Joint Director and Team Leader – WTO and FTA Division

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OverviewBroadly, Indian business welcomes and supports Thailand-India FTAFICCI considers the Agreement a significant milestone in India’s “Look East” PolicyIn a FICCI-survey, 80% of respondents voted for more such AgreementsOf course, pockets of apprehension existMainly due to lack of information and understandingHence, ‘awareness seminars’ like this are so valuable

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Benefits – A Snapshot FTAs create more trade - business to have greater market access FTAs have positive impact on FDI-inflowScope for cost reduction through sourcing of inputs at competitive pricesFTAs with neighbouring countries more likely to succeed because of lower transport and communication costs

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Dimension of Opportunities

Enormous potential reflected in low bilateral trade turnover marginal share in each other’s total

trade India's Share in Thailand's Global Trade - 2003

1.16

0.8

0 0.5 1 1.5

Exports

Imports

per cent

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Scope for Trade Expansion – A Preliminary, Limited Exercise

(1)

Focus on Thailand’s export opportunities (of EHS-products)For each of the 82 EHS-items, we looked into Thailand’s global exports in 2003Taking a cut-off $ 15 million, 42 products were short-listedFor these 42 items, India’s shares in Thai total exports were then examined – this suggests significant unexploited opportunities BECAUSE ……..

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Scope for Trade Expansion – A Preliminary, Limited Exercise

(2)For 25 such products, India accounts for less than 1% of Thai global exportsFor another 12, India’s share is between 1 and 3 per cent

India's Share Number of Tariff Lines

Nil/Negligible 13

Less than 1% 12

1% - 3% 12

Over 3% 5

Frequency Distribution of 42 Selected EHS-Products

in terms of India's share in Thailand's total exports (2003)

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Scope for Trade Expansion – A Preliminary, Limited Exercise

(3)

So, there are 37 EHS-products for which Thailand’s global exports are significant

and India’s share in Thailand’s total < 3%

Matching these items with India’s global imports, we find that for each of 25 such products India’s total imports exceed $ 10 million

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HS Code

Thailand's Global Exports

($ million)

India's Share in

Thai Total (%)

India's Global Imports

($ million)

India's Basic Duty

Rate as of 1 Jan 2004 (%)

390690 49.1 0.95 27.5 25390799 24.8 1.62 18.4 25390810 36.5 0.00 19.6 25391990 15.7 0.99 17.3 25711319 718.5 0.06 50.8 25732690 168.3 2.46 101.4 25840991 161.9 2.86 37.9 25841381 31.4 0.37 30.4 25841459 51.6 0.47 11.0 25841490 19.1 0.17 67.0 25841510 846.2 1.12 10.4 25841821 227.6 0.07 18.3 25842199 24.7 1.52 33.1 25847190 96.5 0.19 92.2 15847989 49.7 1.06 117.1 25848079 18.0 2.01 26.3 25848180 80.2 0.27 104.7 25848210 140.3 0.23 64.4 25850431 180.9 1.94 25.2 25851711 256.0 nil 19.4 15851790 65.0 0.51 169.6 15852390 19.2 nil 28.0 10853400 743.0 0.62 27.9 15854011 228.4 0.09 70.1 25903289 27.7 1.35 43.7 25

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Potential Being Translated into Business Reality

It’s already happening – leading Indian auto companies are asking for price quotations from ThailandSona Koyo Steering to source auto parts from ThailandIncreasing number of Indian manufacturers to set up manufacturing facility and buying offices in Thailand Rico Auto has set aside $ 3 – 4 million Ashok Leyland looking at manufacturing base Jay Bharat Maruti in a technical joint venture Sona Steering to establish a Representative Office

Another 5-7 companies are finalising similar strategies

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Benefits Would Flow Both Ways

India’s obvious attraction is its huge market

Scope for production sharing

Advantages for India include inter alia Tapping the Thai market – e.g. Toyota Kirloskar Stepping up competitiveness by sourcing cost-

efficient components from Thailand – e.g. Sheet Metal Components required in automotive sector

Likely positive impact in ACs and Refrigerators Right platform and push for Indian companies to

position themselves as global players

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Look At Services Too

Quickly explore prospects for expanding bilateral trade in services May start with select sectors IT-enabled Health-related Audio-visual Education Tourism & travel-related

Sector coverage has to be substantial eventually

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Challenges to Meet

Some companies will lose out

Risk of third-country products

unduly getting duty advantage

– ‘trade deflection’

Emergence of ‘inverted duty

structure’ – (in India’s case)

Pending internal reforms

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The Way Forward (1)

Strictly enforce and monitor ‘Rules of Origin’Aggressively pursue necessary internal reforms Help the ‘loser’ firms readjust and restructure their businessWiden the consultation process to all stakeholders Strengthen the communication process between private sectors of both the countries

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The Way Forward (2)FTAs with right partners

Accelerated process of internal reforms

Enhanced competitiveness of domestic enterprises

‘Enabling environment’ for trade and industry

Faster regional and global integration of the economy

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THANK YOU