A Review of the Proposed Pakistan Thailand Free Trade Agreement

The idea of a Free Trade Agreement (FTA) between Pakistan and Thailand was floated in early 2013. This decision was taken in light of Pakistan’s ‘’Vision East Asia” complemented by Thailand’s ‘’Look West” policy and with bilateral trade between the two countries crossing the billion-dollar mark for the first time. This report, the third in its series, is focused on the Thai manufacturing sector which serves as the backbone of the country’s exports.

The purpose of this report is to advise caution as Pakistani officials negotiate terms of the proposed Pakistan Thailand FTA. Pakistan, which is already suffering from premature de-industrialization and an ever-increasing BOT deficit has a poor record of negotiating trade agreements. Thailand, on the other hand, is an export-oriented economy, high levels of exports are an outcome of increased market access through its various trade agreements. The graph below shows a comparison on Pakistan Thailand bilateral trade.

In 2016, Pakistan exported goods worth $20.53 billion whereas Thailand’s exports during the same period were $213.59 billion. The sheer difference in the export volumes of the countries is an indicator of the level of development of the two countries. Whereas Pakistan’s exports are dominated by textiles, apparel, cotton and cereals, Thailand specializes in mechanical equipment, electrical machinery and automobiles.

This report showcases Thailand’s manufacturing sector. The report compares Thailand’s major export industries with Pakistan’s and the differences especially in the auto, auto parts and the petrochemical industries are highlighted. The auto and auto parts industry are relevant as comparators since the Thai authorities have asked for preferential access to these industries.

To further substantiate the findings of our report, a simulation (SMART) has been included to assess the effects of an FTA. Assuming that both countries, Pakistan and Thailand, drop all bilateral tariffs, Pakistan would import an additional $35 worth of goods from Thailand against every $1 worth of exports to Thailand.

The PBC would like to restate its position that Pakistan needs to safeguard its manufacturing jobs. A country of 207 million at Pakistan’s stage of development, can ill-afford to out-source jobs especially in the low-end of the manufacturing sector. An FTA 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 is a private sector not-for- profit advocacy platform set up in 2005 by 14 (now 70) of
Pakistan’s largest businesses. PBC’s research based advocacy supports measures which improve
Pakistani industry’s regional and global competitiveness. More information about PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk.