A Study on the Feasibility of the proposed Pakistan – Thailand Free Trade Agreement

In August 2015 Pakistan and Thailand decided on the Terms of Reference and framework for a free trade agreement during a two-day visit of a Thai delegation to Pakistan. Both governments have expressed their strong interest in the speedy conclusion of a free trade agreement. Pakistan’s past experience with trade agreements and their consequences is reason to proceed with extreme caution where further major free trade agreements are concerned. Previous trade agreements with China, Malaysia and Indonesia among others were characterized by terms that did not grant high potential Pakistani items significant tariff concessions while granting access to the trade partner’s major export items. This has resulted in an onslaught of foreign goods in the Pakistani market as Pakistani exports struggle to find purchase in foreign markets.

Pakistan’s exports to Thailand were USD 118 million in 2014, whereas its imports from Thailand were USD 876 million. Pakistan’s top exports to Thailand at the 2 digit HS code level include fish, cotton and meat. Pakistan’s top imports from Thailand at the 2 digit HS code level include vehicles other than railway, petroleum products, machinery and nuclear reactors.

Under the simulation conducted in this study Pakistan’s total prospective exports to Thailand after the enforcement of the FTA would rise to USD 160 million and Thailand’s total exports to Pakistan would rise to USD 1.71 billion. Therefore, post-FTA Pakistan’s imports from Thailand would skyrocket whereas Pakistan’s exports to Thailand would only show a negligible increase. Furthermore, it is important to note that the National Tariff Commission presently lacks the institutional capacity to fulfill its myriad responsibilities, and therefore will be unable to address issues having to do with the Pakistan-Thailand FTA. Thailand is a major exporter and has benefited from several well-negotiated FTAs. Pakistan, on the other hand, has repeatedly done significant harm to its local industry by signing one-sided agreements with major economic powers. Therefore the findings of this report suggest that the Pakistan-Thailand FTA will likely lead to a similar result.