Afta deal to hit rice, palm oil and coffee

B2bn loss in exports projected in five years

Published: 21/10/2009
Source: Bangkokpost

Thailand is expected to lose 2.04 billion baht in exports to Asean of three key agricultural products - rice, palm oil and coffee beans - over the next five years after the Asean Free Trade Area (Afta) takes effect early next year.

"The six founding members of Asean will bring down their common effective preferential tariffs (CEPT) at the beginning of next year to zero for several key agricultural products including rice, tapioca, palm oil and tea. This will definitely affect the shipments of the Thai products in the Asean market," said Aat Pisanwanich, director of the Center for International Trade Studies of the University of the Thai Chamber of Commerce.

Asean is scheduled to establish free trade among six of its 10 member countries from Jan 1, bringing down common effective preferential tariffs (CEPT) to between zero and 5% for all products, including those previously deferred under sensitive and highly sensitive lists, at the start of next year.

Newcomers to the regional bloc - Cambodia, Laos, Burma and Vietnam - have until 2015 to reduce their tariffs to between zero and 5% on imports from within Asean under their Afta commitments.

From early next year the import tariff for Thai agricultural products including rice, palm oil, onion, garlic, soybeans, soybean oil, maize, coconut oil, pepper, sugar, instant coffee, tea, raw and flavoured milk, and raw silk should be cut from 5% down to zero, according to Afta.Tariffs on tapioca have already been eliminated.

Cuts in tariffs for products on Thailand's sensitive list vary. Products set to carry a 5% tariff include coffee beans (down from 20%), copra (from 15%), potatoes (from 10%) and cut flowers (from 10%).

Over the next six years, Thai rice is set to lose 0.5% of the Asean market to Vietnam at a cost of about US$13 million, while Thai palm oil loses 2.6% of the market to Malaysia at a cost of $46 million, according to the study.

Thai coffee beans are forecast to lose about 0.1% of their market, worth about $200,000, to Vietnam.

For rice, Mr Aat forecast that Vietnam's lower production costs and higher output would eat into Thailand's market share. Thai palm oil is also more expensive than that produced by Malaysia and Indonesia.

Thailand's relatively small production of coffee beans is likely to lose almost the entire Asean market, said Mr Aat.

But the study sees promising prospects for tapioca, with its market share set to rise 0.1% or $7.3 million, over the next five years.