When the former prime minister of Thailand, Pol. Lt. Dr. Thaksin Shinawatra, visited India during November 26-29, 2001, the leaders of both countries agreed to expend economic cooperation in trade and investment, and set up a joint working group to study the feasibility of establishing a Thailand – India free trade area.
The Joint Working Group held four rounds of meetings between May and December of 2002, and concluded that a free trade agreement would create mutual benefits in expanding trade, investment, and economic cooperation in areas, such as tourism, education, finance and banking, health, aviation, and international transportation. In addition, Thailand would benefit from expanded trade and reduced tariffs on exports to India, particularly garments, leather products, chemicals, rubber, plastics, metals, automobile and parts, and electrical goods.
Following the outcome of the study, both parties established a Joint Negotiating Group to develop the framework agreement with the aim to establish a Thailand – India Free Trade Area for trade in goods, services, investment, and economic cooperation. The negotiating group convened six meetings between December 2002 and October 2003. On October 9, 2003, Ministers of Commerce of both countries signed the framework agreement.
An India – Thailand Trade Negotiating Committee was set up to discuss details under the Framework Agreement and formulate a free trade agreement as well as expand economic cooperation between the two countries. Expert Groups have also been set up to negotiate specific areas of the agreement, for example, rules of origins of goods, dispute settlement mechanisms, and trade in services and investment. These expert groups report their conclusions to the Trade Negotiating Committee.
Significant Framework Agreement to establish a free Trade Area between Thailand and India
The Framework Agreement covers the liberalization trade in goods, trade in services and investment, as well as expansion of economic cooperation.
Trade in Goods:Under the Framework Agreement, it was agreed that Thailand and India commence the negotiation on Trade in Goods in January 2004 in order to establish the India – Thailand FTA covering trade in goods by 2010. Initially, with a view to accelerating tariff reduction, both countries agreed to implement an Early Harvest Program (EHS). The tariff reduction or elimination of the remaining products other than those under the EHS will be categorized into two tracks, namely Normal Track and Sensitive Track.
Trade in Services and Investment: Under the Framework Agreement, it was also agreed that the negotiations on Trade in Services and Investment be started in January 2004. Both sides concurred to instigate a progressive liberalization of Trade in Services and an establishment of open and competitive investment regimes that facilitate and promote investment within and between the two countries.
- Thailand and India agreed to promote and enhance economic cooperation in the areas that would be beneficial to both countries, such as information and communication technology, tourism, banking and finance, healthcare, construction, etc.
Early Harvest Scheme
- The Framework Agreement also specifies tariff reduction under EHS of 82 items of goods, embracing products of interest of the two countries, such as fruits (apple, durian, mango), processed food products, gems and jewelry, iron and steel products, automobile parts, electronic goods and electrical appliances, etc. The tariffs of the 82 products under EHS were reduced to 0% since September 1, 2006.
Trade in Goods
- Thailand and India have reached an accord on Trade in Goods that incorporates tariff reduction and/or elimination under the Normal Track and Sensitive Track. Other than that, some of the products will be listed in the Exclusion List, to which no tariff reduction will be granted for a period of three years, and will be reviewed thereafter.
Rules of Origins
- The two countries have agreed upon ‘Change in Tariff Sub-Heading (CTSH) + Local Content of 35%’ as the general rule for consideration of origins of products. They also agreed on the Product Specific Rules (PSR) for another 200 items.
Trade in Services and Investment
- Negotiations for agreements on trade in services and on investment are currently in progress, and is expected to be concluded within 2008.
Dispute Settlement Mechanisms
Consensus has been reached on an agreement to establish mechanisms for the settlement of disputes, which will be prepared as a separate document to cover all agreements deriving from the Thailand – India FTA Agreement.
The Thai side is in the process of submitting the Thailand – India FTA Agreement to the Cabinet and the National Legislature for consideration and approval.