Pakistan and Thailand on Thursday decided to initiate talks for Free Trade Agreement (FTA) on 27-28 September this year in Bangkok.

“The current volume of trade between two countries is very small only $1 billion, which would be doubled by the year 2018”, Pakistan’s Commerce Minister Engr. Khurram Dastgir Khan said in a joint press conference with Minister for Commerce, Thailand, Gen. Chatchai Sarikulya after attending third session of Pakistan-Thailand Joint Trade Committee.

He said that both the sides agreed on terms of reference and framework for FTA. “The FTA with Thailand will be a stepping stone towards Pakistan’s greater integration with ASEAN, a dynamic market of 600 million people with a combined GDP of $2.4 trillion”, he observed. Khurram Dastgir said that both the countries have identified various sectors including food and agriculture, fishery, auto parts, gems and jewellery, textile and apparel, energy and health for furthering bilateral relations.

He informed that studies show that there is considerable scope for expansion of bilateral trade, which can more than double in the short run as a result of FTA. “At the product level, Thailand has comparative advantage in electrical and electronic appliances, machinery and components, and automobiles/ parts. Pakistan, on the other hand, has comparative advantage mainly in cotton yarn and woven textiles, ready-made garments, leather products and other miscellaneous manufactured items such as surgical instruments and sports goods”, Commerce Minister added.

In addition, he said, there exists potential for boosting intra-industry trade between the two countries in several product segments most notably knitted or crocheted fabrics, articles of apparel and clothing accessories, made up textiles, and leather products. Both types of trade can bring benefits for the two countries in terms of enhanced competition and efficiency, lower prices, and improved product quality and variety, Khurram Dastgir remarked.

Quoting the findings of a study, the Minister said that Thailand has comparative advantage in more than 1000 commodities, which constitute about 21 percent of Pakistan’s total imports, which amounts to about $9 billion. Pakistan, on the other hand, has comparative advantage in 684 commodities that constitute about 3 percent of Thailand’s total imports that amounts to about $7 billion. “There is huge potential of increasing bilateral trade by $16 billion”, he added.

“Pakistan due to its geographic location, better connectivity to Central Asia, reasonable physical infrastructure, state-of-the-art telecommunication services and well-developed finance and insurance sector is in better positioned to become part of global manufacturing chain”, the Minister said and added within the ASEAN region, Thailand is a key player in global value chains especially in automobiles and parts, electrical appliances, and electronics. By facilitating cross border movement of goods and services, a free trade regime between the two countries can encourage original equipment manufacturers to base their manufacturing operations in Pakistan to take advantage of cheap labour while relying on Thailand’s technological edge in higher-end product design and manufacturing.

The joint trade committee meeting observed that exporters of two countries were facing tariff and non-tariff barriers due to preferential regimes maintained by both the countries in favour of their respective FTA partners. The result of the study indicates significant trade complementarities and considerable scope for increasing bilateral trade by lowering tariff and non-tariff barriers.

It highlights that while Pakistan has signed regional and bilateral trade with its South Asian neighbours as well with China, Malaysia, and Indonesia, Thailand has free trade deals both bilaterally and as member of ASEAN grouping with Australia, New Zealand, Japan, China and India. In this scenario, exporters of both countries potentially lose out to their competitors who enjoy preferential market access in each other’s market. A free trade agreement between Pakistan and Thailand is thus expected to create a level playing field for exporters of both countries enabling them to compete effectively in each other market.

Minister for Commerce, Thailand, Gen. Chatchai Sarikulya did not speak to the media due to illness.