The Thailand-Australia Free Trade Agreement (TAFTA) -- Regulations and
Procedures *

Roberto Bergami [FNa1]

1. INTRODUCTION

The Australian Government has pursued a number of bilateral agreements in recent years with Singapore, the United States and Thailand -- all of these are currently in operation. Bilateral agreements have been favoured over multilateral agreements, simply because they are much easier to negotiate. The Thailand -- Australia Free Trade Agreement ('TAFTA'), the focus of this paper, commenced its operation on 1 January 2005.

Thailand appears to have a high degree of protectionism for its domestic producers, with the application of more than 5,000 tariffs. [FN1] The application of duties on a number of imported items lessens the impact of competition from foreign goods and distorts trade through price manipulation mechanism (the imposition of duties is effectively a 'penalty').

The Australian Government has sought to overcome the highly protectionist application of duties to imported products by negotiating a bilateral agreement. This agreement provides a number of benefits for exporters and importers alike, but in order to achieve any potential benefits, traders have to carefully follow specific legislative requirements and regulations that prescribe the documentation and therefore the business process requirements.

This paper examines the impact of the TAFTA legislation and regulations insofar as exports and imports are concerned and comments on the most important aspects of preferential treatment under this agreement primarily from an Australian perspective.

2 BACKGROUND

2.1 THE ECONOMIC EFFECTS OF TAFTA

According to the Centre of International Economics, [FN2] bilateral Australia-Thailand trade has been valued at USD 3.6 billion, with Australian exports to Thailand of USD 1.6 billion, and Thai exports to Australia of USD 2.0 billion. Bilateral trade between Australia and Thailand is relatively more important to Thailand than it is to Australia, as shown in Figure 1 below. Exports to Australia account for 1.6 per cent of Thailand's GDP, while exports to Thailand account for 0.4 per cent of Australia's GDP.

Figure 2 below shows the estimated reduction in bilateral trade barriers under the agreement. As can be seen from this figure, the reduction in trade barriers is greatly skewed toward the Thai end and this is because Thailand's tariffs on merchandise trade are considerably higher than those placed on imports to Australia. [FN3]

The anticipation of TAFTA is that it will deliver benefits to the economies of both Australia and Thailand, particularly in merchandise trade. These benefits, largely achieved through trade liberalisation, are considered in the next section. (Unless otherwise indicated references to Articles and Annexes in this paper relate to the text of TAFTA).

Figure 1: Relative significance of bilateral trade between Australia and Thailand [FN4]

Figure 2 Reduction in bilateral trade barriers under the Agreement [FN5]


 
3 THE BENEFITS OF TAFTA

The Australian Department of Foreign Affairs and Trade ('DFAT') has summarised TAFTA as: [FN6]... a major market opening agreement. It will lead to the complete elimination of Thailand's significant tariffs across all sectors (in some cases up to 200 per cent).

The focus of tariff reduction appears to have been on the Thailand side, largely because the opportunities for reduction in duty rates, from the Australian end, are minimal. With few exceptions, Australian imports attract a general duty rate of 5 per cent and a large proportion of imports are allowed entry into the Australian market duty free.

For Australian exporters, the overall savings in Thai customs duties are estimated to be AUD 100 million in the first year alone. [FN7] These savings are a reflection of the commitments to eliminate customs duties, which are found in Article 203:
Except as otherwise provided in this Agreement, each Party shall progressively eliminate its customs duties on originating goods of the other party in accordance with its Tariff Schedule at Annex 2. [FN8]

As a result of TAFTA, Australian imports originating from Thailand will enter with zero duty, unless specific contrary provisions apply under the agreement. [FN9] For some items, the tariff reduction is being introduced progressively, as in the case of Australian exports of beef meat. Prior to the agreement, the duty rate was 50 per cent, reducing immediately to 40 per cent from 1 January 2005 and then progressively to 0 by the year 2020. [FN10] Although the zero rate will not be achieved until 15 years later, this is nevertheless a commitment to expand market access to Australian products in Thailand.

Central to any benefits that may accrue to exporters and importers of either Australia or Thailand is the notion of the origin of the goods, as this concept underpins TAFTA's preferential treatment. Exporters and importers must therefore follow the agreement's requirements to capture relevant international trade benefits, Counsel advising client should ensure that the required processes are followed correctly, particularly in matters relevant to the determination of origin.

4 THE RULES OF ORIGIN

The Australian Industry Group ('AIG') provides a four-step summary of the requirements to qualify for preferential tariff treatment: [FN11]
1. ensure the goods being exported meet their rule of origin test(s);
2. obtain and retain documentary proof of the goods' originating status;
3. complete the necessary documentation to become a 'Registered Exporter'; and
4. obtain a Certificate of Origin ('CO') for each shipment of goods claiming preferential tariff treatment.

The first two steps will be considered in this section and the last two in the next section.

[FN1]. Thailand (TAFTA) Overview (2005) Department of Foreign Affairs and Trade, Available at: http://www.fta.gov.au/default.aspx? FolderID=259&ArticleID=205 (Accessed: 30 June 2005) In this paper the words tariffs and duties are used interchangeably with the same meaning, that is the application of an additional fee to the price of imported products.

[FN2]

[FN3]

[FN4] The Australia–Thailand Free Trade Agreement: economic effects Centre for International Economics, Canberra & Sydney, 1 March 2004

[FN5]. ibid, p. vi. It should be noted that non-tariff barriers, such as quarantine issues, quotas and subsidies have not been considered in the calculations relevant to this figure.

[FN6]. supra at 1.

[FN7]. supra at 1.

[FN8]. Australia-Thailand Free Trade Agreement (Canberra, 5 July 2004), Available at: http:// www.austlii.edu.au/cgibin/disp.pl/au/other/dfat/nia/2004/10.html?query=% 5e+australia%2dthailand+free+trade+agreement (Accessed: 5 November 2004)

[FN9]. Australia-Thailand CER FTA -- Trade in Goods: Australian Tariff Commitments (2005), Available at: http:// www.dfat.gov.au/trade/negotiations/aust-thai/goods_tariff_commitments.html (Accessed 30 June 2005).

[FN10]. A Business Guide to the Thailand-Australia Free Trade Agreement  (TAFTA) (2004), South and South-East Asia Division, Department of Foreign Affairs and Trade, Commonwealth of Australia, Canberra, p. 45.

[FN11]. Accessing preferential tariffs under the Thailand-Australia Free Trade Agreement (2004), Available at: http:// www.aigroup.asn.au/scripts/cgiip.exe/WService=aigroup/ccms.r?PageID=1940 (Accessed 22 December 2004).