Thailand Development research Institute Role of Developing Countries in Services Negotiations: Offensive or Defensive ? : The case of Thailand ICRIER’s International Seminar on Developing Countries and Services Negotiations Gulmohar Hall, IHC, New Delhi, India June 6, 2006 Deunden Nikomborirak Thailand Development research Institute

1. Linking negotiations to Domestic Economic Policy The most important thing in negotiating is to have a clear objective of how services sector liberalization may help promote the the growth of the country’s domestic economy? In doing so, one needs to know inherent weakness – i.e., inefficiency - of the country’s service sector, as well as its strength.

Price & Cost Margin of Major Service Sectors in Thailand 17/11/61 Source: Dee (2004) - Cost of services trade restrictions in Thailand

1. Linking negotiations to Domestic Economic Policy Then one needs to find out why such inefficiency persists? Domestic regulations/policies that serve to limit market size, restrict or distort domestic competition, raise costs, or delay technological upgrades or consolidation? Lack of essential input such as skilled labour, R&D? Lack of foreign competition ?

1. Linking negotiations to Domestic Economic Policy At the same time, one needs to recognize the comparative advantage of domestic services: -- i.e., health, dental and optical services, spa,tourism, mechanics, etc.

1. Linking negotiations to Domestic Economic Policy How can foreign competition help lift productivity and hence, the growth of the service sector and downstream industries? Will the agreement open up new opportunities for competitive service sectors to go overseas?

2. Offense ensure that the negotiating agenda provides balanced focus between issues of interest of both parties (FTAs) or that of developing countries (WTO) “ clean-up own house” to boost the competitiveness of local suppliers – i.e., abolishment of costly and cumbersome rules and regulations; effective human resource policy and schemes. ensure that the country’s position in each issues is aligned with the interest of the country, rather than the particular group of service providers.

3. Defense Have clear sectoral impact assessment and road map on adjustment programs during transition period. Identify possible “niche markets” for local service providers Ensure domestic rules and regulations provide for fair competition between local providers and MNCs – i.e., competition law and policy, transfer-pricing oversight, etc. Ensure that the issue of subsidy is on the table.

4. Conclusion Thailand needs to take both offensive and defensive measures in negotiating in order to ensure that the economy as a whole will benefit from services trade liberalization. In reality, however, negotiations are unavoidably mercantilistic.

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