RESTRICTEDWORLD  TRADE
ORGANIZATIONWT/TPR/S/123
15 October 2003
(03-5280)
Trade Policy Review Body
TRADE POLICY REVIEW
THAILAND
Report by the Secretariat
This report, prepared for the fourth Trade Policy Review of Thailand, has been
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has,
as required by the Agreement establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), sought clarification from the Government of Thailand on its trade
policies and practices.
Any technical questions arising from this report may be addressed to
Mr. Masahiro Hayafuji (tel.:  022 739 5873) and Mr. Michael Daly
(tel.:  022 739 5077).
Document WT/TPR/G/123 contains the policy statement submitted by the
Government of Thailand.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting 
of the Trade Policy Review Body on Thailand.Thailand WT/TPR/S/123
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS vii
(1) E CONOMIC ENVIRONMENT vii
(2) T RADE AND FOREIGN INVESTMENT REGIME vii
(3) P OLICIES AND MEASURES AFFECTING TRADE AND FOREIGN
INVESTMENT viii
(4) S ECTORAL TRADE POLICIES ix
(5) O UTLOOK x
I. ECONOMIC ENVIRONMENT 1
(1) R ECENT ECONOMIC PERFORMANCE 1
(2) M AIN ECONOMIC DEVELOPMENTS 4
(i) Macroeconomic policies 4(ii) Structural policies 5
(3) D
EVELOPMENTS IN TRADE AND FOREIGN INVESTMENT 7
(i) Trade in goods 7(ii) Trade in services 8
(4) F
OREIGN INVESTMENT PATTERNS 11
(5) O UTLOOK 12
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 14
(1) O VERVIEW 14
(2) G ENERAL CONSTITUTIONAL AND INSTITUTIONAL FRAMEWORK 14
(3) S TRUCTURE OF TRADE POLICY FORMULATION 15
(i) Executive branches of government 15
(ii) Advisory, planning, and other bodies 16
(4) T RADE POLICY OBJECTIVES 18
(5) T RADE LAWS AND REGULATIONS 18
(6) T RADE AGREEMENTS AND ARRANGEMENTS 20
(i) Thailand and the WTO 20
(ii) Preferential, regional, and bilateral arrangements 22
(7) T RADE DISPUTES AND CONSULTATIONS 26
(i) Dispute settlement under the GATT/WTO 26(ii) Other 26
(8) F
OREIGN INVESTMENT REGIME 27
(i) Recent performance and developments 27
(ii) Basic framework 27(iii) International agreements 30
III. TRADE POLICIES AND PRACTICES BY MEASURE 32
(1) I
NTRODUCTION 32
(2) M EASURES DIRECTLY AFFECTING IMPORTS 33
(i) Customs procedures 33
(ii) Tariffs 35WT/TPR/S/123 Trade Policy Review
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(iii) Non-tariff border measures 44
(iv) Contingency measures 47(v) Government procurement and countertrade 49
(3) M
EASURES DIRECTLY AFFECTING EXPORTS 51
(i) Registration and documentation procedures 51
(ii) Export taxes, charges, and levies 51
(iii) Export prohibitions, restrictions, and licensing 51(iv) Export assistance 54
(4) M
EASURES AFFECTING PRODUCTION AND TRADE 55
(i) Taxation 55
(ii) Investment incentives 58
(iii) Trade-related investment measures 60(iv) Standards and other technical requirements 60(v) Intellectual property rights 63(vi) Involvement of state-owned enterprises in production and trade 67(vii) Regulation of corporate practices 69
IV. TRADE POLICIES BY SECTOR 72
(1)
INTRODUCTION 72
(2) AGRICULTURE 72
(3) P OLICY DEVELOPMENTS IN THE ENERGY SECTOR 74
(i) Petroleum and petroleum products 74(ii) Other energy 75
4) P
OLICY DEVELOPMENTS IN SELECTED MANUFACTURING SECTORS 75
(i) Textiles and clothing 76(ii) Steel products 77(iii) Motor vehicles 77
5) S
ERVICES 77
(i) Financial services 78
(ii) Telecommunications 84(iii) Transportation 86(iv) Tourism 88
REFERENCES 89
APPENDIX TABLES 91Thailand WT/TPR/S/123
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CHARTS
I. ECONOMIC ENVIRONMENT
I.1 Product composition of merchandise trade, 1999 and 2001 9
I.2 Direction of merchandise trade, 1999 and 2001 10
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES
II.1 Thailand's new bureaucratic structure, effective October 2002 17
III. TRADE POLICIES AND PRACTICES BY MEASURE
III.1 Share of non- ad valorem  duties, by HS section, 2003 38
III.2 Simple average applied MFN tariff rates, by HS section, 1999 and 2003 40III.3 Frequency distribution of MFN tariff rates, 2003 41
III.4 Composition of tax revenue, fiscal year 2001 55
TABLES
I. ECONOMIC ENVIRONMENT
I.1 Main economic and social indicators 2
I.2 Selected macroeconomic indicators, 1997-02 2I.3 Net inflows of foreign direct investment by sector, 1998-02 11
I.4 Net inflows of foreign direct investment by country, 1998-02 12
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVESII.1 Main trade-related legislation, as at May 2003 18
II.2 Status of notifications to the WTO, as at May 2003 20II.3 Involvement in the WTO Dispute Settlement mechanism, as at August 2003 27II.4 Business activities restricted for foreign investment 28
III. TRADE POLICIES AND PRACTICES BY MEASURE
III.1 Structure of MFN tariffs in Thailand 35
III.2 Tariff quota commitments, actual imports under tariff quotas, and MFN/bound tariffs, 1999-03 38III.3 Products subject to import licensing in Thailand, 2002 44III.4 Anti-dumping measures, as at 31 May 2003 48
III.5 Export duties in Thailand, 2003 51
III.6 Products subject to export licensing in Thailand, 2002 52III.7 Corporate income tax in Thailand, June 2003 56III.8 Thai industrial standards (TISs), 1999-02 61III.9 "Specific-controlled" food products administered by the Ministry of Public Health, 2002 62III.10 Trade mark and patent statistics for Thailand, 1998-02 65
III.11 Activities against intellectual property rights violation, 1998-02 67
III.12 Selected publicly owned commercial companies, 2002 68
IV. TRADE POLICIES BY SECTORIV.1 Share of GDP by sector, 1999-02 73
IV.2 Share of employment by sector, 1999-02 73WT/TPR/S/123 Trade Policy Review
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APPENDIX TABLES
III. TRADE POLICIES AND PRACTICES BY MEASURE
AIII.1 Applied tariff escalation and tariff ranges, 1999 and 2003 93
AIII.2 Thailand's technical regulations (mandatory standards), 2001 96
IV. TRADE POLICIES BY SECTOR
AIV.1 Thailand's textile and clothing quota utilization:  Canada, European Union, and United States 97Thailand WT/TPR/S/123
Page vii
SUMMARY OBSERVATIONS
(1) ECONOMIC ENVIRONMENT
1. Since its previous Trade Policy
Review in 1999, Thailand has pursued its
economic reform programme to revive growth
after the 1997 Asian financial crisis.  The ThaiGovernment has, by and large, resisted
protectionist pressures, opting instead for
measures aimed at reinforcing its already
increasingly outward-oriented trade and
investment policies.  Trade plays an ever moreimportant role in the economy;  the shares of
exports and imports in GDP have each risen
to over 50%, compared with around 40% in
1997.
2. During the period under review (1999
to 2003), Thailand's economy recovered
steadily, and by 2002 real GDP had been
restored to its pre-crisis level.  Although real
GDP growth slowed in 2001, it rebounded in
2002 to 5.3%, perhaps aided by a more stable
currency, low inflation, and early signs of
fiscal consolidation in the CentralGovernment.  Thailand’s steady progress
towards macro stabilization and key structural
reforms, including financial-sector
rehabilitation and trade and investment
liberalization, have promoted growth in theface of unfavourable global factors, such as
weaker exports in some key markets (except in
China) owing to heightened prospects of
recession.
3. While international factors will
continue to heavily influence Thailand’s
growth prospects through export performance
and capital inflows, continued macroeconomic
stability and fiscal consolidation are also
essential.  Accelerated structural reformswould help restore the still fragile corporate
and financial sectors burdened by debt and
non-performing loans left after the crisis.
Further opening of the economy would raise
productivity, and thus competitiveness, and
attract much needed foreign direct investment,
which slumped in 2002.  The Government hasrenewed its efforts for macroeconomic andstructural reforms to meet these formidable
challenges.
4. Thailand’s economic vulnerability to
external factors has declined.  In particular,
the current account has recorded sizeable
surpluses since Thailand's previous Review;for example, it reached 6.1% of GDP in 2002,
comprising positive trade and services
balances.  The current account surplus reflects
excess national savings over domestic
investment;  it also corresponds to capitaloutflows, and increased international reserves.
Total external debt has declined substantially
(from 93.2% of GDP in 1998 to 47.0% in
2002), and the debt service ratio has also
fallen.  Private external debt, which comprisesmainly long term debt, has also declined.
5. The real effective exchange rate of the
Baht has declined slightly since 1999;  this
may have added a competitive edge to Thai
exporters and producers competing with
imports on the domestic market.  While
Thailand’s overall share in major exportmarkets is relatively stable, competition from
lower-priced exports, particularly from China,
is intensifying.
6. Manufacturing has contributed
substantially to growth.  The sector’s share ofGDP rose from 32.7% in 1999 to 33.8% in
2002.  Nevertheless, substantial, albeit
declining, excess capacity remains, reflecting
past over-investment.  Domestic spending,
especially private consumption on motorvehicles and other durables, encouraged by
lower bank lending rates and rising consumer
credit levels, was the main stimulus for higher
production in 2002.  Unemployment has fallen
continuously, from 4.4% in 1998 to 2.4% in2002, with job growth most pronounced in
manufacturing, construction, wholesale and
retail trade, hotel and restaurants.
(2) T
RADE AND FOREIGN INVESTMENT
REGIME
7. The structure of trade policy
formulation in Thailand has not changedsubstantially since its previous Trade PolicyWT/TPR/S/123 Trade Policy Review
Page viii
Review in 1999.  The Government has
introduced measures to improve bureaucratic
efficiency and governance, including
establishment of the independent National
Counter Corruption Commission, and has
continued to restructure the public sector.
8. Thailand accords at least MFN
treatment to all WTO Members. During the
period under review, it has been an active
participant in WTO activities.  Under the WTO
dispute settlement mechanism, it has been aparty to six disputes, one as respondent and
five as complainant.  It participates in the
WTO Working Groups on Trade and
Investment,  Transparency in Government
Procurement, and Trade and CompetitionPolicy.
9. Thailand is committed to trade and
investment liberalization as a means of
improving competitiveness and thereby
promoting sustainable economic growth and
alleviating poverty.  Such reforms are an
important part of the Government’s "dualtrack" development approach of strengthening
the domestic economy while integrating
Thailand more into the global economy.
Export growth, including diversification of
markets and moving into higher-valuedproducts, is a major thrust of trade policy.
10. The Government supports free trade,
and is committed to multilateral liberalization
especially in agriculture.  As an APEC
member, Thailand is also committed to "openregionalism" as a means of achieving free and
open trade and investment by 2020.  It also
engages in regional trade liberalization and,
in addition to AFTA, is now actively seeking to
negotiate a network of bilateral preferentialtrading arrangements.  Thailand is also
pursuing greater regional trade links within
ASEAN, including the establishment of an
ASEAN-China Free Trade Area within
ten years, the formation of an East Asia Free
Trade Area between ASEAN members, China,
Japan and Korea ("ASEAN plus Three"), andan ASEAN-Japan Economic Partnership.
Thailand believes regional FTAs can be aneffective catalyst for free trade and
complementary to multilateralism.
11. Thailand continues to operate a
generally liberal foreign investment regime.
Negative lists restricting foreign direct
investment in some activities have beenreduced.  U.S. investors receive preferential
treatment, being exempt from most FDI
restrictions under a 1966 Treaty.
(3) P
OLICIES AND MEASURES
AFFECTING TRADE AND FOREIGN
INVESTMENT
12. The general thrust of Thailand’s trade
and investment policy has remained liberal,
and new efforts have been made to facilitate
trade and improve market access.  Such effortshave been particularly noticeable in the areas
of customs valuation and foreign direct
investment.
13. The tariff remains a main instrument
of Thailand's trade policy.  Its structure is
rather complex owing to the multiplicity of
rates applicable to each of the 5,505 tarifflines;  with a simple average applied MFN
rate of 14.7% in 2003, the tariff affords a
relatively high level of protection.  Moreover,
with about a quarter of all tariff lines
unbound, and bound rates often considerablyexceeding applied MFN rates, the authorities
have considerable scope to raise tariffs at any
time, by means of Royal decrees or ministerial
regulations and notifications, with Cabinet
approval.  Nevertheless, during the periodunder review, Thailand raised tariffs in only a
few instances (concerning mainly food
products and automobiles).  Thailand has
taken several anti-dumping actions during the
period under review.
14. Import licensing for various items
remains opaque and appears in some cases to
be equivalent to quantitative restrictions.
Most import licensing requirements are for
national security, health, and environment
reasons.  A number of other non-tariff border
measures remain for other reasons, forexample to protect infant industries;  theThailand WT/TPR/S/123
Page ix
effectiveness of these measures is
questionable.
15. Thailand has not acceded to the
Agreement on Government Procurement.
Government procurement continues to be used
as an instrument of economic policy, withpreferences being accorded to domestic
suppliers.
16. The authorities recognize the need to
remove impediments to investment rather than
relying on tax-based incentives, which havebeen used widely.  Thus, various subsidies tied
to exports have been removed and investment
incentives have been streamlined.  On the
other hand, the Government appears to be
taking a more proactive approach to industrialpolicy and the pursuit of improved
competitiveness, with measures apparently
targeted at certain industries, such as agri-
industry, automobiles, textiles, electronics,
and high-valued services.  Most local-content
and export performance-requirements,
including those attached to incentives for newinvestments, were abolished during the period
under review.
17. Considerable progress has been made
to corporatize state-owned enterprises in
preparation for their eventual privatization,but the privatization programme as a whole
seems behind schedule.  However, in 2003 the
Government established the "Vaynpak Fund",
a mutual fund, with some B 100 billion in
capital;  the fund will invest in industriesbelieved to show bright prospects.
18. The number of Thai industrial
standards based on international "norms" has
increased since the previous Review of
Thailand.  Various laws related to quarantinerequirements have also been amended.
19. Intellectual property legislation has
also been strengthened and the Government
has taken various actions to enforce
protection.
20. The implementation of competition
policy appears to be weak;  since itsinauguration in 1999, the Office of Trade
Competition Commission has issued decisions
in only three cases.  This apparent weakness
may reflect institutional, procedural, legal or
resource limitations.  The authorities believe
that enforcement of the Trade Competition Actwill be more effective following ongoing
institutional and human resource development
as well as experience gained from
international cooperation.
21. An efficient capital market capable of
mobilizing and channelling savings into
productive uses is essential for Thailand's
successful economic restructuring and long-
term development.  This requires good
governance Improving corporate governancethrough better transparency and disclosure
requirements and enforcement of accounting
rules is a government priority as many
corporations face weak balance sheets.
(4) S
ECTORAL TRADE POLICIES
22. Agriculture continues to present a
contrasting policy between the "CairnsGroup" liberalizing approach to agricultural
trade and the relatively high tariff protection
in favour of selected food stuffs.
23. The authorities consider that there is
little incentive for state-owned enterprises withmonopoly power, to improve productivity;
recognizing that this results in an inefficient
use of resources, Thailand has been promoting
privatization of various state-owned
enterprises.  While private participation in theenergy sectors – gas, electricity, and
petroleum products – has increased gradually
through the corporatization of state-owned
companies and partial deregulation.  These
sectors continue to be heavily dominated byinfluential state-owned providers (including
statutory monopolies).
24. Most local-content requirements in
manufacturing have been eliminated.  Tariffs
on certain industrial goods, such as
automobiles and motorcycles have been
increased.  In 2002 and 2003, Thailandintroduced provisional anti-dumping measuresWT/TPR/S/123 Trade Policy Review
Page x
on certain steel products. Under-utilization of
Thailand's quotas for textiles and clothing
exports suggest that the sector's international
competitiveness may be weak in certain
products.
25. Thailand has unilaterally reformed
some services, including higher foreign equity
limits in banking.  Majority Thai ownership is
nevertheless required in many services, and
must be at least 70% in domestic shipping and
aviation.  While the financial sector has beenrestructured substantially, the slow pace of
corporate rehabilitation has constrained
economic recovery.  The sector is being
gradually deregulated and prudential controls
enhanced.  The Thai Asset ManagementCorporation was formed in 2001 to
restructure non-performing loans, which
remain high.  Bank privatization, after some
initial success, has waned.  The basic
telecommunications market is to be fully
liberalized in 2006.  However, other planned
deregulation in the sector has slowed, mainlydue to delays in establishing the independent
regulator.  State monopolies over basic
domestic and international telephone services
remain.  By contrast, more competition in
mobile telephones has triggered greatlyimproved productivity.  Greater private-sector
involvement in transport, including the sale of
23% equity in Thai Airways International, is
envisaged.  Majority foreign investment in
hotels, including accommodation andrestaurant activities, and guided tour and
travel services, requires approval under the
1999 Foreign Business Act.
(5) O
UTLOOK
26. Thailand’s economic prospects appear
to be  favourable. Growth in early 2002 was
strong, despite the uncertain international
climate and the adverse effects on tourism of
the SARS outbreak.  The Government forecasts
about 4.5%-5.5% growth in 2003.  The Bankof Thailand's growth projection for 2004 is
between 4.5%-6%.  It has readjusted
downwards forecasts for core inflation, of less
than 1% in 2003, but slightly higher headline
inflation, of 1% to 2%, caused by the rise in
world prices of oil and commodities.  Bothcore and headline inflation are expected to
average around 1%-2% in 2004.  Aggregate
demand, buoyed by exports and low real
interest rates, is expected to remain strong and
a major source of non-inflationary growth,given substantial excess capacity in
production and low cost-push pressures.
27. Robust growth will depend upon
continued structural reforms and
macroeconomic stabilization, especially fiscalconsolidation and sound public debt
management.  The high public-sector debt and
substantial contingent liabilities associated
with financial sector rehabilitation remain a
significant downside risk, as does the large
overhang of corporate debt and non-
performing loans after the crisis.  Themaintenance of fiscal discipline, notably
ensuring that the balanced budget objective is
met, would enhance future growth prospects.
Further improvement in market access as well
as progress in privatization and regulatoryreforms to make domestic markets more
competitive, would also assist a sustained
recovery.  Prospects also hinge on
international economic developments and
their impact on Thai exports and inwardforeign investment, both of which are vital for
Thai growth.  Expanding export shares in
major markets, especially as competition from
Chinese products intensifies, and rekindling
foreign direct investment, especially after thesharp fall in 2002, will be key factors
influencing Thailand’s economic performance.