RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/191 
22 October 2007  
 
(07-4486) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
THAILAND 
 
  
 
This report, prepared for the fifth 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 Thailand on its trade policies and 
practices. 
 
Any technical questions arising from this report may be addressed to 
Sergios Stamnas (Tel. 022 739 5382). 
 
Document WT/TPR/G/191 contains the policy statement submitted by Thailand. 
 
 
 
 
Note: This report is subject to restricted ci rculation and press embargo until the end of the 
first session of the meeting of the Trade Policy Review Body on Thailand. Thailand WT/TPR/S/191 
 Page iii 
 
 
CONTENTS 
 
  Page 
SUMMARY OBSERVATIONS vii  (1) E
CONOMIC ENVIRONMENT  vii 
 (2) T RADE POLICY FRAMEWORK  viii 
 (3) T RADE POLICY DEVELOPMENTS  ix 
 (4) S ECTORAL POLICY DEVELOPMENTS  xi 
 (5) O UTLOOK  xiii 
I. ECONOMIC ENVIRONMENT 1 
 (1) I NTRODUCTION  1 
 (2) R ECENT ECONOMIC DEVELOPMENTS  3 
 (3) M AIN MACROECONOMIC POLICY DEVELOPMENTS  6 
 (i) Monetary and exchange rate policy 6 
 (ii) Fiscal policy 8 
 (4) M AIN STRUCTURAL POLICY DEVELOPMENTS  9 
 (i) Tax reform 9 
 (ii) Financial and capital markets reform 9 
 (iii) Privatization 9 
 (iv) Labour 10 
 (v) Governance 10 
 (5) B ALANCE -OF-PAYMENTS DEVELOPMENTS  11 
 (i) Current and trade accounts 11 
 (ii) External liabilities 12 
 (6) D EVELOPMENTS IN MERCHANDISE TRADE  13 
 (i) Composition of trade 13 
 (ii) Direction of trade 13 
 (7) T RENDS AND PATTERNS IN FOREIGN INVESTMENT  16 
 (8) O UTLOOK  18 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 20 
 (1) O VERVIEW  20 
 (2) G ENERAL CONSTITUTIONAL AND INSTITUTIONAL FRAMEWORK  20 
 (3) S TRUCTURE OF TRADE POLICY FORMULATION  21 
 (i) Executive branch es of government 21 
 (ii) Advisory, planning, and other bodies 23 
 (4) T RADE POLICY OBJECTIVES  23 
 (5) T RADE LAWS AND REGULATIONS  24 
 (6) T RADE AGREEMENTS AND ARRANGEMENTS  27 
 (i) Thailand and the WTO 27 
 (ii) Preferential, regional, and bilateral arrangements 28 
 (7) T RADE DISPUTES AND CONSULTATIONS  37 
 (i) Dispute settlement under the GATT/WTO 37 
 (ii) Other 38 WT/TPR/S/191 Trade Policy Review 
Page iv 
 
 
  Page 
(8) F OREIGN INVESTMENT REGIME  38 
 (i) Recent developments 38 
 (ii) Basic framework 38  (iii) International agreements 40 
III. TRADE POLICIES AND PRACTICES BY MEASURE 42 
 (1) 
INTRODUCTION  42 
 (2) M EASURES DIRECTLY AFFECTING IMPORTS  43 
 (i) Customs procedures 43 
 (ii) Tariffs 47  (iii) Non-tariff border measures 59 
 (iv) Contingency measures 63 
 (v) Government procurement and countertrade 66 
 (3) M
EASURES DIRECTLY AFFECTING EXPORTS  70 
 (i) Registration and documentation procedures 70 
 (ii) Export taxes, charges, and levies 70  (iii) Export prohibitions, re strictions, and licensing 71 
 (iv) Export assistance 74 
 (4) M
EASURES AFFECTING PRODUCTION AND TRADE  75 
 (i) Taxation 75 
 (ii) Investment incentives 80  (iii) Trade-related investment measures 83 
 (iv) Other forms of production assistance 83 
 (v) Standards and other technical requirements 84  (vi) Intellectual property rights 88 
 (vii) State involvement in production and trade 95 
 (viii) Regulation of corporate practices 98 
IV. TRADE POLICIES BY SECTOR 104 
(1) I
NTRODUCTION  104 
 (2) A GRICULTURE  105 
 (i) Features 105 
 (ii) Policy objectives and measures 105 
 (3) E NERGY   108 
 (i) Hydrocarbons 109 
 (ii) Electricity 111 
 (4) M ANUFACTURING  113 
 (i) Features 113 
 (ii) Policy objectives and measures 113 
 (5) S ERVICES  117 
 (i) Features 117 
 (ii) Overall commitments under the GATS 117  (iii) Banking, finance, and insurance 118 
 (iv) Telecommunications 126 
 (v) Transport 128  (vi) Tourism 132 
 (vii) Distribution services 133 
REFERENCES   135 
APPENDIX TABLES  143 Thailand WT/TPR/S/191 
 Page v 
 
 
CHARTS 
  Page 
I. ECONOMIC ENVIRONMENT 
 I.1 Product composition of merchandise trade, 2002 and 2006 14 
I.2 Direction of merchandise trade, 2002 and 2006 15 
 III. TRADE POLICIES AND PRACTICES BY MEASURE  
 
III.1 Share of non- ad valorem  duties, by HS section, 2006 51 
III.2 Simple average applied MFN tariff rates, by HS section, 2003 and 2006 54 
III.3 Frequency distribution of MFN tariff rates, 2006 55 
III.4 Tariff escalation by 2-digit ISIC industry, 2003 and 2006 56 III.5 Anti-dumping measures, 2002-06 65 
 
IV. TRADE POLICIES BY SECTOR  
IV.1 Interest rate spread, 2002-07  123 
 
TABLES 
 
I. ECONOMIC ENVIRONMENT 
 
I.1 Selected macroeconomi c indicators, 2002-06 2 
I.2 Basic economic and soci al indicators, 2002-06 4 
I.3 Balance of payments, 2002-06 12 
I.4 Inflows of foreign direct investment, 2002-06 16 I.5 Outflows of foreign direct investment, 2002-06 17 
 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES  
II.1 Main trade-related legislation, May 2007  25 
II.2 Principal notifications under WTO Agreements, 2003 to July 2007  26 II.3 Involvement in the WTO Dispute Settlement Mechanism, 2000-07 37 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE  
 
III.1 Thailand's tariff structure (including ad valorem  equivalents (AVEs)), 2003 and 2006 49 
III.2 Tariff quota commitments, actual imports under tariff quotas, and  
 MFN/bound tariffs, 2005 and 2006 53 
III.3 Preferential tradin g agreements, 2007  59 
III.4 Products subject to import licensing and prohibition in Thailand, 2007  60 
III.5 Anti-dumping measures, 31 December 2006 66 
III.6 Export duties, 2007  71 
III.7 Products subject to export licensing, 2007  71 
III.8 Central government tax revenue by source, 2002-06 76 
III.9 Sample of duty assessment, 2007  77 III.10 Corporate income tax in Thailand, June 2007  79 
III.11 Thai industrial st andards (TISs), 2002-06 84 
III.12 "Specific-controlled" food products administered by the Ministry of Public Health,  as of June 2007   86 
III.13 Trade mark and patent statistics, 2002-06 90 
III.14 Activities against intellectual property rights violation, 2002-05  94 III.15 State involvement in the economy, 2007  95 
III.16 Legal measures applied to products in the Controlled List, as of March 2007  99 WT/TPR/S/191 Trade Policy Review 
Page vi 
 
 
  Page 
IV. TRADE POLICIES BY SECTOR 
 
IV.1 Domestic support to agriculture and livestock notified to the WTO, 2002-04  107  
 
APPENDIX TABLES 
 
I. ECONOMIC ENVIRONMENT 
 AI.1 Merchandise exports by group of products, 2002-06 145 
AI.2 Merchandise imports by group of products, 2002-06 147 
AI.3 Merchandise exports by destination, 2002-06 149 AI.4 Merchandise imports by origin, 2002-06 150 
 
 III. TRADE POLICIES AND PRACTICES BY MEASURE  
 
AIII.1 Thailand's technical regulations (mandatory standards), 2007  151 
 
  Thailand WT/TPR/S/191 
 Page vii 
 
 
SUMMARY OBSERVATIONS 
 
(1) ECONOMIC ENVIRONMENT  
1. Since its previous Trade Policy 
Review in 2003, despite a series of negative 
shocks, Thailand's real GDP has grown at an average annual rate of 5.7% (with inflation averaging a modest 3.4%).  This is largely the result of strong growth in exports and 
domestic consumption, although the latter's 
growth has been slowing;  by contrast, growth of private investment has been relatively weak, especially in 2006.  Concurrently, GDP per capita rose from US$2,007 in 2002 to US$3,159 in 2006, slightly higher than its 
pre- (Asian) crisis level of US$3,032 (1996).  
Average income poverty has remained stable, with around 2% of the population living below US$1 a day.  Income inequality (as measured by the Gini coefficient) dropped slightly (from 
0.525 in 2000 to 0.499 in 2004).  Overall 
unemployment has declined from 2.4% in 2002 to around 1.5% in 2006 as a result of increased employment in the services sector.    
2. Since 2005, however, a confluence of 
factors has led to a slowdown in real GDP 
growth, which is expected to be 4.3% in 2007.  
The factors include higher oil prices, slower growth in the economies of Thailand's major trading partners, the downward electronic cycle, a devastating tsunami, a prolonged 
drought, political instability and uncertainty, 
as well as continued unrest in the southern part of the country.  These have all undermined consumer and investor confidence as well as export growth.  The slowdown in GDP growth 
in 2007 is also partly because growth from 
increased capacity utilization has been exhausted, and new capacity is expanding slowly due to sluggish investment resulting from domestic investors' lack of confidence.  These developments, together with persistent 
infrastructure deficiencies (mainly outside 
metropolitan areas) burdensome government regulation (including price controls), and the decline in Thailand's international competitiveness as a result of, inter alia , the 
recent appreciation of its currency, pose 
challenges to sustained future growth.  Thailand's economic outlook thus depends, in 
particular, on the Government's ability to restore consumer and investor confidence and to undertake pending structural reforms that 
would help improve Thailand's 
competitiveness.   
3. Thailand's Tenth National Economic 
and Social Development Plan, is guided by the "sufficiency economy" principle, which is 
based on the idea of building economic 
resilience to internal and outside shocks, keeping investment and household debt within sustainable levels, and ensuring growth with stability.  Thailand surpassed its poverty reduction targets although poverty remains 
significant in poorer regions and rural areas.  
Despite longstanding efforts, corruption remains significant in both the private and public sectors;  a Government anti-corruption campaign is aimed in particular at 
high-ranking decision-makers and bureaucrats.   
4. During much of the period under 
review, Thailand has mostly pursued an accommodative monetary policy so as to encourage demand and foster economic growth.  The continuing strength of capital 
inflows and the virtually continuous current 
account surplus (reflecting national savings higher than gross domest ic investment) have 
exerted upward pressure on the national currency, the baht.  Between January 2004 and 
December 2006, the real effective exchange 
rate appreciated by 12.7%, while the nominal effective exchange rate appreciated by 6.9%. 
5. Thailand's fiscal position has remained 
strong, underpinned by robust growth in tax 
revenues with the fiscal surplus rising from 
3.8% of GDP in 2003 to 4.4% in 2006.  A large portion of the Government's expenditure is off-budget and includes provision of credit to SME's, and housing projects for the poor;  its cumulative cost between 2001 and 2004 
was estimated to be 6% of GDP.  Fiscal 
decentralization has progressed slower than initially planned.  Tax reform has been focused on raising tax collection, dealing with tax evasion and reducing the cost of doing 
business in Thailand;  a Roadmap for Tax WT/TPR/S/191 Trade Policy Review 
Page viii 
 
 
Reform seems to be under preparation with a 
view to, inter alia , broadening the tax base.   
6. During the period under review, 
sustained growth in exports of goods and 
services resulted in a current account surplus 
in all years except for 2005.  Strong capital inflows coupled with this current account surplus have resulted in a rise in foreign exchange reserves from US$42 billion in 2003 
to US$71 billion in March 2007, more than 
three times the level of short-term external debt and equivalent to roughly 6.7 months of merchandise imports.  The ratio of external debt to GDP and the debt service ratio have declined due,  inter alia , to the Government's 
policy of retiring high interest debt. 
7. The economy has become more 
outward-oriented, with trade in goods and non-factor services rising from 124.6% in 2003 to 143.5% in 2006, and inward foreign direct 
investment (FDI) increasing by more than 
86%.  Manufactured exports still account for more than three quarters of total merchandise exports.  During the period under review, there has been a marked shift in Thailand’s trade destinations;  most Asian economies have 
gained at the expense of the EC-25 and the 
United States, although these, together with Japan, remain Thaila nd's largest export 
markets. 
8. Thailand continues to operate a 
generally liberal foreign investment regime.  
Negative lists restricting levels of FDI in some activities have remained unchanged.  However, amendments of certain legal provisions are under way to prevent foreign 
investors from using nominee shareholders or 
preferential voting rights to take control of Thai companies in restricted sectors.  U.S. investors receive preferential treatment, being exempt from most FDI restrictions under a 1966 Treaty.  Annual FDI inflows grew from 
US$11.5 billion in 2003 to US$20.4 billion in 
2006;  nevertheless, gross domestic investment remained below its pre-crisis levels (i.e. 40% of GDP during 1990-96 compared with 29% in 2005).  Manufacturing has remained the 
largest recipient of FDI, followed by retail and wholesale trading, non-bank financial 
institutions, and real estate activities;  as of 2006, Singapore was the largest overseas investor, followed by Japan, the EC-25, and 
the United States.  Privatization, a contentious 
issue, progressed slowly before being halted in 2006;  as in other areas, progress depends on political developments. 
(2) T
RADE POLICY FRAMEWORK  
9. Thailand is an original Member of the 
WTO.  It grants at least MFN treatment to all its trading partners and receives the special and differential treatment provided for in the WTO Agreements.   
10. Despite constitutional and legislative 
changes owing to the 2006 political 
developments, the structure of trade policy formulation and implementation in Thailand has remained unchanged since its previous Trade Policy Review in 2003. 
11. A new Constitution was approved by 
referendum in August 2007.  Although the 2006 Interim Constitution did not contain any clauses on economic principles and freedom, it guaranteed the protection of rights, liberties, and equality in accordance with the customary 
practice of democratic government as well as 
Thailand's existing international obligations. 
12. Priority areas of the 10
th National 
Economic and Social Development Plan include human and social capital development, 
community strengthening, economic 
restructuring, environmental diversity, and good governance.  Thailand's trade policies embody, inter alia , guiding principles such as 
"sufficiency" and "sustainable economy" as 
well as "fair" and progressive trade 
liberalization. 
13. Regulatory reform has progressed 
under the National Laws Development Plan 2005-2008.  Several laws or amendments have been enacted during the period under review 
(e.g. customs valuation, intellectual property 
rights, competition policy, bankruptcy) or are at different stages of preparation (government Thailand WT/TPR/S/191 
 Page ix 
 
 
procurement, energy, electricity, telecoms, 
e-commerce, tourism). 
14. Thailand has maintained its support 
and commitment to the liberalization of the multilateral trading system, especially for agriculture.  It also remains committed to "open regionalism" a nd considers regional 
trade liberalization an effective catalyst for 
freer trade and complementary to 
multilateralism.  However, the focus of foreign policy now appears to be the strengthening of regional links, not only with immediate neighbours, but in the wider Asian region 
through free-trade agreements (FTAs).  The 
expansion and deepening of preferential treatment and regional integration is among the most notable developments during the period under review (2003-07).  In addition to 
expanding intra-ASEAN FTA undertakings as 
well as ASEAN agreements with third countries, and participating in the establishment of the Bangladesh – India – Myanmar – Sri Lanka – Thailand Economic Cooperation (BIMST-EC) FTA, Thailand has 
concluded a network of bilateral preferential 
trading arrangements with several trading partners (Australia, Bahrain, India, Japan, Peru, New Zealand).  Certain agreements also include liberalization of trade in certain 
services. 
15. Thailand, a beneficiary under various 
GSP schemes and an active participant in the GSTP, is expected to benefit from improved preferential access for certain items under the EC and U.S. GSP schemes.  
16. An E-Government Action Plan 
(2005-07), which promotes  e-services and is 
aimed at developing a government portal, should help increase transparency.  Thailand has made efforts to meet its transparency 
obligations at the multilateral level by, 
inter alia , meeting WTO notification 
requirements in several areas (e.g. agriculture, subsidies, customs tariff) and submitting its first replies to the WTO Questionnaire on 
Import Licensing Procedures in January 2007.  
Despite efforts to increase the level of transparency and disclosure, allegations of corruption have remained in Thailand's 
customs procedures, customs valuation, tariff-rate-quota licensing, government procurement, and the granting of tax incentives.  
(3) T
RADE POLICY DEVELOPMENTS  
17. The customs tariff is one of Thailand's 
main trade policy instruments as well as a major, albeit declining, source of tax revenue (7.4% of total tax revenue).  The introduction 
of the 8-digit ASEAN Harmonized Tariff 
Nomenclature (AHTN) 2007 in January 2007 increased the number of tariff lines by 50.8%;  the lack of a workable version in an official WTO language confined the tariff analysis in this report to the 2006 tariff.  The tariff is 
relatively complex, involving a multiplicity of 
rates (31 ad valorem , 19 specific duties and 
158 alternative duties).  Tariff cuts involving more than a third of the lines, reduced the overall simple average applied MFN tariff 
from 13% (2003) to 11% (2006).  Although 
the number of duty-free tariff lines has increased considerably (to 18.4%), and 37.3% of lines are subject to applied tariff rates of 5% or less, peak ad valorem  rates (of up to 80%) 
have remained unchanged and concentrated in 
a few sensitive items (e.g. motor vehicles, 
sugar, motor cycles, tea).  Insofar as estimates of the ad valorem  equivalents (AVEs) of 
non-ad valorem  duties exist, they show that 
such duties tend to conceal relatively high 
rates of tariff protection;  for example, three of 
the top 20 tariff lines had non- ad valorem  
duties with AVEs that ranged from 87.7% (prepared or preserved fish, minced) to 340.2% (certain ethyl alcohol).  The simple 
average of non- ad valorem  rates for which 
AVEs were available fell from 20.5% (2003) to 16.5% (2006).  The average applied customs duty on agricultural products (WTO definition), at 25% remains higher than the average for industrial goods (8.8%).   
18. Thailand has bound 73.7% of its tariff 
lines:  100% of agricultural lines (WTO definition) and 69.5% of its non-agricultural lines;  Thailand concluded the process of binding its tariffs on specific information 
technology products at zero at end-2005.  WT/TPR/S/191 Trade Policy Review 
Page x 
 
 
When an applied MFN rate is higher than the 
bound rate, observance of the binding commitment depends on the implementation of the "whichever is lower" principle;  for a 
few tariff lines, the bound duty type is not the 
same as the applied one (e .g. the applied rate is 
specific but the bound rate is ad valorem ).  
The adoption of the AHTN nomenclature, which increased considerably the number of 
tariff lines, makes the transposition of existing 
binding commitments to HS 2007 a priority task;  in June 2007, the authorities indicated that they were to start the relevant WTO procedures.  The gap of 16.5 percentage points between the average bound and applied MFN 
tariff rates still imparts a strong degree of 
unpredictability to the tariff regime and provides a great deal of scope for the authorities to raise applied rates within the bindings;  for instance, between 2003 and 
2006 duties on eight tariff lines (e.g. cuts and 
edible offal, fused magnesia, cocaine, raw hides and skins, flat rolled products of iron and steel) were increased considerably.  Nonetheless, the overall trend in applied MFN rates is downward. 
19. The transparency and simplicity of 
customs procedures, crucial elements of trade facilitation, have been increased;  clearance times were shortened with extensive use of paperless trading, and corruption is being 
tackled with preventive measures, including 
improved salary and fringe benefits for customs officials.  Further regulatory changes and training activities have enhanced the implementation and understanding of the 
WTO Agreement on Customs Valuation;  
nevertheless, the process of repealing legal provisions allowing the use of reference prices, which the authorities claim have never been invoked, is still under way.  Several port charges are levied at lower rates on export 
cargo than on import cargo. 
20. Import licensing and prohibitions on 
various items for, inter alia , economic reasons 
(infant industry protection) have remained generally unchanged since the last Review of 
Thailand.  Coverage of products can be altered 
through notifications of the Ministry of Commerce.  During the review period, 
Thailand initiated several anti-dumping cases involving mainly base metals and products thereof and chemicals;  anti-dumping duties on 
hot-rolled steel caused market supply 
problems, and were relaxed temporarily.  Thailand maintains few compulsory standards, and the number of Thai industrial standards based on international standards has continued 
to rise;  various amendments were made to 
laws related to quarantine requirements. 
21. Institutional improvements have been 
aimed at clamping down on re-exporting intended to circumvent or benefit from origin-related treatment in third markets.  The 
persistence of relativel y high statutory export 
taxes on a few commodities (wood and articles thereof, hides) and the possibility of re-instating others, constitutes assistance to the downstream processing of such commodities 
as well as an element of uncertainty.  The 
scope of export licensing and prohibitions has been reduced since 2003;  they are maintained for economic, quality, health, and safety purposes.  Exports of items that are in short supply domestically or that might raise prices 
unduly are subject to quotas (e.g. sugar).  The 
state-owned Export-Import Bank of Thailand (EXIM Bank), which provides relevant financial services that are not adequately provided in the Thai banking system, has 
launched a new credit facility for small and 
medium enterprise (SME) exporters;  losses incurred from the Bank's export credit insurance or business transactions can be compensated by the Ministry of Finance, but 
apparently this has never been the case so far.  
Exports involving 5,224 tariff lines remain eligible for "tax and duty compensation", which is set as a fixed percentage of the f.o.b. value for each product, thus providing the possibility for over- and under-compensation 
despite regular adjustments;  at present 
average compensation rates by product range from 0.74% to 3.86%. 
22. In order to encourage investment in 
priority sectors, remote areas, and production 
by SMEs Thailand continues to use tax (e.g. 
duty exemptions or reductions, corporate tax Thailand WT/TPR/S/191 
 Page xi 
 
 
holidays, accelerated depreciation) and non-
tax incentives (e.g. low interest loans), whose cost-effectiveness is questionable.  Various subsidies tied to exports have been removed. 
23. Price controls and/or monitoring 
continue to affect more than 200 products and 20 services, perhaps accounting for as much as 20% of the CPI basket of goods and services.  The list of controlled goods or services is 
reviewed at least once a year. 
24. State involvement in the economy 
persists (e.g. in agriculture and natural resources, energy, manufacturing, financial, telecoms, transportation, infrastructure, and other services).  Regulatory changes have been 
made to prevent abuse of corporatized entities' 
monopoly power. 
25. Government procurement remains an 
important instrument of economic policy, with 3% price preferences accorded to domestic 
suppliers.  Reportedly, language used in 
procurement tenders may exclude foreign products from the process, although relevant regulations require that wording does not obstruct competition or benefit specific suppliers.  Countertrade requirements tied to 
public procurement contracts were officially  
repealed in early 2007. 
26. Thailand has strengthened its legal 
framework for the protection of intellectual property rights (lPRs) by enacting legislation 
on geographical indications and optical disc 
production;  action was also taken to promote, coordinate, and enforce IPR protection through a Memorandum of Understanding with a number of private-sector representatives and 
law-enforcement groups, and by strengthening 
the institutional framework  for enforcement.  
In late 2006 and early 2007, Thailand issued three compulsory licences, for three medicines, without the consent of the patent holder, for use by the Government;  the 
Government Pharmaceutical Organization was 
granted the rights relating to the patent-protected invention against payment of a royalty fee to the right holder of 0.5% of the total sales value. 27. To cope with competition policy 
weaknesses, in 2007 Thailand enacted a definition of the dominant player in the market, based on market share and sales 
volume.  State-owned enterprises and farmers' 
cooperatives are not covered by the competition legislation, whose enforcement remains weak (one case has been dealt with since 2003).  Reforms in the corporate 
governance legal framework seem to have 
been slow. 
(4) S
ECTORAL POLICY DEVELOPMENTS  
28. Agriculture, where labour productivity 
is relatively low, remains an important component of the Thai economy, external 
trade, and employment;  it also plays a key 
role in achieving increased  food "sufficiency", and poverty reduction.  Government policy has been geared not only towards raising productivity and per capita income in the 
sector, but also implementing the "Sufficiency 
Economy" philosophy, which argues that production diversity reduces the risk of single commodity dependence and improves land fertility.  Tariff protection for agricultural goods has remained unchanged.  Thailand 
relaxed its tariff rate quotas, which apply to 
23 agricultural commodities, by increasing the in-quota volume of potatoes and allowing unlimited imports of soya bean and soya bean cake for certain producer groups at lower 
in-quota rates.  Domestic producers have 
benefited from various types of support, including general services measures, market price intervention, soft loans, price support for certain inputs, and subsidized electricity tariffs 
for agricultural pumping;  such support is 
equivalent to about 1% of GDP and more than 6% of total government expenditure.  Support has remained focused on measures exempt from the reduction commitment (75% of total support expenditure) and observed de minimis  
requirements established under the Agreement 
on Agriculture.  A paddy pledging scheme remains in place.  Incentives have been available for shifting away from garlic production;  support for bio-fuel-related crops 
is under consideration.   WT/TPR/S/191 Trade Policy Review 
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29. During the period under review, steps 
were taken to promote energy conservation and increase domestic energy production, which is dominated by state firms, so as to, 
inter alia,  reduce dependence on energy 
imports;  several regulatory reforms in this regard are under way.  In 2006, domestic oil production covered 13.5% of domestic consumption, compared with 73% for natural 
gas, which is used mostly for electricity 
generation.   The privatization of the state monopoly Electricity Generating Authority of Thailand (EGAT), was a contentious issue and is no longer envisaged.  To cope with recent fuel bill increases, the authorities subsidized 
retail petrol and diesel prices temporarily, and 
cut the excise tax on diesel.  The retail price of liquefied petroleum gas used for cooking has been "stabilized" (by means of a nationwide blanket price freeze), since 7 May 2004, at 
B 16.81 per kg, representing an estimated cost 
of some B 360 million per month to the Government (May 2007);  in addition, the actual costs of bio-fuels are reflected in the gas price and their retail price is lower than gasoline and diesel oil.  Electricity production 
costs were also subsidized in 2004, as the 
state-owned oil and electricity firms were instructed to absorb incr eased fuel costs.  As 
from 2005, a fair, "transparent" and market-based energy pricing structure that seemingly 
reflects actual costs has been put in place;  
cross-subsidization remains in favour of certain low-consumption residential categories and agricultural pumping. 
30. Manufacturing's contribution to 
merchandise exports has risen slightly, with 
electronics maintaining its role as an important export earner.  Overall average applied MFN tariff protection has been reduced, particularly with respect to raw materials and semi-finished items, so as to reduce the tariff's 
anti-export bias.  Tax and non-tax incentives 
are in place to, inter alia,  encourage 
investment in priority manufacturing industries.  As a result of the expiry of the Agreement on Textiles and Clothing (ATC) 
and efforts to clamp down on re-exports aimed 
at circumventing trade measures or exploiting preferential treatment in third markets, the share of textiles and clothing in total exports 
dropped from 7.9% in 2002 to 6.2% in 2005.  High tariff protection and escalation, favouring assembly, support the rapidly growing 
automotive industry, which meets 95% of 
domestic demand for cars.  Furthermore, reductions in excise tax rates together with soft loans have assisted sales growth and promoted clean (i.e. natural gas) vehicles;  a scheme to 
promote investment in eco-cars has been 
approved and the formulation of policy measures is under way.  Importation of used passenger cars is gene rally prohibited except 
when imported temporarily by the public sector for re-export.  
31. Overall, the services sector, which 
makes up a large part of the Thai economy, has benefited from limited liberalization and reform efforts in line with Thailand's existing GATS commitments, which cover close to half 
of the 160-odd services sectors under the 
GATS.  As undertaken in line with its GATS commitments, Thailand increased the maximum allowable foreign ownership in telecom operators (effective January 2006), from 25% to between 49% and 100%, 
depending on the type of business.  
Nevertheless, foreign- ownership limitations 
remain or are under consideration in several sectors;  for instance, a three-stage foreign-ownership liberalization plan for 
insurance, initiated in 1997, remains at its first 
stage.  Annual life insurance premiums of up to B 50,000 are tax-deductible only for holders of policies issued by locally licensed companies.  The banking sector has been 
improving its balance sheet and non-
performing loans portfolio, and migration to more stringent Basel II capital adequacy rules is expected to be completed in late 2008.  During the review period, banks maintained capital adequacy ratios in excess of minimum 
requirements.  The domestic maritime services 
industry has remained protected by cargo reservation requirements and cabotage restrictions;  furthermore, it has benefited from promotional measures to attract Thai operators 
flying the Thai flag.  Privatization and 
divestment in Thai Airways and airports, as well as the negotiation of "open skies" Thailand WT/TPR/S/191 
 Page xiii 
 
 
agreements with major countries from the 
region, have increased competition in the sector.  Tourism recovered from several setbacks in 2006; however, work permits for 
foreign tourist guides seem to be a concern.  
Retail trade has been liberalized gradually since the late 1980s, but a reverse trend seems to have affected large retailers in recent years; in 2007, a draft retail law aimed at restricting 
the expansion of major foreign players was 
reviewed by the Office of the Council of State, and steps were taken to help small retailers run their business more competitively. 
(5) O
UTLOOK  
32. By and large, Thailand's economic 
fundamentals remain good.  In the short term, 
supporting domestic demand and rebuilding investor confidence, as well as moving forward with structural reforms, are the main economic policy challenges.  Meeting these 
challenges requires supportive macroeconomic 
policies and addressing investor concerns regarding Thailand's openness to foreign 
investment.  If macroeconomic targets set under the Tenth Development Plan are achieved, real GDP will be sustained and help 
the economy to become more competitive and 
productive.  Total factor productivity growth (TFP) within the manufacturing and services sectors would require more domestic innovation and technological advancement.  
Hitherto, though the appreciation of the baht 
does not seem to have adversely affected exports (as currencies of competitors also appreciated during the period), further upward pressure on the baht may do so in the future, if not mitigated by improved TFP.  The 
negotiations under way in the WTO could 
make a major contribution to improving Thailand's market access as well as the predictability and stability of its own trade and investment regime (by expanding its tariff 
bindings and GATS commitments).  
Nevertheless, the benef its to Thailand will not 
be fully realized until its economy is able to respond competitively to external demand.