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3. Barriers to trade
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3.1 Tariff and tariff administrative measures

3.1.1 Tariff escalation

Tariff escalation exists in Thailand. Higher tariff rates are applied to non- finished products and intermediary products than those to finished products. Primary and capital goods are subject to a 5 percent tariff rate; intermediary products are subject to a 10 percent tariff rate; finished products are subject to a 20 percent tariff rate while special products which need to be protected are subject to a 30 percent tariff rate.

3.1.2 Tariff quotas

Thailand applies tariff quotas to 23 agricultural produces, namely longan, coconut pulp, milk, butter, potatoes, onion, garlic, coconut, coffee, tea, dried capsicum, corn, rice, bean, onion seeds, bean oil, bean cake, sugar cane, coconut oil, palm oil, instant coffee, local tobacco slices, and silk. Low tariff rates are applied to in-quota imports, and high tariff rates are applied to out-of-quota imports. For example, the import quota for corn is 54,440 mt which is subject to a 20 percent tariff rate, while out-of-quota corn imports are subject to a 73.8 percent tariff rate.

The Chinese side will watch closely the implementation of the tariff concession measures, and it is hoped that Thailand will open the market for agricultural products currently subject to tariff quotas at an early date.

3.2 Import restrictions

Thailand requires all processed foods should be accompanied by a detailed list of ingredients and a manufacturing process description in applications for food import registration. The requirement of disclosing the ingredients and the manufacturing process of food has been viewed as barrier to import by many countries.

Thailand's Food and Drug Administration (TFDA) under the Ministry of Health requires that import licensing administration is applied to imports of food, drugs and certain medical equipment. Import license for food shall be renewed every three years, and recertification is required for each renewal, as well as the stamping at the Commercial Councilor's Office of the Chinese Embassy in Thailand. Additio nal charges should be paid when the relevant documents have reached the Bureau. Import license for drugs shall be renewed every year, and the same fees shall be paid. The above requirements are burdensome to Chinese exporting enterprises. Some Chinese enterprises complain that the administration of motorcycle import license of Thailand is not transparent, which has hindered the export of complete motorcycles from China.

3.3 Technical barriers to trade

3.3.1 Certification requirement

The Thai government requires the compulsory certification of 60 products in ten sectors, including agriculture, construction materials, consumer goods, electrical appliances and accessories, PVC pipe, medical equipment, LPG gas containers, surface coatings, and vehicles.

3.3.2 Technical standards

On 25 August 2005, the Thai Industrial Standards Institute of the Ministry of Industry announced the standard of safety requirements for household refrigerators and suggested that the standards be compulsory. The standard specifies the safety requirements and testing methods of household refrigerators. The applicable scope includes the nominal voltage of single-phase appliances not exceeding 250 volt and that of other electrical appliances not exceeding 480 volt. The standard is related to the general harm done to family members or people nearby brought by the electric power compressors used in the equipment. The Chinese side will pay attention to the above measures.

3.4 Sanitary and phytosanitary measures

3.4.1 Testing of chemical additives in foodstuffs

Thailand's Food and Drug Administration (TFDA) imposes new testing regulations in view of food safety. The new regulations taking effect as of 1 April 2005 requires that many imported food products undergo testing and certification for a number of chemical additives. These new rules are burdensome to importers and lack risk evaluation.

3.4.2 The Residual Toxic Substances in Foods

On 1 July 2005, Thailand imposed new rules on the residual toxic substances in foods. The residual toxic substances mean toxic substances in agriculture including their derivatives in different forms, i.e. conversion products, metabolites, reaction products, or any other toxic extraneous matter in such substances which are contaminated in foods. Toxic substances in agriculture mean substances purposively applied to prevent, destroy, lure, repel or control pests and animals or unattended plants and animals during cultivation, storage, transportation, distribution, or selling as well as applied to control ectoparasites in animals and to control plant growth, i.e., defoliaged, defruiting, inhibited young leaves, or substances applied in pre- and post- harvested plant products to prevent deterioration during storage and transportation; but not including those substances applied as fertilizer, nutritious substance for plants and animals, food additives and veterinary drugs.

As regards residual toxic substances in foods, the following standards must be complied with: (1) The toxic substances in agriculture which MRLs are applied must be of those officially registered and the established Maximum Residue Limits. (2) The tolerances of those toxic substances in agriculture which are officially prohibited under the Notification of Ministry of Agriculture and Cooperatives (MOAC) are not permitted, except for the established Extraneous Maximum Residue Limits. In cases other than the above two standards, the residual toxic substances must be complied with the established MRLs set forth by Codex Alimentarious Commission, Joint FAO/WHO Food Standard Programme.

The rule will affect food export to Thailand. The Chinese side will pay close attention to it.

3.5 Government procurement

Thailand is not a signatory to the WTO Agreement on Government Procurement. A series of restrictions have been set by the Thai government in its government procurement tenders on foreign bidders. For example, preferential treatment is provided to domestic suppliers, which receive an automatic 15 percent price advantage over foreign bidders in initial bid round evaluations. A procuring government agency reserves the right to accept or reject any or all bids at any time and may also modify the technical requirements during the bidding process. The latter provision allows considerable leeway to government agencies in managing tenders, while denying bidders any recourse to challenge procedures. The Chinese companies complain that the above practices put them in an unfair position in the bidding.

In addition, according to the Counter Trade Act, a counter-purchase of Thai commodities valued at not less than 50 percent of the value of the principal contract is required of foreign bidders for any government procurement contract exceeding Baht 300 million. As part of a counter-trade deal, the Thai government also may specify markets into which commodities may not be sold; these are usually markets where the Thai commodities already enjoy significant access. These regulations increase the cost of operation for foreign companies that have won in the bidding.

China has expressed deep concern regarding the above-mentioned practices, hoping that the competent Thai authorities will create a fair and level playing field for foreign participation in the Thai government procurement.

3.6 Export subsidies

Thailand maintains programs to support trade in certain manufactured products and processed agricultural products, including various tax benefits, import duty reductions, credit at below-market rates on some government-to-government sales of Thai rice, and preferential financing for exporters. The Thai government terminated its packing credit program in compliance with the WTO commitments but received an extension of its WTO exemption period for Industrial Estate Authority of Thailand and the Board of Investment until December 2005. China will keep on watching the implementation of the export subsidy measures of Thailand.

3.7 Barriers to trade in services

3.7.1 Banking

According to the regulations of the Thai government, foreigners are permitted to hold a maximum of 25 percent of the equity in Thai banks. Within the "Financial Sector Master Plan" drafted by the Bank of Thailand and approved by the Parliament, this percentage may be increased to 49 percent at such time as the Central Bank deems appropriate. The Plan will allow foreign banks to open three to five branches out of Bangkok, but no specific time table is given. At present, foreign banks are limited to one branch. Furthermore, foreign banks must maintain minimum capital funds of Baht 125 million (US$3.1 million) invested in government or state-owned enterprise securities or deposited directly with the Bank of Thailand.

3.7.2 Construction

Construction is not in the list of encouraged investment. To register and start business operation in Thailand, foreign contractors are required to form joint ventures with local companies with foreign ownership not exceeding 49 percent. There are strict restrictions on the managerial staff brought in by the foreign contractors. Generally, companies with a registered capital exceeding Baht 100 million should employ at least 4 local workers for employing one foreign national, and those with a registered capital of less than Baht 100 million should employ at least 5 local workers for employing one foreign national. The introduction of general labors is strictly restricted. Foreign- funded contractors are only allowed to participate in projects of public infrastructure construction exceeding Baht 500 million, but generally they are not allowed to take part in projects financed by the Thai government budget.

The Thai government also has relevant qualification and performance requirements for contractors bidding for specific engineering projects. Except for international bidding, Thailand does not recognize engineering performance of foreign contractors out of Thailand. Therefore, a number of large scale contractors are subject to various restrictions despite of their outstanding reputation and achievements internationally.

3.7.3 Telecommunications service

The Thai government began to allow foreign participation in the telecommunications sector through establishing joint ventures in 1989, but at the limited level. According to regulations, foreign ownership in companies providing basic services should not exceed 50 percent, while foreign ownership in companies providing value-added services should not exceed 40 percent. In 2004, the Thai National Telecommunications Commission (NTC) was founded. Empowered by the Constitution, the Commission makes adjustment to the telecommunications industry independently, but controversial issues such as licensing, interconnection, competition, tariff rebalancing, and standards- making still remain unresolved. Licenses for new Internet Service Providers (ISPs) and many value-added services have yet to be issued. Pursuant to the WTO agreement, Thailand committed to fully liberalize its telecommunications service sector including basic telecommunications business and value-added services in January 2006 by permitting foreign investment in the sector. The Chinese side will pay attention to the implementation of the commitment.

3.7.4 Law

Current Thai law prohibits foreign equity participation in Thai law firms in excess of 49 percent, and foreign nationals are prohibited from practicing law in Thailand. In certain circumstances, foreign attorneys may act in a consultative capacity.

3.7.5 Labor service

Thailand is a big country in terms of labor export, thus, setting strict controls on the introduction of labor. The Thai working permits are not available to common foreign nationals providing labor services. 39 categories of labor are restricted to enter Thailand to work. They include common labor, workers in the areas of agriculture, forestry, animal husbandry, fishery (except managerial personnel of agricultural products), brick makers, carpenters or other construction workers, wood carvers, and drivers (except pilots and mechanists). Such practices have restricted China's labor export to Thailand. At present, China exports a labor force of around 2,000 people to Thailand annually, of whom half are for contracted engineering projects while the rest are scarce human resources such as those working in the fields of textiles, electronics, metallurgy, engineers for ports' operation, managerial personnel, jewel processing and tourist guides for shopping in Chinese language.

3.7.6 Medical service

Thai government policy is highly restrictive and lack of transparency in the healthcare services sector such as hospitals, out-patient services, and medical check-up services.

3.8 Other barriers

The Thai government retains authority to set price ceilings for 20 goods and services, including medicines, sound recordings, milk, soda, sugar, fuel oil, and chemical fertilizer. Price control review mechanisms are not transparent. Price control determinations are sometimes based on outdated assumptions, including exchange rates, and go for long periods without review, even upon repeated petition for review by affected parties.

The above regulations which place foreign firms on an unequal footing with the local firms violate the principle of liberalization of the WTO. The Chinese side has expressed its concern and hopes Thailand to take measures to improve the situation.

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