Partner Nations Can Encourage Free Trade

Free trade has been in the center of discussions between member states of the Association of Southeast Asian Nations, and its partner states like China, Japan and the United States. Encouraging free trade, in fact, is the driving force behind the efforts of ASEAN states and Thailand is at the vanguard of the campaign.

If you look at each of the ASEAN nations, you can find that Thailand has been leading everybody in terms of fostering free trade. Take note that free trade means not only the unhindered flow of goods, but also skilled or qualified labor in each of the industries in the country.

So, how did Thailand make free trade possible between itself and its partner nations? Here are two ways that other countries, not just in the ASEAN region, but in the whole world in general can think about implementing in their trade negotiations.

Lifting or Easing of Tariffs

One of the most significant constraints to achieving total free flow of trade, industry and labor is the tariff.

In a nutshell, tariffs are duties imposed upon goods that enter a country’s borders from overseas. In order to recoup their expenses, importers factor in these duties to their prices when selling the goods to their buyers. That makes certain goods expensive, severely limiting the trade of such items and discouraging imports.

Theoretically, tariff taxes encourage more local consumption, but can become restrictive if imposed on goods that can only be obtained from overseas sources. For instance, certain precious metals that are not natural to any nation must be imported overseas.

When tariffs are eased, or even eliminated, the cost of bringing in crucial goods from overseas will become lower, and end prices in the consumer market become lower as well. This will encourage consumer spending and stimulate the economy.

Lifting Restrictions on Foreign Ownership of Businesses

There are various reasons why a foreign national, or a group of foreigners, will want to engage in business in any country outside their home nations.

Whatever those reasons, however, what remains true is the fact that investors will want to retain majority of control over the enterprises that they inject capital into. However, restrictions on foreign ownership in businesses can stifle that desire, and can discourage investor influx into a country.

Thailand has overcome that obstacle by allowing majority of shares in a business operating in certain industries to be held by foreign investors. There are still industries that are exclusive to, or at least control is limited for foreigners, local Thai businessmen.

This is to ensure fair competition because, theoretically, foreign investors can amass more capital that local entrepreneurs because of the differences in the exchange rate.

A Global Economy is Just Over the Horizon

Thanks to the efforts of countries like Thailand, the ASEAN free trade area may just become a reality in the very near future. Armed with free trade agreements inked with nations like Australia and Japan, as well as the aggressive infrastructural developments undertaken by its government, the Kingdom may very well emerge as the leader in free trade.

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