US president Bush Sunday announced that the United States intends negotiating a free trade agreement with Thailand.

Although such an agreement could stimulate sales of US textiles to Thailand, it would certainly boost Thai apparel exports to the United States, depending on rules of origin negotiated by both countries.

George Bush made it clear that he wanted rewarding Thailand for its support in the fight against international terrorism.

This is the second FTA negotiated with an Asian nation after a deal was concluded with Singapore a few months ago.

After Singapore, Australia and Central America

The United States and Australia are also negotiating a free trade agreement. Discussions could be completed in the coming year.

First round of discussions between the US and Thailand could take place by mid-2004, the White House said.

The Bush administration is free to negotiate trade agreements after getting US trade promotion authority from US Congress in 2002.

Any trade pact will be submitted to the Congress, however, with lawmakers forced to globally accept or reject the new agreement.

The recent failure of WTO talks in Cancun will result in a series of bilateral free trade agreements being separately negotiated between member countries, observers warned.

In addition to the FTA with Australia, Washington is currently discussing a similar agreement with Central America.

US accounting offer 53% of apparel exports

The US market accounted for 53% of Thailand's total apparel exports in the first half of 2003, according to Thai official data.

Shipments to the US were up nearly 10% to US$762 million in the same period after falling 4.5% in 2002 to US$1.65 billion.

After the baht dramatically rose against the US dollar, however, sales to the United States rapidly plummeted this summer.

After still rising 6.35% in July, US apparel imports from Thailand declined nearly 19% in August in volume terms, according to US official statistics.
Thailand was the US 14th apparel supplier in August before Pakistan, Guatemala or even Cambodia.

The low-cost country was able shifting to value-added products in the past years after labor costs substantially increased.

Thailand is a major supplier of childrenswear, including baby garments. The country also built a strong MMF industry, in joint-venture with chemical groups from other Asian countries, such as India and Taiwan.

Local content limited to 30%

Thailand and Australia just completed a free trade agreement this weekend after negotiators finally agreed on textile rules of origin.

Australia accepted limiting to 30% the local content of apparel from Thailand, instead of the 50% local content Canberra was requiring until now.

In exchange, Australia's wool exports will benefit from a removal in Thailand's trade barriers.

Thailand is also engaged in a free trade process with other ASEAN members such as with India. Along wit the United States, New Zealand and Canada also proposed negotiating a bilateral FTA this weekend.