Thailand’s leathergoods industry could be hurt by an influx of Korean goods under a free trade pact, according to David Chiu, president of the Thai Leather Goods Association. Bangkok is continuing to negotiate with the Seoul government after refusing to sign an ASEAN-Korea trade pact last month because of Korea’s resistance to opening up its rice market. The agreement aims to liberalise trade between Korea and the ten-nation ASEAN (Association of South East Asian Nations) bloc by 2010 as part of plans for a wider regional free trade pact. Chiu said however, that a more moderate Thailand-South Korean free trade agreement seemed to be nearing a conclusion quietly.

Leathergoods are currently included on a list of products considered for import tariff reductions under the agreement. Chiu said his group had made its concerns known to Thai negotiators but had not received a response. It wants leathergoods placed on a list of sensitive products on which tariffs would not be cut too quickly. ‘Although Thai producers have competitive production and labour costs compared to South Korean manufacturers, the Korean producers still have an advantage over the Thai leather goods industry in terms of cost and quality of raw materials,’ he said.

Chiu added that Thai leathergoods manufacturers needed to import raw materials such as tanning leather, fittings and accessories, with import duties ranging from 5% to 20%. The Thai leather industry has been focusing on product quality improvement in order to avoid competition in the labour-intensive market, but the upstream side of the Thai industry is still weak.

Currently, import duties on leathergoods items average 40%. In addition, said Chiu, South Korea had proposed the inclusion of about 100 items manufactured in the Kaesong special economic zone situated in North Korea, including leathergoods, in its trade agreement with Thailand. The proposal reflects Seoul’s policy to promote peace with the North by supporting its economic development. Mr Chiu said the Kaesong zone offered much lower labour costs than those of Thailand and several Southeast Asian countries, raising concerns among ASEAN nations