US embassy cable - 05BANGKOK1026

C O N F I D E N T I A L SECTION 01 OF 03 BANGKOK 001026 
 
SIPDIS 
 
DEPT FOR EAP AND EAP/BCLTV 
DEPT PLEASE PASS TO USTR 
COMMERCE FOR JKELLY 
 
E.O. 12958: DECL: 02/09/2015 
TAGS: PREL, PGOV, EAGR, ECON, EINV, ETRD, ASCH, ID, TH, Ambassador's Calls 
SUBJECT: AMBASSADOR BOYCE CALLS ON THAI COMMERCE MINISTER 
 
 
Classified By: Ambassador Ralph L. Boyce.  Reason: 1.4 (b) and (d) 
 
1.  (C) Summary.  Ambassador Boyce paid his first official 
call on Thai Commerce Minister Watana Muangsook on February 
4, 2005.  A beaming Watana predicted a landslide for the 
ruling party on February 6, saying it was vindication of 
Prime Minister Thaksin Shinawatra's hands-on "CEO style." 
Watana also observed the US response to the December 26 
Tsunami disaster had "won many friends" in his country.  The 
 
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Ambassador applauded Thailand's strong economic growth.  The 
Minister noted current high rice prices were a boon and said 
quality trumps cheap prices in the export market.  Watana 
said the Royal Thai Government (RTG) looked to increase 
economic growth through domestic spending.  Following 
elections, the Ambassador was hopeful Free Trade Agreement 
talks could be re-energized.  Watana said if he was in charge 
"they'd be done by now," and affirmed Thailand's commitment 
to concluding an FTA.  Watana said he appreciated the USG's 
reduction of the anti-dumping shrimp tariff and the "changed 
circumstances" reassessment currently underway following the 
Tsunami disaster.  Watana concluded the meeting by updating 
 
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the Ambassador on the Ford and Gregory and Cook commercial 
disputes, saying he would keep the Ambassador apprised of 
future developments.  End Summary. 
 
ELECTIONS: MINISTER PREDICTS A LANDSLIDE 
 
2.  (C) A buoyant Commerce Minister Watana Muangsook 
predicted a 370-seat landslide for the ruling Thai Rak Thai 
(TRT) party in the February 6 elections.  Watana estimated 
that the TRT would win 31 of Bangkok's 37 seats outright, and 
would pick up another 2-3 seats in four more hotly contested 
Bangkok constituencies.  (Note: TRT actually appears to have 
won 32 Bangkok seats.  End Note.)  Ambassador Boyce noted 
TRT's 2001 election win was unprecedented in three ways: TRT 
fielded much younger candidates, Bangkok voted like the rest 
of the country, and the party won a majority.  (Note: A rerun 
of disputed seats later deprived TRT of its overall majority. 
 End note.) 
 
3.  (C) The Commerce Minister countered that these 
"revolutionary" firsts in 2001 were now outdone by the TRT 
being the first party to complete a full term, and 
expectations Prime Minister Thaksin Shinawatra would be the 
first PM elected to a second term.  Watana said he expected 
the Election Commission (EC) would endorse the results on 
March 6, allowing the convening of parliament and election of 
a Speaker on March 7.  The Minister said the end of the 
election period now cleared the way for action on many 
fronts, adding that PM Thaksin would visit the country's 
trouble plagued south soon after the vote. 
 
THE US AND THAI IMAGES 
 
4. (C) The Ambassador commented on negative Thai perceptions 
of the US following the 1997 financial crisis.  Watana 
downplayed any lingering feelings of unhappiness, commenting 
"Thais tend to forget the bad."  He noted the US response to 
the December 26 Tsunami disaster had "won many friends" and 
improved America's image in the country.  The Ambassador 
observed that the Tsunami had highlighted Thailand's position 
as a regional leader, noting that no one had questioned 
Thailand's selection as a base for regional relief efforts. 
 
 
THE ECONOMY: "LET THEM EAT RICE..." 
 
5.  (C) Ambassador Boyce applauded Thailand's 22 percent GDP 
growth over the last four years, only outpaced by China, and 
an amazing feat considering the economic crisis less than a 
decade earlier.  The Minister remarked that economic 
indicators were good for agricultural commodities rice and 
tapioca.  Watana noted rice is now priced at USD 300 per ton, 
a boon for Thai exports given Asia's inelastic demand. 
 
...AUSTRALIA IS THE MODEL, INDONESIA 
 
6.  (C) Watana noted the common belief is that exporting 
cheap goods was the best way to increase exports but he 
disagreed.  He said quality is a better strategy than cheap 
prices, along with convenience and other factors.  The 
Ambassador cautioned that demand was a paramount 
consideration, suggesting that you can't sell what people 
don't want.  The Minister explained RTG's strategy to 
increase export-reliant Thailand's domestic market as an 
engine for economic growth.  Comparing Thailand to Australia, 
Watana noted the latter has just 20 million people (one third 
Thailand's population) and exports amounting to just 80 
percent of Thailand's, but three times its GDP.  Similarly, 
Chile's 15 million people had a per capita income more than 
three times Thailand's 62 million.  Watana said the key to 
duplicate their success was developing domestic demand: "You 
need to give the poor money so that they have money to 
spend."  The Ambassador replied that loans rather than 
giveaways might be a more sustainable strategy.   The 
Ambassador also pointed out that Australia might not be the 
best economic model for Thailand.  Watana noted he was very 
impressed with Indonesia's new Trade Minister, Ms. Mari 
Pangestu, noting that she is the only non-Muslim in the 
cabinet.  He noted with envy the size of Indonesia's 
potential domestic market. 
 
FTA: LETS GET THIS THING DONE 
 
7.  (C) The Ambassador noted the Thai public's generally 
negative perception of a prospective US free trade agreement 
and that he therefore understood the RTG's efforts to keep 
the politically sensitive issue out of the press while 
contesting the election.  Ambassador Boyce expressed hope 
that with the election over, both sides could begin a 
concerted campaign to highlight the mutual benefits an FTA 
would bring.  The Ambassador noted that while most Thais 
believe the treaty will put them at a disadvantage, the 
reality is that both countries would greatly benefit from an 
FTA.  The Ambassador expressed his hope that with elections 
over the RTG leadership would not lose momentum in pursuing 
an FTA. 
 
8.  (C)  Minister Watana explained that responsibility for 
the US-Thai FTA lay with a special commission chaired by 
Finance Minister Dr. Somkid Jatusripitak.  Watana noted that 
although Commerce staff are on the negotiating team, "my 
people are not in charge," as when his Permanent Secretary 
Mr. Karun Kittasatporn (also present) was chief negotiator 
for the successfully completed Thai-Australia FTA.  Watana 
pronounced that if Commerce was in charge of the US-Thai FTA 
negotiation, "It would be done by now."  Trade Negotiation 
Director General Ms. Apiradi Tantraporn noted that while the 
full negotiation rounds had been postponed, smaller 
negotiating groups were meeting, such as the recent textile 
round in Bangkok, and the investment group meeting in 
Washington D.C. next week.  She said Thailand is "fully 
committed" to see the negotiations through. 
 
ANTI-DUMPING TARIFF ON THAI SHRIMP 
 
9.  (U) Minister Watana expressed appreciation for the US 
reduction of the average anti-dumping import tariff on Thai 
frozen shrimp from 6.03 percent 5.95 percent.  (Note: Among 
the six countries subject to the shrimp tariff, Thailand is 
the largest exporter at USD 956.8 million worth in 2003.  The 
Commerce Ministry's Foreign Trade Department believes the 
reduction will help strengthen Thailand's competitiveness in 
the US prawn market.  End Note.)  The Ambassador explained 
that the US International Trade Commission (ITC) was 
reviewing the tariff in light of changed circumstances 
stemming from the December 26 Tsunami disaster.  The 
Ambassador noted that the Embassy Economic Counselor was 
currently in the south to assess damage done to the Thai 
shrimp industry.  The Ambassador said that the ITC 
determination would likely take a few months.   The Minister 
voiced his gratitude for the Embassy's efforts. 
 
FORD CUSTOMS PROBLEM 
 
10.  (C) Ambassador Boyce asked the Minister for an update on 
the Ford customs issue.  (Ford owes the RTG USD 12 million in 
unpaid customs duties over a two-year period.  Thailand's 
Department of Special Investigations (DSI) is pursuing a 
criminal case against Ford, accusing the company of evading 
the duties in an attempt to defraud the RTG.  Ford has said 
it was a good faith error and wants to pay the duties owed, 
but is unwilling to accept any direct or implied admission of 
criminal activity.  In an October 21 meeting between PM 
Thaksin and Ford executives (which Watana attended), the PM 
seemed to agree with Ford's argument and asked his staff to 
resolve the matter.  In a November 18 follow-up meeting, 
Justice Minister Pongthep Thepkanjana (who also attended the 
previous meeting), argued the criminal case was clear and 
would not be dropped.  In a December 2004 meeting with former 
Ambassador Johnson, Watana pledged to resolve the matter, 
though probably not until after elections.  Ford has seen no 
interest in compromise during recent meetings with Finance 
Ministry (responsible for customs matters) officials and 
believes criminal warrants will soon be issued.  The Japanese 
Embassy was told by the Finance Deputy Minister that there is 
nothing he can do.)   Watana noted he had met with Ford 
Executives several times and that the Prime Minster had told 
Ford in his meeting that he hoped the problem could be solved 
amicably.  Watana said he expected to travel to the US in 
March or April, implying that the Ford case would figure 
prominently in his travel plans. 
 
GREGORY COOK - PTT DISPUTE 
 
11.  (SBU) Minster Watana also offered an update on the 
dispute between American company Gregory and Cook and 70 
percent RTG-owned oil company PTT (Petroleum Authority of 
Thailand) Public Company Ltd. (PTT). (Gregory and Cook formed 
a joint venture (IGC) with a Singaporean company (IPCO) in 
1994 to construct two gas pipelines for the then 100 percent 
RTG owned state oil enterprise, but in 1995 a dispute arose. 
The Court of Arbitration of the International Chamber of 
Commerce awarded IGC USD 25.3 million in 2002, but PTT has 
yet to provide payment.  In 2003 the USG facilitated 
discussions to reach a settlement; discussions were held but 
to date PTT has not responded to IGC's December 2004 
settlement offer.)  After chronicling the background of the 
case, Watana explained that US Commerce Secretary Evans had 
asked him to mediate the dispute; Permanent Secretary Karun 
noted that the presence of the Singaporean claimant added 
further complexity in resolving the matter.  Noting IGC's 
desire to settle the dispute outside of court, the Ambassador 
stated that meeting behind closed doors would go further to 
resolve the dispute than a public airing in the Thai press. 
Watana promised to keep the Ambassador apprised of further 
developments in the case. 
BOYCE