Visiting Thai Prime Minister Thaksin Shinawatra shakes hands with Prime Minister Junichiro Koizumi in Tokyo on Sept. 1 after the announcement of an overall free-trade agreement.

Thai Prime Minister Thaksin Shinawatra said that only "minor areas" remained to be negotiated and that the two countries, whose trade was worth $35 billion last year, hoped to sign a complete accord in 2006.

Japan has been striving to seal trade deals with Southeast Asian countries, with a pact in place with Singapore and draft agreements with Malaysia and the Philippines.

The government settled the outline of the latest pact after Thailand backed down on its tariffs on luxury car imports earlier this year.

Thailand imports more from Japan than from any other country and counts on Japan as the second biggest market for its exports, largely agricultural products.

Under the deal, the two countries agreed that more than 90 percent of bilateral trade should be tariff-free within 10 years and Bangkok vowed to step up transparency and legal protection to help Japanese investors.

Both sides made some concessions but maintained reservations on two heavily protected sectors -- automobiles for Thailand and agriculture for Japan.

Under the accord, Thailand agreed to lift tariffs on all Japanese steel products within 10 years. Currently, it imposes tariffs on Japanese steel ranging from 7.5 percent to 20 percent.

Thailand will lower tariffs on Japanese luxury cars with 3,000cc or larger engines to 60 percent from the current 80 percent by 2009.

Japan, for its part, agreed to cut tariffs on Thai agricultural products such as chicken, shrimp and tropical fruits but rejected Bangkok's demand for lower charges on rice, wheat, dairy products and beef.

The Japan Times Weekly: Sept. 10, 2005
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