The decision, which came out of the blue this week after 12 years of talks, will impact Thai exports such as mango and pineapple making them less competitive, threatening the market share or the margin of Thai exporters.
The withdrawal of duty-free access to the United States for a range of Thai products should be seen by Thailand as another shot across its bows as the US toughens its stance on trade. The decision made by the US President is the second in two years and comes as Thailand’s exports to the United States boomed in September with a massive 19.7% expansion.
A decision by US President Donald Trump has been announced to cut duty free access to the United States across a range of Thai products valued at ฿25.3 billion commencing on December 30th.
The trade affected includes the export of pineapples, mangos, steel pipes and precious stones.
The effect of the move will be to make these exports to the United States less competitive which may impact Thailand’s economy through loss of exports or margin to exporters.
It comes at a time when Thailand is already projected to see an 8% fall for this year in exports due to the disruption to world trade caused by the Covid-19 crisis.
Decision announced by the US Office of Trade Representative but was made by US President Trump
The decision was announced this week by Robert Lighthizer of the US Office of Trade Representative in Washington DC.
The Trump administration official, known for his tough-talking style, said that the decision had come from the US President himself and followed a request from the National Pork Producer’s Council in 2018 to take action against Thailand.
Second blow in two years to Thai exporters
This is the second action taken against Thailand in two years following last year’s decision to remove another ฿41 billion in Thai goods from generous tariff-free access under the Generalised System of Preferences scheme operated in the United States across nearly 120 countries and over 3,500 types of exports or products.
Last year it was labour conditions in Thailand, this year it is trade reciprocity as the US gets tougher
Last year, the action was again linked with the National Pork Producer’s Council. At that time, the reason given for the decision was the lack of progress made by Thailand in advancing worker’s rights in the kingdom.
This latest announcement refers to a lack of reciprocal trade access for pork products. The official announcement cited ‘lack of sufficient progress providing the United States with equitable and reasonable market access for pork products.’
The US trade office said that it has engaged with Thailand for twelve years over the issue but had failed to find a reasonable compromise.
At his first meeting with Thai Prime Minister Prayut Chan ocha in early April, this year, the new US Ambassador to the kingdom, Michael De Sombre proposed a new more ‘proactive’ and wide-ranging trade deal between Thailand and the United States of America.
Reelection of US President will deepen US-China tensions and make things more challenging
The move comes with increasing tension between the United States with all eyes on next week’s US Presidential Election.
Despite international commentary and a perceived consensus that a Biden presidency would be equally tough on China, this cannot be taken at face value. It is quite likely that tensions would diminish.
The reelection of US President Donald Trump, however, will signal more robust and stringent action by the United States as it moves to counter China’s expansion in Asia and across the world both in trade, geopolitical and indeed military terms.
In this respect, the planned move by Chinese firms offshore to Thailand will be reappraised in the light of the election result or under a Trump administration, cooperation between China and Thailand will begin to attract the scrutiny of the US administration.
An example of this is Thailand’s decision to partner with Chinese firm Huawei in its communications infrastructure notably in the Eastern Economic Corridor project in the eastern provinces.
Thai trade policy is becoming more China-centric
Thailand’s trade policy is increasingly moving towards China and this may put it on a course for further friction with the United States if the US President is reelected.
The proposed finalisation of the RCEP or Regional Comprehensive Economic Partnership in November is a key policy objective for Thailand. This would represent one of the largest free-trade pacts in the world between China, Australia, Japan, South Korea, New Zealand and the 10 nation ASEAN bloc including Thailand.
This is something that does not sit well with the Trump administration as it puts China at the heart of Asia Pacific trade while the US has been more interested in bilateral agreements.
The new bloc also pointedly excludes Taiwan and at last year’s ASEAN summit in Bangkok, India withdrew from it.
Thailand’s exports to the US boomed in September
The United States was Thailand’s biggest export market in 2019 representing nearly ฿1 trillion or $29.72 billion. So far in 2020, to the end of September, the kingdom’s exports are down and are projected to fall by up to 8% for the year.
In May, the drop was expected to be over 9% but a better than expected rebound in the United States has seen a massive 19.7% expansion in Thai exports to its biggest market in September 2020 even as it saw a contraction in both Japan and Europe.
It also saw a 6.9% expansion of exports to China, its second-largest export market.