Thailand Summary
Introduction
The Kingdom of Thailand has been a WTO member since January 1995, and has made steady progress in recent years towards trade liberalization, as well as restructuring its public sector and strengthening its financial system. Thailand has already reached the halfway point in fulfilling its trade and investment liberalization targets under the Bogor Declaration among Asia-Pacific states. This commitment aims to reduce barriers to trade and investment by promoting the free flow of goods, services and capital among Asian-Pacific economies (for developed and developing countries by the years 2010 and 2020, respectively). The Thai government is pursuing a "dual track" approach of strengthening the domestic economy while integrating into the global economy through export growth and market diversification into high-valued products. [1]
Thailand is also advocating for a network of bilateral preferential trading arrangements, particularly within the Asian/South Pacific region, including the establishment of an ASEAN-China Free Trade Area within ten years, the formation of an East Asia Free Trade Area between ASEAN members, China, Japan, and Korea (ASEAN plus Three), and an ASEAN-Japan Economic Partnership. [2]
The United States, Thailand's largest trading partner (Thailand ranks 18th among U.S. trading partners), is currently in negotiations with the Thai government for a free-trade agreement that would expand market and investment access between the countries. [3] U.S. investors are already exempt from barriers to investment due to a 1966 treaty. [4]
Agriculture
Agriculture accounts for nearly half of employment in Thailand and 20% of exports, though it only makes up about 9% of GDP. [5] Within the WTO, Thailand has delineated a set of specific demands for freer global farm trade, geared toward reducing high import tariffs on farm products and export subsidies that distort global farm prices. It has called for the maximum final import duty rate to be set at 25% and for the complete elimination of export subsidies by developed countries within three years. [6] However, Thailand does have high levels of tariff protection against imports for certain agricultural products, averaging 26% agricultural tariff protection, compared to only 13% overall tariffs on imports. [7]
The secretary-general of Thailand's Joint WTO Committee has encouraged developing countries to form alliances to strengthen their bargaining positions, and the Thai private sector has engaged in talks with neighboring countries such as Indonesia, Malaysia, China, the Philippines and Vietnam on the topic of agriculture issues. Thailand is a member of the Cairns Group of 17 agricultural exporting countries pushing for deep cuts in tariff rates and the elimination of all export subsidies. With the continued advocacy of the newly cohesive G-20 group of developing countries at the Cancun ministerial meetings in November 2004, the elimination of developed country export subsidies will continue to be an important issue in the Doha Round.
Thailand recently joined Australia and Brazil in challenging European export subsidies on sugar, which could have important repercussions on both European and American policies of sugar subsidization, which developing countries claim is keeping the price of sugar depressed by up to 40%. [8]
Trade-Related Intellectual Property Rights
Along with Brazil and India, Thailand is one of the few developing countries that have the pharmaceutical sector capacity to produce generic drugs for pandemic diseases like HIV/AIDS, which can be exported to other developing countries who cannot afford patented drug prices. With its generic production capability, Thailand supplies antiretroviral AIDS drugs to 10% of its HIV-positive population, a much higher figure than other Asian countries facing the HIV/AIDS pandemic, and is currently exporting drugs to Cambodia, Laos, and Burma, countries that do not have the capacity to produce their own generic drugs. However, many Thai HIV/AIDS activists, as well as international groups such as Doctors Without Borders are afraid that the upcoming free trade agreement with the United States will include much more stringent intellectual property protection provisions, similar to provisions included in recent U.S. agreements with Singapore, Chile, and Morocco, that will put Thailand's generic drug production in jeopardy.
Food Safety
In February 2003, Thailand introduced more stringent safety tests on food imports from the EU, Japan and the US, conducted on "a non-discriminatory basis" and "based on scientific evidence." Authorities say that the Kingdom is pursuing world standards for food-safety testing, not retaliating against any other countries policies, such as the strict testing long encountered by Thai shrimp and poultry exporters in the EU and the US. The tighter measures, however, will first be applied to agricultural goods including fruit, canned products, milk, cheese and butter mainly from the EU and the US, and then followed by inspections of industrial products.
Investment and Competition
WTO director-general and former Thai government official Supachai Panitchpakdi has urged Thailand to get involved in designing a framework for negotiations of multilateral rules for investment and competition. The country has experience in both issues, and it holds a set of domestic regulations that would likely be affected by such rules. However, the Singapore Issues concerning investment and competition proved to be quite contentious at the Cancun Ministerial Meeting, and it is still unclear how much progress will be made, if at all, on these issues during the Doha Round.
Thailand officially ceased offering preferential tax incentives through its Board of Investment (BoI) at the end of 2003. However, the privileges, which are offered in the forms of eight-year waivers on corporate taxes, as well as discounts or waivers on machinery import taxes, may still be granted by petition for future exemptions on a year-by-year basis. Thus, companies operating in Thailand with these privileges - mostly electronics, electrical appliance and agribusiness firms - would see their tax and tariff exemptions cut off by 2005 at the soonest. Many American companies benefit from these policies, and have invested an estimated $16 billion in Thailand. [9]
Textiles and Clothing
Thai exports of textiles and clothing, which account for about 8% of its total exports, anticipate increased competition from countries including China and Vietnam after the beginning of the quota-free global trading which will begin on 1 Jan 2005 under the WTO Agreement on Textiles and Clothing (ATC). Many hope that an upcoming free trade deal with the United States will lessen the negative impact of increased competition in textiles. [10]
Conclusion
With an average customs tariff-rate of 27%, Thailand remains a comparatively high-tariff country compared with 14% for Malaysia, 11% for Australia, 9% for South Korea, and 4% for the US.[11] In order to bring down trade barriers more rapidly on a concessions basis, it is actively pursuing bilateral free trade arrangements with countries including China, Japan, the United States, Australia, Bahrain, India and Singapore. Faced with increasing competition from China in its leading export sectors of electronics and textiles, Thailand is being forced to diversify its markets and re-examine where its comparative advantages lie.
Last updated June 2004
[1] WTO Trade Policy Review 2003
[2] WTO Trade Policy Review 2003
[3] Thailand-U.S.: freer trade weakers access to HIV/AIDS drugs. IPS-Inter Press Service, 21 May 2004.
[4] WTO Trade Policy Review 2003
[5] WTO Trade Policy Review 2003
[6] WTO Draft Guidelines for Freer Global Farm Trade Fails to Meet Thai Demands. Bangkok Pos, 20 Feb 2003.
[7] WTO Trade Policy Review 2003
[8] Fed: Australia has WTO hopes for sugar, AAP NEWSFEED, 5 May 2004.
[9] Thailand-U.S.: freer trade weakers access to HIV/AIDS drugs. IPS-Inter Press Service, 21 May 2004.
[10] Textile trade put on alert, The Nation, 22 May 2004.
[11] WTO Chief's Warning: Bilateral deals 'a threat'. The Nation, 20 Feb 2003.
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