Thailand plans to revamp its import duty structure and non-trade barriers as it prepares for talks with the United States to lessen the impact of a 36% tariff on its exports, says Finance Minister Pichai Chunhavajira.
But any measures Thailand negotiates in talks with the United States must be practical and feasible, he said on Tuesday.
Mr Pichai is preparing to travel to Washington with a delegation to negotiate with the US Trade Representative (USTR) after finalising measures to propose for the US to consider.
“We hope to travel to the US to negotiate with the USTR as soon as possible,” he said.
Any proposals that Thailand brings to the table must be things that the country is capable of delivering and wants to do as well, he said.
“We are not doing this just because the US asked us to do,” Mr Pichai told reporters. “This is a good opportunity to reform our own system and make it look better.
“This is something we want to do, and we have the capability, and we will benefit from it. This effort can help to find a way to reduce taxes for everyone equally.”
Major irritants
The Office of the USTR in a report last month listed high barriers of trade with Thailand including lax intellectual property protection, sanitary and phytosanitary curbs, import licensing rules and incentive systems for customs officials as major irritants.
Mr Pichai said a meeting on Tuesday determined five approaches to reforms:
1. Finding ways to balance trade between the two countries. Thailand currently has a trade surplus of about $45 billion, the 11th highest in the world, with the US.
The surplus was the main reason Washington cited for imposing a 36% tariff on Thai goods, far higher than the 10-25% range that government and business leaders had expected.
In order to narrow the surplus, Mr Pichai said one approach would involve increasing imports of raw materials for animal feed production. Thailand can produce 20 million tonnes of animal feed per year, with corn as a main ingredient. Currently, of the 9 million tonnes it uses, 4 million tonnes imported and the rest produced domestically.
Thailand may require more imports from the US, where corn prices are competitive, he said.
Imports of meat, especially animal offal that is not consumed but can be processed into food in Thailand, are also possible, the minister said.
2. Thailand has identified 100 items imported from the US that are subject to low import taxes, but face other trade barriers that cause frustration for the US. Reducing or eliminating these barriers will be looked at.
3. Addressing non-tariff issues, which are a priority for the United States. Although Thailand has a trade surplus of $45 billion, or 72% of its total trade, the country is being taxed at 36%. Meanwhile, Cambodia, with only a $900-million trade surplus with the US, faces a 40% tariff rate.
“Therefore, any mechanisms that create trade barriers or involve complex procedures will be seen as opportunities to improve our efficiency, making Thailand look better without redundancy or delays,” said Mr Pichai.
4. While Thailand and Vietnam have substantial trade surpluses with the United States, they have trade deficits with China because Chinese products have exceptionally low costs. Moreover, there are certain products that are imported into Thailand, slightly modified, but can still obtain a certificate of origin from Thailand and use Thailand as a base for export to other countries. Stricter controls will need to be applied when issuing certificates of origin.
5. In the energy sector, Thailand still needs to import 2.7 billion cubic feet of natural gas annually, purchasing it from the Middle East. Thailand can consider buying it from the US, where the price is only $2 before shipping costs. The price of gas from the Gulf of Thailand is $5.90, with contract prices at $12 and spot prices at $10, the minister said.
Aside from purchasing gas from the US, Thai companies should invest in natural gas production in the United States now that it is planning to lay pipelines from Alaska. Thai companies could also invest in food processing plants in the US and sell their products worldwide.
“These approaches are likely to show the US the benefits they would gain from these measures within five years, and in another five years, trade between the two countries would be more balanced,” said Mr Pichai.
Prime Minister Paetongtarn Shinawatra said that the negotiation strategy with the US will be “quick and precise”, and aimed at protecting the interests of the country as much as possible.
However, she cautioned against a hurried outcome as talks will be needed at multiple levels before an agreement can be reached.
The fallout from the US tariffs took a toll on Thailand’s financial markets on Tuesday, with the benchmark SET Index slumping 4.5% to a fresh five-year low. The baht hit its lowest level since November.
