Thailand should join TPP but govt must prepare for challenges, says study

 However, it would also bring many challenges that the government and the private sector should prepare for before jumping into the deal.

A study by the Commerce Ministry’s Trade Negotiations Department, in cooperation with investment-research firm Bryan Cave (Thailand), concluded that the country should join the pact, while also carefully considering some issues where Thailand would have a low competitive edge.

The ministry also commissioned an educational institution in June to study the implications of the TPP, which is scheduled to report by the end of the year. 

One reason to join the pact is that some of Thailand’s main export competitors in Asean – Malaysia, Vietnam and Singapore – have already been included in the deal.

It has been suggested that the process for the pact’s current 12 members to accept Thailand into the TPP could take two years, which should be adequate time to prepare and to bring up to speed those sectors not yet ready for this large FTA.

Still, there is no need to rush. There is still the Regional Comprehensive Economic Cooperation (RCEP), which if completed will be even larger than the TPP, comprising 16 countries – China, Japan, South Korea, India, Australia, New Zealand, and the 10 Asean members.

As it stands, the TPP is the biggest trade agreement in history, reducing tariffs and other forms of protectionism in 12 countries making up about 40 per cent of the global economy and with economic output of almost US$30 trillion (Bt1 quadrillion). The deal came after more than five years of negotiations among the United States, Canada, Japan, Australia, Singapore, Brunei, Chile, Malaysia, Mexico, New Zealand, Peru and Vietnam.

For Thailand, the study shows that the country could gain and lose in various sectors included in the TPP. Here are some advantages and challenges.

Trade in goods

Advantages: Increased market access to TPP members, particularly the US, as well as reducing the risk of Thailand losing its tariff privileges under the US Generalised System of Preferences. However, since Thailand already has FTAs with many TPP members, it would only benefit trade with the US and some other countries such as Mexico and Canada.

Challenges: Some products exported by TPP members are quite similar to Thai goods, so Thailand would have to adapt to be able to compete with them seriously.

However, if Thailand does not join the TPP, the country will have less opportunity to access the US market. In the near future, many Thai products could lose GSP privileges and face higher tariffs. Those products are fruits, processed foods, and jewellery and ornaments. 

Service and investment

Advantages: Thailand would ensure more foreign direct investment, as many countries would be interested in dealing with this trading bloc. Consumers would enjoy lower service costs. Thailand might have more chance to access technology and innovation in finance and insurance services and telecommunication.

Challenges: Some Thai service enterprises, especially in the financial sector, could face tougher competition and would need to adjust, as US enterprises are quite strong in this sector.

More worrying, the Thai government could be sued by powerful US and other private enterprises under the pact’s controversial investor-state dispute mechanism.

Service jobs, especially in the finance and insurance sectors, could be lost to foreigners with more expertise.

Thai government agencies, particularly the Bank of Thailand and the Finance Ministry, would need to amend many laws to bring the country into compliance with the TPP.

In the delivery sector, Thailand Post would be seriously challenged.

E-commerce

Advantages: There should be more transparency in tariff collection from digital content and software trading. The government sector would be urged to create more efficient laws and many enterprises would join in the promotion of better protection in e-commerce.

Intellectual property rights

Advantages: Innovation and development in the pharmaceutical sector would be encouraged. 

Challenges: Delays in access to generic drugs, as the monopoly period for big pharmaceutical corporations could be longer. Drug companies could extend their patents and reduce the opportunity for patients to access cheap drugs.

Thai state agencies such as the Government Pharmaceutical Organisation would not able to use information from clinical trials to register or produce generic drug, even after drug patents have expired, as such information would be considered intellectual property and afforded protection accordingly.

Thailand would have to join the International Union for the Protection of New Varieties of Plants and increase its protection of certain plant species, which could affect local wisdom and farmers. 

Competition policy

Advantages: Enhanced business environment for enterprises and investors.

Challenges: Thai state-owned enterprises would be affected by market liberalisation,

Government procurement

Advantages: Increased opportunity for Thai enterprises, especially construction companies, to join other countries’ government procurement projects. Increased transparency in government procurement processes.

Challenges: Thai enterprises would face tougher competition as many foreign enterprises would be able to join many projects.

Labour

Challenges: Many countries could use the labour issue to create non-tariff barriers for Thai products, despite lower tariffs. Thai businesses could face higher labour costs as the US would pressure the country to increase wages and improve worker-protection standards.

Environment

Advantages: Thailand would need to upgrade its environmental-protection standards, while many industries would be encouraged to produce and import environmentally friendly products.

Challenges: Thailand could be forced to join other international pacts on increasing environmental-protection standards.

Support varies

The industries that would like Thailand to join the TPP include textiles and garments, sugar, air-conditioners, electrical appliances and electronics, foods, jewellery and rubber. Some of these enterprises are worried that they will lose US tariff privileges soon, and see the TPP as a way to mitigate this.

However, manufacturers of machinery and metal goods, and agricultural producers, are highly concerned about their ability to compete with the high technological development of equivalent US industries. 

Other sectors such as leather and leather goods, plastics, automobiles and parts are hesitant about the TPP.