TDRI Warns of Major Risks in Thailand’s Reciprocal Trade Deal with US

Senior economist flags concerns over 99% tariff exemption on US goods, digital taxes, and adherence to Washington’s labour standards.

 

The Thailand Development Research Institute (TDRI) is urging the Thai government to monitor seven critical issues arising from its new reciprocal trade agreement framework with the United States, warning that the risks could outweigh the benefits.

 

The caution follows Prime Minister Anutin Charnvirakul’s signing of a joint framework agreement on reciprocal trade at the recent ASEAN Summit to negotiate the comprehensive trade deal by the end of the year.

 

While the agreement aims to boost confidence and eliminate tariff barriers, the TDRI highlighted several potential pitfalls.

 

Dr Nonarit Bisonyabut, a senior Research Fellow at the TDRI, acknowledged a positive aspect: the framework could lead to a 0% exemption from the existing 19% Reciprocal Tax for specific Thai goods.

 

However, he stressed that the concessions Thailand appears to have made require close scrutiny.

 

 

Dr Nonarit identified the following high-risk areas for the Thai government:

 

Massive Tariff Exemptions: Thailand may have to eliminate tariffs on up to 99% of all product categories imported from the US. This sweeping liberalisation could affect thousands of product lines.

 

Adoption of US Standards: The country has agreed to accept US standards for automotive products (safety and emissions), pharmaceuticals, and meat products. The government must track the economic impact of adopting these new regulations.

 

Labour and Environment: The agreement includes provisions on labour and environmental standards, specifically mentioning workers’ rights to form unions for collective bargaining. Businesses must be prepared for the resulting changes.

 

Intellectual Property (IP): Stricter IP protection measures are anticipated, which will directly affect users currently engaged in rights infringement.

 

Digital Taxation Ban: The agreement requires Thailand not to impose digital service taxes.

 

Service Sector Liberalisation: The telecommunications sector, in particular, must be liberalised, increasing the allowable percentage of foreign ownership.

 

Increased US Imports: Thailand is expected to increase its imports of certain goods, including animal feed corn, soybeans, energy products, and aircraft, to help reduce the bilateral trade deficit.

 

“Many of these issues will require amendments to Thai laws and will take a considerable amount of time,” Dr Nonarit explained.

 

He stressed the need for transparency and understanding not only with the US but also with the public and all domestic sectors involved.

 

When questioned on the government's best approach, Dr Nonarit advised that negotiations must be based on mutual benefit.

 

Thailand should leverage the talks to secure market access for its own goods in the US—a key item currently under discussion.

 

He added that Thai negotiators should establish a clear list of products eligible for the reciprocal tax reduction from 19% and, where necessary, ask for an adjustment period for certain clauses it is not ready to implement.

 

"We also need to study the potential benefits and drawbacks of the digital service tax issue carefully," he concluded. "We need to know if Thailand will lose out on potential tax revenue, and by how much."