THE ROAD MAP AHEAD FOR THAILAND’S TRADE IN COVID AFTERMATH

Pimchanok Vonkorpon Pitfield, Ambassador and Permanent Representative of Thailand to the World Trade Organization and the World Intellectual Property Organization, said Covid-19 has brought with it a new landscape and paradigm for long-term trade and the global economy. Some may be short-term and some may be more permanent.

What, then, are changes that will have a long-term effect on the future global economy? Let us look at some key trade-related and socio-economic developments on the road to recovery from Covid-19.

Investment and supply-chain reconfiguration: While some key services like tourism, restaurants and airlines faced serious contraction, some industries have found a new revival, for example, electronics where gadgets are in high demand. Food security concerns, shortages of materials and components, logistical logjams, container scarcity and price hikes plus border restrictions all have contributed to a political and economic necessity for governments to support a “closer to home” supply chain policy in order to avoid risk and for security and strategic reasons.

Investment also will become more strategic in response to future developments. For example, the US has identified four crucial sectors where they will try their utmost to prevent supply chain disruption and depend on their own, not foreign, investment.

They are:

1. Semiconductors and advanced packaging;

2. High-capacity battery for cars and others;

3. Rare earth and strategic minerals;

4. Pharmaceutical products and related materials.

Geo-political tensions intensify

The clash between the two major economies – China and the United States – that began during President Donald Trump’s term and accelerated because of Covid-19, will intensify under President Joe Biden, not subside. Labour rights will be added to the already long list of issues of bilateral contention, from trade, technology, currency to cyber and regional security.

Living with pandemics

Most people have realised now that Covid and other pandemics will not disappear entirely. This has prompted many governments to step up their capabilities in the healthcare industry and related services and strengthen their competitiveness in this vital area in order to avoid dependence on outside supplies. People will likely spend more on home improvement and healthcare. Online education and training have become a serious option for academic institutions. And, of course, remote meetings through various apps and platforms are likely to stay with us.

Accelerating digital transformation

Even though digital and technology disruption was taking place before the arrival of Covid-19, work-from-home practices and lockdowns have led to explosive growth of e-commerce, digital payment, online sales platforms and home delivery services. In parallel to the Covid-19 aftermath, digital and crypto currencies, as well as fin-tech, grew rapidly while transformation in manufacturing sectors continued through adoption of AI, big data utilisation, and internet of things. Blockchain is increasingly used for trade transactions in products and services.

Green economy and living

Greater recognition of climate change, coupled with fast advancing technology, means that green economy is becoming real albeit at a relatively high cost. Four major areas that will see this trend grow fastest are: food, transport, energy and construction. Think of driverless EV cars powered by electricity pulling through dwellings which are carbon-neutral and environmentally-friendly. End that evening with an organic dinner.

New landscapes for trade rules and negotiations

With all these changes coming, frontiers in trade rules also are changing – but not all of them through the WTO or FTAs. Several countries are taking up issues on digital tax, dealing with big tech companies on tax and competition, tightening investment rules and foreign employee screening to prevent access to sensitive technology, strengthening financial regulation on off-shore accounts and prevention of cyber-crime are just some of the emerging areas where trade conflicts are heading. This is not to say that “traditional” measures are forgotten – “trade remedies”, such as anti-dumping, countervailing and safeguard measures, are actively used by many countries as well as tariffs. Increasingly, non-tariff barriers such as standards, safety, quotas and services and investment restrictions are prevalent and even more complicated than ever. These trends reflect the vulnerability of many governments, putting pressure to shield the domestic economy before the post-Covid recovery.

What should a mid-sized, developing country like Thailand do then?

- It must embrace the new paradigm for trade rules with open-mindedness and forward-looking vision.

- Focus not only on access to markets but more importantly, find ways for industries and entrepreneurs to develop and have access to technology, finance, data and information, knowledge and know-how.

- Create a multi-generational domestic ecosystem that is conducive to innovation, human development and social cohesion.

The global trade and investment situation continues to be dynamic. But what role should Thailand as a global member play in mapping global trade and investment?

Auramon Supthaweethum, director-general, Department of Trade Negotiations, said that in the past, we saw some situations where certain countries adopted trade protectionist measures to address their trade deficit, such as the US and China. Some countries may adopt non-tariff measures due to health reasons in solving the Covid-19 problem.

However, countries are aware of the negative effects of trade protective measures, especially during the Covid-19 crisis. They see that trade is a crucial factor to help cope with the Covid crisis. As in the international dialogue forum, many countries have joined hands or vowed to avoid implementing trade restrictions that do not comply with WTO. They have also promised to place no obstacles in the import-export of pharmaceutical products, medical equipment and essential goods as quoted in Asean and Apec (Asia Pacific Economic Cooperation) statements, for instance.

For Thailand, it is significant to adopt the open trading system and comply with world trade rules under international standards, while not creating unnecessary trade barriers This will contribute to the economic recovery of Thailand and the world in dealing with the Covid-19 crisis.

New free-trade agreements must be consistent with the word trade direction. It was found that FTAs in the past 20-30 years emphasised on reducing barriers in trading products, services and investment. However, the implementation of FTAs over the past 10 years to date has been more comprehensive, including opening the market for goods, services and investment. There are regulations to enhance transparency, fairness, and competitiveness as well as more new issues like digital trade, environment, trade and sustainable development, labour, social and environmental responsibility, investment facilitation, measures to reduce investment barriers for promoting cross-border flow of investors, etc.

Jareeporn Jarukornsakul, chairman and Group CEO of WHA Corporation Pcl, said that global investment would grow in Asia. It can be seen from the past that the investment rate has always expanded, led by China, India and Indonesia because of their large populations. Asean and Thailand must keep an eye on China’s One Belt One Road policy which will link Asean with Europe.

“Thailand also has an advantage being in the geographical centre of this region. This advantage must be used to show leadership and increase competitiveness,” Jareeporn said.