Sustaining Thailand's digital growth: how trade and competition play a role for the electronics indu

Increasing openness in digital trade has made it possible for businesses to buy from the best suppliers on the market, wherever they are located – and this has benefited Thailand, whose electronics exports have surged by 50 per cent in just three years, a growth rate that even surpasses China, South Korea or Germany. 

Thailand should no longer fear foreign competition, but embrace it as a win-win game.

Furthermore, a new trade deal in the World Trade Organisation in Geneva is under way to abolish the remaining custom duties on electronics and IT products imposed against Thai exports. 

The negotiations for the so-called IT agreement are currently stalled by China and Europe, who fear imports from Southeast Asian competitors that may threaten local production of household electronics. 

It is hardly a coincidence that these sensitive products make up more than 80 per cent of Thai tech exports. Moreover, Thailand needs to rally its allies towards an immediate conclusion of these talks.

An important competition issue facing the electronics industry concerns technology standards, where tech giants have been drawn into high-profile patent disputes, and suing each other to enforce patents in those standards. 

These lawsuits are primarily disputes about designs and software, and therefore do not threaten Thailand – although other patent issues could do so.

Competitors in the tech industry develop common industry standards and join their patents into one package. These so-called patent pools jointly collect licence fees from those who want to sell a product using the standard. 

This is not a problem in itself. In fact, global standards are essential for Thai exports, as they ensure that Thai products are possible to use on overseas markets and simplify the process by grouping dozens of patent holders into one single negotiation.

However, if patent pools try to block the development of competing standards, or if licences are not offered on reasonable terms to the emerging markets, they could effectively block Thai companies from entering the market. 

The standard that affects the Thai electronics industry more than any other is the MPEG-2 video-encoding protocol, used to digitally store or display video on electronic devices – many DVD players or television manufacturers need to pay a licence fee to a US-based for-profit patent-pooling firm called MPEG LA. 

Its critics have noted that a near majority of the patents within the MPEG-2 package have actually expired, and merely been artificially extended beyond their term of protection by being incorporated into an “all or nothing” package deal with later irrelevant patents.

Stakeholders have accused MPEG LA of overcharging them, as they claim the licensing fees sometimes even exceed their profit margins – and have proceeded to develop their own standards, only to find themselves threatened with legal action for patent infringements.

Governments and exporters need to follow these developments closely to secure free-market competition at home and abroad if Thailand wants to keep its position in the digital economy.

 

Hosuk Lee-Makiyama is director of the European Centre for International Political Economy, a trade and international economic policy think-tank in Brussels.