Thailand seeks clarity on scrapping of US trade preferences

Thailand seeks clarity on scrapping of US trade preferences

Tariff breaks for all seafood to end on April 25, says US, citing lack of protection of workers' rights

Thai government and business leaders are seeking clarification from the United States about the planned suspension of $1.3 billion (39.2 billion baht) in trade preferences, ostensibly because of failure to curb labour abuses in the fishery industry.

The suspension, to take effect on April 25, will focus on products for which the US is a relatively important market, but where Thailand accounts for a relatively small share of US imports, the office of the US Trade Representative (USTR) said in a statement.

Eligibility of all Thai seafood products for the Generalized System of Preferences (GSP) will be revoked due to “longstanding worker rights issues in the seafood and shipping industries”, the statement said. Areas where Thailand was said to remain weak are protection for freedom of association and collective bargaining.

Commerce Ministry officials on Saturday were studying the US decision and will hold a briefing at 10.30am on Monday, said Keerati Ratchano, acting director-general of the Foreign Trade Department.

“I need more time to assess the impact as we just got the list of affected products,” said Pimchanok Vonkorpon, director-general of the Commerce Ministry’s trade policy and strategy office.

Immediately after the news from Washington broke early Saturday, there was speculation that the suspension might have been in retaliation for Thailand’s decision to ban three farm chemicals this week. That is highly unlikely given that detailed reviews of tariffs generally take months to conduct.

The US embassy in Thailand sent a letter to the government on Thursday asking it to review the chemical ban. 

In any case, officials said, Thailand will use international forums, especially the Asean Summit to be held in Bangkok from Nov 2-4 and attended by US representatives, to negotiate for favourable solutions.

The GSP decision was in fact based on a broader complaint filed by the AFL CIO, the largest US labour union federation, in 2015 about workers' rights in Thailand.

Trade groups said it was too early to estimate the possible damage from the latest US move.

Ghanyapad Tantipipatpong, chairwoman of the Thai National Shippers’ Council, said the private sector was confused by the announcement and its focus on labour in the fishery industry.

“Thailand has been on Tier 2 in the US Human Trafficking in Persons report since the country was upgraded from Tier 3 in mid-2018,” she said. “This means Thailand has proven that it could solve the problem well. Besides, only developed countries can move to Tier 1.”

Thailand in recent years has taken a number of steps against fishing industry abuses, prompting the European Commission to lift its threat of a ban on Thai seafood. Trade under the GSP between Thailand and the US totalled $4.8 billion in 2018.

Thailand’s overall exports to the US totalled $31.9 billion last year, according to data compiled by Bloomberg.

Prime Minister Prayut Chan-o-cha tightened up rules to curb illegal, unreported and unregulated fishing, as well as forced labour, leading domestic trade bodies to complain that the laws are pushing up costs in a $6-billion export industry that is already grappling with a surging currency.

Ms Ghanyapad said exporters would need time to digest the list, which reportedly includes 573 items.

“Meanwhile, we’ll have to monitor the US reactions during the six-month grace period. In any case, the fishing inductry will have to adjust itself further and find new markets,” she added.

Kalin Sarasin, chairman of the Thai Chamber of Commerce, also said his group would need time to study the details.

“We’ll check whether the affected operators are Thais or owned by foreigners,” he said. “We expect to conclude the details soon.”

Poj Aramwattananont, chairman of the Thai Frozen Foods Association, said his group had yet to study the detail but had the impression the suspension would affect mainly fish and squid exports.

“The announcement adds to the woes of this segment. Over the past several years, Thai exporters have been buckling under the strong baht and high labour costs but have tried to adjusted themselves by finding new markets,” he said. 

The Thai goods affected by the GSP suspension include 573 items. They include seafood, fruits and vegetables, seeds, syrup and sugar, soybean sauce, vegetable and fruit juices, kitchenware, plywood doors and windows frames, ornaments, steel sheets and some stainless steel products.

The country has been struggling to boost exports, especially shipments of agricultural products, amid challenges that include a strong baht and the ongoing US-China trade war. Exports unexpectedly dropped for a second month in September, the Commerce Ministry said on Oct 21.

The baht reached a new six-year high against the US dollar on Oct 25. The currency has gained 7.9% this year, more than any of its emerging-market peers except the Russian rouble.

While Thailand in May successfully dodged a US Treasury watchlist of foreign currency manipulators, it could find itself in the crosshairs in a report due in coming weeks as its trade surplus with the US in the 12 months through August nears $20 billion and its current account surplus remains above a 2% threshold, two of three criteria considered.

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