US views removal of GSP perks as trivial
US Secretary of Commerce Wilbur Ross addressed the recent US decision to remove Generalized System of Preferences (GSP) tariff exemptions on US$1.3 billion in Thai exports on Monday, calling the amount "trivial" and affirming there is still time for negotiations before the tariffs take effect in April.
At the Indo-Pacific Business Forum, a US-organised trade conference held concurrently with the Asean Summit, Mr Ross attempted to clarify misconceptions around the GSP tariffs.
"The GSP issue has been blown way out of proportion," Mr Ross said. "Some 70% of Thailand's GDP is exports, making up $340 billion, and the total amount of GSP products exported to the US last year was $4.4 billion, while only $1.3 billion is being removed from the zero-tariff category."
NOT A BIG DEAL?
In October, the US Trade Representative (USTR) announced it would end GSP tariff exemptions for Thailand, affecting 573 products including all Thai seafood products. The USTR cited labour rights violations as the reason for the removal of GSP protections.
The Commerce Ministry said the higher import tariff of 4.5% is expected to reduce US-bound exports by $28.8-32.8 million next year, or 0.01% of overall exports.
"The $1.3 billion is 0.38% of Thailand's GDP and that trivial proportion is subject to tariffs averaging 4.5%," Mr Ross said. "It is no big deal, but there is still time between now and April 2020, before the tariffs go into effect, to renegotiate the underlying issue of workers rights."
While the dollar amount may appear insignificant compared to GDP, the tariff increases represent one more blow to an already beleaguered Thai export sector that is reeling from a stronger baht and disruption from the US-China trade war.
The rationale behind the tariffs is Thailand's violations of worker's rights, however this is not an issue normally pushed on other nations by the Trump administration. The new tariffs are part of expansive efforts to reduce the US trade deficit in Asia-Pacific, most notably with China.
According to the USTR, Thailand exported $31.9 billion to the US in 2018, while importing only $12.6 billion, a $19.3 billion deficit for the US.
"As part of the GSP scheme, there are a number of requirements for countries to benefit," said Michael Heath, charge d' affaires at the US embassy in Bangkok. "One issue is labour rights, such as allowing migrant workers to unionise. We have talked with the Thai government about this issue for the past six years and have not come to a resolution."
The EU had previously raised concerns about labour practices in Thailand's fishing industry over allegations of using slave labour and insufficient policing of illegal fishing, and issued a yellow card, threatening to halt all seafood imports from Thailand if the issues were not addressed. However, the EU removed the yellow card this year in January after it found Thailand had appropriately reformed its seafood industry.
Perhaps a more likely explanation for the sudden removal of tariff exemptions by the US is the large trade deficit with Thailand, as well as Thailand's decision to ban certain chemicals, which will in turn reduce US agricultural exports to the kingdom.
"We will continue to discuss with the Thai government this issue and understand it will be based on public health concerns, but also want it to be based on sound scientific research," Mr Heath said.
"A number of studies have found these chemicals are not carcinogenic and safe for consumption."
Last weekend, Prime Minister Prayut Chan-o-cha met with Mr Ross at the Asean Summit to discuss trade and investments, while raising concerns over the GSP revocation.
Mr Ross, the highest ranking official sent by the US to the Asean Summit, was accompanied by a group of American investors who are being courted for investment in Thai industries such as aerospace and digital technology, especially in the Eastern Economic Corridor (EEC).
"Many US companies are having great success in the EEC like Ford Motor Co and Jelly Belly," Mr Heath said.
"US companies that based their production in the EEC told me they did it because they got good treatment from the Board of Investment."
He said Thailand is still a very attractive place for investment, and US companies have billions of dollars of unannounced investment deals in Thailand.
At the forum, the US-based glass manufacturing company Guardian Industries announced it will open its regional headquarters in Bangkok. Mr Heath said the move is in part due to the attractiveness of the market in Thailand.