Although the Biden administration is expected to reestablish the US's multilateral trade framework, underlying challenges for Thai exports still remain as carbon emissions, labour rights and trade pact conditions are critical issues affecting growth prospects, says a think tank.
As Democrat nominee Joe Biden is set to officially become the 46th US president in January with a majority of seats in the House of Representatives controlled by the Democrat Party, it is plausible a Biden presidency will rehabilitate economic and trade relations through a multilateral framework, such the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The administration may also reconsider the suspended Generalized System of Preferences (GSP) for 231 Thai products that was imposed by the Trump administration, said Krungthai Compass, the research unit of Krungthai Bank.
US demand for commodity products related to infrastructure investment is projected to rise, while Mr Biden's support of green energy projects bodes well for Thailand's alternative energy industry, said the think tank.
But these potential benefits for Thailand could be offset by a few challenges.
Exports of auto parts may inevitably be affected by Washington's green energy policy, resulting in a rapid growth in the electric vehicle market while reducing the importance of the internal combustion engine market, said Krungthai Compass.
This scenario will essentially affect Thai manufacturers who are part of the supply chain of the automobile industry that uses internal combustion engines.
Mr Biden's goal to reduce the use of fossil energy to achieve net zero emissions by 2050 will further pressure global crude oil prices to rise, said Krungthai Compass.
Higher crude prices will affect the cost of Thailand's production although this may help rev up the country's export value in the short run.
There are underlying challenges for Thai exports going forward despite how the Biden administration is expected to reestablish the US's multilateral trade framework, says Krungthai Compass. Port Authority of Thailand
Although Thailand would benefit from joining the CPTPP, the move would open a channel for member countries to export their products, such as soybean, corn, fertilisers, chemicals and pesticides to Thailand, said Krungthai Compass.
CPTPP member countries are also required to follow the International Union for the Protection of New Varieties of Plants (UPOV 1991), a key condition of the large trade pact meant to protect intellectual property.
Complying with UPOV 1991 means Thai farmers would no longer be able to keep seeds for planting.
On the other hand, CPTPP member countries would be given an opportunity to use Thai plant species for research and development as well as for patent purposes, according to Krungthai Compass.
New Zealand, a CPTPP member, has requested a three-year grace period to adjust its laws in line with UPOV 1991.
The US under Mr Biden's leadership is also expected to keep a closer watch on export products that rely on labour-intensive industries, such as seafood.
Slow progress in improving human rights for Thailand's fishing industry could pave the way for the US to impose a trade sanction on Thailand despite how the country has tried to resolve the human trafficking problem with an upgrade from Tier 3 status to Tier 2 Watch List in the Trafficking in Persons Report, said the think tank.
Besides challenges stemming from the new US administration's economic and trade policies, competitiveness in Thai export value will be reduced as a Biden presidency has ushered a risk-on sentiment among investors, with fund inflows moving into emerging markets, causing regional currencies to appreciate against the US dollar, said Krungthai Compass.
Expectations of continuous monetary policy easing by the US Federal Reserve and higher US taxes on individuals and corporates will likely encourage capital to move out of the US stock market to seek better returns elsewhere, said the think tank.
Thai exports are forecast to contract by 7.4% year-on-year in 2020 before recovering to a 4% growth in 2021, according to Krungthai Compass.