US self-interest behind GSP axe

US self-interest behind GSP axe

The suspension of trade preferences for Thailand under the Generalised System of Preferences (GSP) worth US$1.3 billion (42 billion baht) by the US Trade Representative (USTR) was to take place on Saturday.

The USTR linked the GSP suspension to the findings that Thailand failed to make enough efforts to promote labour rights, freedom of association and collective bargaining. With the suspension, a total of 573 types of Thai goods, including several agricultural products and all seafood products exported to the US market will be subject to a 4.5% US tariff, said Trade Policy Strategy Office of the Thai Ministry of Commerce. The tariff imposed on Thai exports will decrease the price competitiveness of the Thai products in the US market, which could subsequently lead to a decrease in Thai exports and an estimated loss of 40,000 jobs in Thailand.

On the surface, the US reasoning sounds legitimate, given the mounting records of human rights abuses and ongoing deterioration of democracy and media freedom in Thailand. A closer look, however, indicates that the US trade deficit with Thailand is a more likely reason. According to Freedom in the World 2019, an annual report released by Freedom House, Thailand scored 35, which means "partly free", while Vietnam scored only 20, which means "not free" for both political rights and civil liberties. Moreover, in June last year, US President Donald Trump publicly called Vietnam "the single biggest abuser of everyone". However, the US has invoked no punitive trade policy against Vietnam.

According to World Report 2019, an annual report released by Human Rights Watch, the US keeps strengthening its diplomatic relations with Vietnam, while ignoring "systematic rights abuses". Furthermore, the US Navy aircraft carrier USS Carl Vinson and USS Theodore Roosevelt paid historical visits to Danang in March 2018 and March 2020 respectively. During his official visit to Vietnam in July 2018, US Secretary of State Mike Pompeo even publicly called on North Korea to give up its nuclear weapons in exchange for economic development by highlighting "Vietnam's economic miracle" after the US and Vietnam agreed to normalise diplomatic relations in 1995. US Secretary of Defence Jame Mattis visited Vietnam twice in 2018.

The announcement of the USTR in October 2019 came as little surprise, given the previous US attempts to seek greater accesses to the Thai market.

In efforts to deal with its deficit with Thailand, the US capped imports of no less than 11 Thai products in November 2018 because Thai exports exceeded the ceiling market share required by the US GSP system. Adul Chotinisakorn, then chief of the Department of Foreign Trade, told the media in Nov 2018 that the GSP partial revocation was "due to their [Thai exporters] excessive exports of over US$180 million in value or a market share of 50% for each product, in line with the Competitive Need Limit defined by the US".

Even though the economy of Thailand compared to the US is relatively small, Thailand ranks America's 20th largest trading partner in goods. The US is the 3rd largest trading partner of Thailand after Japan and China. By the end of 2019, the US-Thailand bilateral trade volume was approximately $46.7 billion, and the US trade deficit with Thailand was $20.15 billion.

Over the years of trade surpluses, Thailand's stockpile of foreign reserves has steadily increased. According to a report released by the Congressional Research Service in December 2018, Thailand's trade surplus with the US ranked the 11th largest among US trade partners. By mid-2019, as Asia Times reported in November 2019, Thailand's foreign reserve reached $200.5 billion, the 12th highest in the world. In 2017, the USTR put Thailand on its Priority Watch List, citing the country's poor protection of intellectual property.

Mr Trump's attempt to reduce the trade deficit with Thailand through the suspension of GSP invited a tit-for-tat response by Thailand. On Oct 18, 2019, the US Agricultural Department sent a letter to Thai Prime Minister Prayut Chan-o-cha calling on the Thai government to put off the proposed ban on agrochemical glyphosate.

After years of research, Thailand's National Hazardous Substances Committee (NHSC) found that some agricultural products imported from the US, such as soybeans, wheat, corn, coffee, apples and grapes were contaminated with glyphosate, which harms people's health. However, the US rejected the NHSC's findings citing a lack of scientific evidence. If the ban really comes into force, as the letter read, the annual US exports of soybeans, wheat, coffee and fruits which are worth up to $1.7 billion will be hurt. However, the NHSC still voted to ban the use of glyphosate along with two other chemical substances, paraquat and chlorpyrifos. But Thailand finally blinked reversing the ban a month later.

The decision by the Thai government to reverse the ban drew criticisms from Thai civil society groups. BioThai, a civil society organisation working on sustainable development, use of biological resources and fair trade, said: "They [the Thai government] are helping companies that import these chemicals, particularly the importers of glyphosate." While Thailand finally agreed to reverse the ban, the US decision to suspend Thailand's GSP remains unchanged.

Linkin trade disputes with other issues, such as democracy and human rights, has always been a strategy of choice for the US to mask its own selfish mercantile intent against its trading partners. Even Japan, which has a good record of human rights, healthy democracy and media freedom, has also experienced frequent unfair trade negotiations with the US. As Sato Yoichiro, Professor in the College of Asia Pacific Studies at Ritsumeikan Asia Pacific University, wrote in an article published in May last year in The Japan Times, during the negotiations over the textile dispute from 1955 to 1972 between the two countries, the US tried to link the textile dispute with the negotiation for Okinawa's reversion to Japan. In 1995, President Bill Clinton intervened in the foreign exchange market to pressure Japanese automakers to buy more US-made parts.

It is still unclear if Thailand is on Mr Trump's hit list. However, "The impact of lifting GSP privileges or putting Thailand on a currency watch list, as a Bangkok-based investment analyst told Asia Times in late 2019, "has had zero direct impact. It's the uncertainty of what could be next that's hurting sentiment".

Yet, what seems to be clear now is that the US decision to suspend Thailand's GSP resulted more from the US trade deficit with Thailand than the issues of human rights and freedom of association.


Sek Sophal is a researcher at the Democracy Promotion Centre, the Ritsumeikan Centre for Asia Pacific Studies in Beppu, Japan.

Sek Sophal

Researcher at the Democracy Promotion Centre

Sek Sophal is a researcher at the Democracy Promotion Centre, the Ritsumeikan Centre for Asia Pacific Studies in Beppu, Japan. He is also a contributor to The Bangkok Post

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