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Thailand may lose US trade privileges

Thai Day, Thailand

Thailand may lose US trade privileges

By Daniel Ten Kate

9 August 2006

Thailand is included in a group of 13 countries that may lose preferential tariffs when the US revamps its Generalized System of Preferences (GSP) program at the end of the year, US officials said yesterday.

“We’ve talked to the Foreign Trade Department and key industry groups to let them know we are conducting a review,” Peter Thorin, an economic officer at the US embassy in Bangkok, told reporters yesterday.

“We will go through the review country by country,” he added. “The result could be different in each country.”

Government officials and exporters have until September 5 to submit evidence about how increased tariffs will affect certain industries. The US Trade Representative will use that information to formulate a recommendation on Thailand’s status to the US Congress, which must renew the GSP program before it expires on December 31.

Thailand benefits from the GSP program more than any country except India, shipping more than US$3.5 billion to the US under the program last year. The program covers about 18 percent of the country’s nearly $17 billion in exports to the US, with jewelry, color televisions, tires and stainless steel among the products receiving the most benefits.

Although it remains unclear if Thailand will lose any benefits at all, the economic impact of completely losing GSP privileges may be negligible. The program accounts for only three percent of the country’s total exports - an amount economists say can be compensated through penetrating other markets.

“If the US cuts GSP privileges, it won’t affect the overall economy much,” said Aat Pisarnwanich, director of the International Trade Study Center at the University of the Thai Chamber of Commerce. “Total exports to the US may drop by less than five percent, and jewelry and electronics sectors may suffer. But we can substitute the losses by selling more to other countries.”

Economists also doubt that the US will completely eliminate benefits for Thailand due to its solid political friendship. US lawmakers appear most interested in hurting other top beneficiaries, such as India and Brazil, which the US sees as major roadblocks to reaching a deal in the latest round of global trade talks.

The loss of the preferential tariff program may nudge the government into completing stalled talks on a bilateral trade deal, however. Asked yesterday if the US is trying to punish Thailand for dragging its feet on the deal, Thorin said: “I’m sure people will think that, but the review began in October of last year when everyone thought good progress was being made on the FTA.”

As the trade talks with Thailand have stalled, the US has stepped up efforts to complete bilateral free-trade agreements with South Korea and Malaysia - two countries that have already graduated from the GSP program, which is designed to help developing countries. Regional economies that no longer receive the special benefits include Singapore, Hong Kong and Taiwan.

The 13 countries under review account for nearly 70 percent of GSP benefits. All export more than $100 million to the US under the program and meet one of two criteria: the World Bank classified the country as an “upper-middle-income” economy last year; or the country’s exports accounted for more than 0.25 percent of world goods exports last year. Thailand met all the criteria. The GSP program covers 133 countries, including 42 least developed countries. India, Thailand, Brazil and Indonesia enjoy nearly 50 percent of all GSP benefits.

“Those countries take up so much of the benefits,” said James Carouso, another economic officer at the US embassy. “So the administration wants to know what it can do to make the system more fair.”