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US Suspend Thailand’s $1.3 Billion Trade Preferences

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The suspension of trade preferences will focus on products for which the U.S. is a relatively important market for the Southeast Asian nation, but where Thailand accounts for a relatively small share of U.S. imports, the Office of the U.S. Trade Representative said.

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The United States is suspending some trade preferences for Thailand over concerns about worker rights, adding to the obstacles facing the export-reliant nation’s slowing economy.

The move affects $1.3 billion in trade preferences and was sparked by Thailand’s failure to provide rights such as protection for freedom of association and collective bargaining, the Office of the U.S. Trade Representative said in a statement. The suspension takes effect in six months.

The eligibility of all Thai seafood products for the so-called Generalized System of Preferences will also be revoked due to “longstanding worker rights issues in the seafood and shipping industries,” the office said.

The U.S. move is a sudden worsening of ties with treaty-ally Thailand. Where officials have long feared American criticism of trade policies over the Asian nation’s goods surplus and efforts to curb a surging currency. A dispute has also flared over a Thai decision to ban some farm chemicals, which the U.S. said may hit American agricultural exports, according to local reports.

Thai Response

The Thai government said it will outline its response to the U.S. steps over trade preferences at a briefing on Monday.

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

The suspension of trade preferences will focus on products for which the U.S. is a relatively important market for the Southeast Asian nation, but where Thailand accounts for a relatively small share of U.S. imports, the Office of the U.S. Trade Representative said.

The action against seafood comes even after Thailand took steps against fishing industry abuses, which prompted the European Commission to lift the threat of a ban on related Thai products.

Prime Minister Prayuth Chan-Ocha tightened up rules to curb illegal, unreported and unregulated fishing as well as forced labor, leading domestic trade bodies to complain that the laws had pushed up costs in a $6 billion export industry that’s already grappling with a surging currency.

Slowing Growth

Southeast Asia’s second-biggest economy faces the slowest growth in 2019 in five years and is struggling to boost shipments, especially farm products. Challenges include a strong currency and the fallout of the U.S.-China trade war. Thai exports unexpectedly dropped for a second month in September.

The U.S. is Thailand’s second-largest export market, and shipments were worth $31.9 billion last year, data compiled by Bloomberg shows.

Trade under the Generalized System of Preferences between Thailand and the U.S. totaled $4.4 billion in 2018, according to the Office of the U.S. Trade Representative.

Thailand earlier this week said it’s banning three farming chemicals — paraquat, glyphosate and chlorpyrifos — over risks to health. The Nation newspaper reported that the U.S. has written to Prayuth to reconsider glyphosate over the potential disruption it may cause to food imports from trading partners.

When asked about the U.S. objections, Deputy Agriculture Minister Mananya Thaiseth told reporters earlier this week that “we have to care about the demands of the Thai people.”

Thailand’s baht reached a new six-year high against the U.S. dollar on Oct. 25. The currency has gained 7.9% this year, more than any of its emerging-market peers except Russia’s ruble.

Thailand in May successfully dodged a U.S. Treasury watch-list of foreign currency manipulators.

But it could find itself in the cross-hairs in a report due in coming weeks, as its trade surplus with the U.S. in the 12 months through August nears $20 billion and its current-account surplus remains above a 2% threshold, two of three criteria considered.

Source: Bloomberg