InfoQuest, (October 28, 2019) -- The United States announced that it will suspend duty-free treatment for some Thai products under the Generalized System of Preferences (GSP) program. The suspension will take effect in six months. Regarding the announcement, Mr. Keerati Ratchano, acting director-general of the Department of Foreign Trade (DFT) of the Ministry of Commerce and inspector, stressed that the withdrawal of duty-free status on 573 Thai export products does not mean that Thailand will unable to export these products to the United States, nor does it mean that Thailand's export trade based on the GSP with a total value of 40 billion baht will be totally affected.
Thailand can still ship products to the United States, but has to pay most-favored nation rate ((MFN rate) of about 4.5 percent or an estimated value of no more than 1.8 billion baht.
Following the suspension, a variety of Thai products will no longer enjoy duty-free treatment under GSP, including motorcycles, glasses, machinery, electrical equipment, plastics and plastic products, seasonings, chemicals, steel products, copper, ceramic products and jewelry. The products subject to the highest tariff rate are tableware, ceramics and kitchen utensils, with a tax rate of 26 percent, while the products on which the lowest tariff rate will be imposed are chemicals, with a tax rate of 0.1 percent.
"I would like to reiterate that not all of the exports worth 40 billion baht in total, which rely on GSP, will be affected. Actually the suspension will only influence about 1.5-1.8 billion baht exports, because we will have to pay an average tariff rate of 4.5 percent. The specific tax rate imposed varies from product to product. The highest taxed products are tableware and ceramic cookware at about 26 percent while the lowest rate is chemicals at 0.1 percent. What needs to be emphasized is that the tariff preferences are subject to sudden cancellation as they are granted unilaterally by the United States. Once they are removed, we will no longer enjoy them. Hence we must pay attention to improving our competitiveness, "said Mr. Keerati.
Meanwhile, he pointed that the Ministry of Commerce will hold talks with the United States as soon as possible to regain preferential treatment under the GSP, stressing that Thailand will not take any trade retaliation measure and there are still six months to go before the suspension takes effect. Thailand plans to seek preliminary negotiations with the United States in the upcoming ASEAN Summit hosted by Thailand in November, and conduct further negotiations with the United States under the framework of the Thailand-United States trade and investment agreement after the ASEAN Summit.
"Thailand will not launch retaliatory measures against the United States. Instead, it will seek reasonable negotiations to bring positive results to Thailand. After the ASEAN Summit, there will be opportunities for in-depth negotiations regarding the issue. Washington has already informed us that we can organize a negotiation delegation to have a dialogue with the United States Trade Representative (USTR), or we can invite the representatives of the United States to Thailand for negotiations. At the first stage, staff-level talks are likely to be held to clarify more details … We will do our best to press ahead the negotiations. Many aspects involved in the issue needs analyzing and considering. It is not only related to trade but also labor rights," said Mr. Keerati.
Mr. Keerati revealed that the DFT has invited relevant enterprises to hold discussions to gain a picture of the specific situation and assess the impact of the suspension. The DFT has urged local enterprises to explore new markets to replace the original ones, especially those with economic growth potential, such as the Middle East, Eastern Europe, South America and Russia, and take full advantage of Thailand's 13 free trade agreements (FTAs) with ASEAN, China, Japan, India, Australia, New Zealand, Chile and Peru.
In addition, local enterprises must adjust their competition strategies and increase the added value of their products, including enhancing innovative technologies, seeking new technologies to improve their products, and replacing price competition by strengthening consistency of products through R&D, so as to adapt to the global trade featuring market liberalization.
"We have been informed for some time that the United States will cancel Thailand's preferential treatment. Earlier, the United States has sent a signal, revealing that the results of the hearing will be announced at the end of October or early November. The Ministry of Commerce also met with the private sector a long time ago, urging it to make self-adjustments by stressing that GSP is granted unilaterally. When preferential treatment is removed, we should produce products of better quality instead of competing on price alone," said Mr. Keerati.
Source: InfoQuest, by Kasamarporn Kittisamphan / Nisarat / Rachada, translated by Xinhua Silk Road
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