The latest assessment indicates that at least one million local workers across all industries would lose their jobs and many small and medium-sized enterprises would be forced to shut down should the United States in November confirm its intention to end the tax holiday on Thai goods under the Generalised System of Preferences (GSP).

The Federation of Thai Industries (FTI) and the Board of Trade of Thailand met last week to assess the effects of the US announcement of plans to cut duty-free benefits on Thai goods. Their findings will be submitted to the Commerce Ministry and then forwarded to the US Embassy in Bangkok this week.

The withdrawal of the privileges would cause major problems for Thai manufacturers, which in a worst-case scenario would see businesses forced to shut down their operations.

This could cause the loss of about one million domestic jobs, with the impact on one sector often spilling over into other industries.

The US government is reviewing GSP benefits to 13 countries: India, Brazil, Argentina, Indonesia, Russia, the Philippines, Croatia, Kazakhstan, Romania, South Africa, Turkey, Venezuela and Thailand. It has opposed the renewal of the programme because it says the benefits are unfairly distributed to a small group of countries.

Manufactured products hardest hit by GSP removal include electronics and electrical appliances, rubber and plastic goods, jewellery and ceramics.

Kramol Trevibul, deputy secretary-general of the Electronic and Electrical Appliances Club of the FTI, said the end of the privilege programme would have a domino effect not only manufacturing but also the supply chain.

"Export growth will definitely drop in many sectors and it will lead to operational closure for manufacturers and suppliers," he said.

Kramol said more than 200 suppliers in the electrical appliances industry would be forced to close if the US cut off the GSP privileges. They would immediately lose their export competitiveness, to China in particular.

"The actual unemployment effect could be about 100,000 lost jobs in this sector alone," he added.

Somsak Borrisuttanakul, chairman of the FTI's Plastics Industry Club, said about 30,000 workers in this sector would lose their jobs because exports to the US would drop sharply. The US is Thailand's largest export market for plastic goods.

The industry has 200,000 workers, of which almost one-quarter are involved in producing goods for the export trade.

"Losing the privileges would have a double-edged effect. Thai manufacturers would face higher production and export costs, as a result of which American importers would face increasing prices," he said.

Somsak said plastic goods exported to the US were currently subject to an average import duty of 4.2 per cent. Loss of GSP benefits would lift the tariff to 7.2 per cent. This would be on top of Thai manufacturers having already shouldered higher production costs caused by the rise in oil prices.

He said Thai plastic products would be phased out of the US market and replaced with goods produced more cheaply in China.

Pornchai Chuenchomlada, president of the Thai Gems and Jewellery Traders Association, said at least 50,000 people in the industry would lose their jobs if the GSP benefits were removed. The US is the Kingdom's largest jewellery export market, with an average value of Bt40 billion per year.

"Unquestionably, jewellery export value and volume will drop because of lost competitiveness to China and other competitors such as Belgium and Italy," he said. He added that this would force some SME businesses to close down.

Pornchai said the industry's exports were forecast to drop by 10-20 per cent in the post-GSP era.

Last week's meeting decided that the US should be told that the removal of GSP benefits would not only harm Thai exports but also lead to losses on the part of the US.

A Commerce Ministry official who participated in the meeting said the US would lose out to other developed countries, and also to its major export competitor, China.

The source also said US consumers would have to pay higher prices for goods as a result of any import-tariff increases following the withdrawal of GSP.

"Cutting off the GSP benefits of these countries will pave the way for cheaper Chinese goods to flood the US market. Other exporting countries will lose their competitive advantage," the ministry source said, adding that US companies that have set up manufacturing plants in Thailand and ship their products to the US would also lose the tax benefits.

"US companies in Thailand may consider shutting down their operations and shifting their plants to China," the source said.

As an indication of Chinese competitiveness, exports of television sets from China to the US have increased despite a GSP cut on that country's products. China exports 14 million sets per year, double the number shipped by the Kingdom.

Petchanet Pratruangkrai

The Nation