THE country should seek out new markets and pursue direct trade negotiations with the United States against the backdrop of heightened fears of a global trade war following protectionist moves by Washington, the Thailand Development Research Institute (TDRI) said.
Last week, President Donald Trump said that the US will impose tariffs of 25 per cent on steel imports and 10 per cent on aluminium imports to shore up the country’s struggling heavy industries. The action could trigger retaliation from other countries.
Nonarit Bisonyabut, a TDRI research fellow, said that what the US wants from this move is new trade negotiations with the countries with which it incurs trade deficits. Thailand is among these countries.
Thailand will likely see impacts as a producer of intermediate goods that are exported to the US’s key trading partners, such as China. The effects would also be felt if the US were to impose tariffs on additional products, such as electrical appliances, to address its large trade deficits, he said.
In the short term, the Ministry of Commerce may find a way to negotiate directly with the US and, in the long term, plan to penetrate new markets, such as by entering the Trans-Pacific Partnership (TPP), he said.
In the short term, Nonarit expected that the likely trade war would not lead to a global economic crisis, as global economic growth is still forecast at over 3 per cent this year.
A country’s protectionist measures against another will eventually worsen both economies, which could lead to new negotiations in both bilateral trade agreements and free trade agreements, he said.
This is similar to the US talks with Mexico and Canada regarding the North American Free Trade Agreement (Nafta), while the World Trade Organisation (WTO) would play a central role in resolving disputes or preventing any trade wars, Nonarit said.
“It’s quite certain that trade wars will happen. The solution for our country is either direct negotiations with the US or the penetration of new markets. The WTO’s mechanisms take a long time, while economic impacts will arise first. Other measures are required to relieve the problems,” he said.
Thailand’s Joint Standing Committee on Commerce, Industry and Banking said several economies, like the European Union (EU), Canada, China and South Korea, could retaliate if the US were to go ahead with the tariffs and, eventually, production, trade and product prices across the world will be impacted.
Stanley Kang, chairman of the Joint Foreign Chambers of Commerce in Thailand, said: “Each point must be analysed. The world, in the next era, must have free trade with the involvement of technology and innovation in competition.
“We must follow up the situation and have clear evaluations in several dimensions. Although the US will likely protect its market through tax cuts, the country tends to get involved in TPP negotiations.
“The flagged US tariffs (on imported steel and aluminium) are aimed at helping local industries.”
Rolf-Dieter Daniel, president of the European Chamber of Commerce, said that the US move on tariffs would not be good for the ideal of free trade, which should see all aspire to borderless markets.
“Trump move is going against the global trade direction, wanting to control markets, and protect markets and industries,” he said. “He forgets the impact on connected industries from the measure. Finally, (the US move) will affect US industries with higher production costs, as the automobile industry still depends on imported steel.”
He said that Trump hopes to only protect local markets and industries without any concern over the impacts on US allies, particularly the EU, and with China, which export products to the US.
Kang and Daniel shared the view that Thailand, as a small country with a small proportion of trade with the US, may see minimal impacts compared with the major countries.
Kang said Thailand should not panic or be overly concerned over the global trade measures if the country has strong competitiveness.
Daniel said he would await the details of Trump’s protectionist measures and overall direction on trade, and whether the actions will be temporary. If they were not, the US and its trading partners could be affected in the long term.