THAILAND should capitalise on its position as chair of the next two Asean summits in 2019 by finishing the Regional Comprehensive Economic Partnership (RCEP) negotiations in order to mitigate risks from the US-China trade war, say experts.
The RCEP, led by China, is the largest proposed multilateral free trade agreement in history, involving 16 countries including India and the 10 Asean members.
“Being a part of a mega-trade pact like RCEP will improve Thailand’s position geopolitically, and allow the country to benefit from free trade and mitigate the risks of the trade war hitting Thai exports such as computers, motor vehicles and chemicals,” said the director of the Thailand Development Research Institute (TDRI)’s Economic Intelligence Services (EIS), Kirida Bhaopichitr.
Exports of computer parts and circuits to China fell by 18.4 per cent in October, according to Thailand’s Ministry of Commerce.
Kirida spoke during the “Understanding Industry 4.0: Challenge and Opportunity for True Digital Transformation with Global and Thailand Economic Outlook 2018-2019” held by Deloitte Thailand last week.
Thailand is unlikely to proceed in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), as the trade pact has less weight due to the absence of the US, she added.
Unlike the CPTPP, the RCEP is a more traditional type of trade deal, focusing mainly on reducing tariffs and putting less emphasis on issues such as intellectual property rights and protection.
By joining RCEP, Thailand would make itself part of a mega-trade bloc, giving it more leverage in terms of attracting foreign investment as well as boosting exports, she said.
Other experts agree.
“Thailand should capitalise on this opportunity as the chairman of the Asean summit in 2019 and maximise the potential gains from the trade war,” concurred Pipat Luengnaruemitchai, assistant managing director and head of private wealth management research at Phatra Securities Plc, in an interview on the sidelines of another event last week.
“Although the figures are yet to be shown, I expect a single- digit increase in private investment in the next three to five years as a result of the trade war,” he said.
“Joining RCEP would increase our bargaining power in trade. As the Asean host, Thailand will have a timely opportunity to push for progress in the RCEP negotiations,” he said.
However, he also noted that joining RCEP would bring with it some uncertainty, as the mega-trade deal is propelled by China. Joining it would risk damaging trade relations between Thailand and the US.
Matthew Circosta, an analyst for Moody’s Investors Service (Singapore), also agrees that joining RCEP could help Thailand.
“Joining a mega-trade pact will certainly allow Asean countries to cope with uncertain trade conditions in the upcoming years,” he said last Friday at Moody’s “Inside Asean – Spotlight on Thailand” seminar.
“The trade war will cause a shift in the global supply chain, and Thailand will be negatively affected by this,” he said.
Circosta suggested that new multilateral trade deals may be an opportunity for Thailand to find its place in the shifting global supply chain.
“Asean is an export reliant region that champions free trade. Therefore, not joining such multilateral trade deals like RCEP and the CPTPP will leave Thailand out of the supply chain,” he said.