Thailand should consider joining both the Trans Pacific Partnership (TPP) and Regional Comprehensive Economic Partnership (RCEP) free-trade agreements when Prime Minister Prayut Chan-o-cha convenes a high-power committee next month to chart the country's
The TPP is led by the US with 11 other member countries – Japan, Australia, New Zealand, Canada, Mexico, Peru, Chile, Malaysia, Singapore, Vietnam and Brunei. The RCEP has a total of 16 countries: the 10 countries of Asean plus China, Japan, South Korea, India, Australia and New Zealand.
Both are crucial FTAs, which will account for 38 per cent and 29 per cent of world GDP, respectively. The 12-country TPP currently has a combined GDP of US$28.3 trillion with a combined population of 800 million, while RCEP has a combined GDP of US$22.8 trillion with a combined population of 3.5 billion.
In comparison, Thailand’s GDP (US$378 billion) is only 0.49 per cent of the world economy, so we are a relatively small economy which cannot afford to be excluded from any major trade bloc in Asia and the Pacific.
A preliminary research shows that Thailand will face negative consequences in the next 2-3 years if it is not a TPP member.
Thailand’s export sector and foreign direct investment will take a hit because Malaysia and Vietnam, for example, are both TPP and RCEP members. For exports, TPP is expected to enforce a new set of rules on origin of goods, which will effectively hurt exporters who are not members, as they may not be able to ship products to TPP markets such as the US.
This in turn will hurt foreign direct investment in Thailand, as new manufacturing projects will be diverted to Malaysia or Vietnam.
Previously, Thailand did not take a clear position on joining the TPP whose 12 founding member countries recently reached an agreement in the US, partly because of some issues such as domestic political chaos and fears of expensive drugs from becoming a TPP member.
The government should now review its TPP position to ensure that the country does not miss potential economic opportunities resulting from this powerful grouping.
Glyn Davies, the new US ambassador to Thailand, said in a recent interview that the US was ready to consider Thailand’s interest in joining the TPP.
On the other hand, Thailand should also push for implementation of the RCEP to further boost the potential of the Asean Economic Community, which will take off at the end of this year.
With the AEC as a sub-set of RCEP, the 10-country Asean will also seek to integrate its combined economy with the European Union and Russia, among other regional groupings.
In this context, Thailand will have to manage both FTAs competently to maintain its international competitiveness – as an exporting nation and a preferred destination for foreign investors amid the changing political-economic landscape in this part of the world.
On one hand, China is asserting itself more prominently in regional security and economic issues as evidenced by reclamation of the South China Sea’s islands.
On the other hand, the US is using the TPP as a new tool to rebalance its security and economic interests in this region.
Thailand needs to adopt a fine balance to ensure optimal benefits and avoid tilting excessively towards one side or the other.