Thailand’s Economic Challenge: Somjai Phagaphasvivat on Competing with Vietnam in US Trade Talks

In the ever-evolving landscape of global trade, staying ahead of the curve is not just preferred; it’s essential. Recently, Thailand has found itself in a predicament as it teeters on the precipice of falling behind its neighbor, Vietnam, especially in critical trade talks with the United States. Under the astute analysis of Somjai Phagaphasvivat, an eminent international trade expert, Thailand’s current economic strategy lacks the robustness of Vietnam’s vast network of free trade agreements (FTAs). This shortfall could soon force the nation to confront some formidable choices if it wishes to maintain its economic standing.

Vietnam’s assertive trade strategy, marked by its comprehensive FTAs with 27 countries, leaves Thailand trailing. By eradicating tariffs on most US imports, Vietnam has become a formidable competitor, securing its position in the US-Vietnam trade dialogue. Somjai succinctly points out, “Vietnam’s increasing competitiveness is largely a function of its extensive FTA network. For Thailand to stay relevant, a similar strategic pivot might be necessary.”

Thailand’s position, however, is not without its constraints. The country’s arsenal of FTAs is relatively limited, leaving it scrambling to offer the extensive tariff reductions on American goods that US negotiators are insisting upon. Discussions appear to be at an impasse, focusing heavily on aligning tariff reductions with the expectations set forth by the US, particularly aiming to bring them to zero where feasible. Yet, as Somjai categorizes, these tariff adjustments are not straightforward—divided into goods taxed at the Most Favoured Nation (MFN) rate, those taxed below MFN but not at zero, and others that are already void of tariffs.

While trade protocol remains a focal point, Somjai also highlights an interesting dynamic in the US’s broader strategy, one wherein economic agreements are intricately entwined with security interests—a time-tested maneuver reminiscent of President Donald Trump’s administration. This trend shows signs of persistence, aiming to bolster US influence in Asia while counterbalancing China’s pervasive sway. The possibility of a naval base in Thailand’s Phang Nga province offers a strategic oversight of the bustling Strait of Malacca, illustrating this blend of defense and trade policies.

Thailand’s Finance Minister, Pichai Chunhavajira, echoes a similar sentiment, acknowledging the inescapable geopolitical undercurrents now coloring the trade discussions with Washington. With such complex layers at play, Somjai urges caution, advising that any hasty tariff slashes could severely undermine local industries. He encourages negotiators to advocate for gradual integration measures, such as phased adjustments, relaxed standards, or the implementation of quotas.

Beyond tariffs, the US is vigorously championing open-access government procurement, thus attempting to unravel restrictions and enable American firms to capture Thai public contracts. The implications of this push are significant, hinting at broader economic integration but also stirring local competition fears.

As we watch Thailand navigate these complex waters, it remains pivotal for the nation to consider strategic adaptations akin to Vietnam’s model if it hopes to secure and sustain its economic tenure in an increasingly competitive global arena. These insights, drawn from Somjai’s assessments and other geopolitical shifts, paint a vivid picture of an economy on the brink of transformation, with crucial decisions looming on the horizon.