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Thai concerns about TPP on its exports and FDI

The Trans-Pacific Partnership (TPP) among 12 countries led by the US, along with Canada, Mexico, Peru, Chile, Australia, and New Zealand, encompasses not only tariff reductions for trade in goods among members but also includes eliminating barriers to investments and services trade. TPP members account for 40 per cent of Thailand’s total trade and 45 per cent of foreign direct investments (FDI) annually. Thailand has free-trade agreements (FTAs) with most of the 12 countries except the US, Canada, and Mexico.

FDI from Canada and Mexico comprise less than 2 percent of Thailand’s total FDI annually and exports to Canada and Mexico account for less than 1 percent of. Thailand’s total exports come from the US, is 8 percent and direct investment in the country is 8 percent annually. The largest potential impact from TPP the agreement on Thailand is greater competition in the US market from TPP members.

As tariffs charged on Thai products will be higher than on those from TPP members, exporters are concerned that Thai exports to the US will be less price-attractive than similar products from member countries. When the TPP takes effect, there will probably be a negative effect on Thai exports of garments and certain agricultural products to the US. Currently, key garment exports from Thailand to the US, are charged tariff rates of 5.7 to 21.6 percent.

Businesses in Thailand have another concern the country will be a less attractive destination for FDI from US companies compared to Vietnam or Malaysia. This could deter some new investments from the US to member countries instead of Thailand as investment protection among TPP member countries will be stronger.