Pacific Rim trade is slated to surge in the coming years as negotiations for the Trans-Pacific Partnership (TPP), the world’s largest free trade agreement (FTA), move forward. At present there are 12 signatories to the agreement, including Thailand’s largest export market, the US.
Although Thailand has not yet committed to joining the agreement, recent statements from top politicians indicate it could still sign on, should negotiations around the problem areas of pharmaceutical patents and biodiversity requirements prove successful. Thailand’s options are not limited to the TPP, however, and the government is also in the midst of negotiating the Regional Comprehensive Economic Partnership (RCEP), whose signatories include China and India.
It is not a question of either/or, however, and many stakeholders anticipate that Thailand will eventually join both trade blocs, offering significant opportunities for long-term trade growth and further investment in the coming years.
In October 2015, 12 countries met in Atlanta to announce successful TPP negotiations, including Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam. In February 2016, ministers from each of these signatories met in Auckland for an official signing ceremony.
The TPP would reduce or eliminate tariffs across nearly 18,000 categories of goods, especially farm products such as sugar, rice, cheese and beef. Importantly, it also includes guidelines for dispute resolution between foreign investors and government, requests that government not discriminate against foreign investors and demands that certain countries improve existing labour standards. It also contains key regulations regarding intellectual property rights, which are of particular concern to Thailand.
In mid-August of 2015, deputy commerce minister Apiradi Tantraporn told media that, although Thailand might eventually join the TPP, it would do better to focus on negotiating RCEP, a proposed FTA between ASEAN nations and a host of trade partners including China, India, Japan, Australia, South Korea and New Zealand. The TPP and RCEP could both be critical FTAs for Thailand, as they account for 38% and 29% of global GDP, respectively, a combined GDP of $28.3trn and $22.8trn, respectively, and cover a combined population of 3.5bn.
Risk & Reward
A study published in 2012 by the East-West Centre and Peterson Centre for International Economics projected that Thailand would have the second-largest income gains by percentage point of all potential TPP members, at 7.6, which would have a positive effect on domestic consumption, and further reduce export dependence.
However, in a 2015 analysis of the potential impact on Thailand, law firm Roedl & Partner reported that some experts fear Thailand would suffer significant losses in its export sector, particularly in relation to US-bound exports, as the TPP also includes Thailand’s trade rivals, Malaysia and Vietnam.
New pharmaceutical regulations pose perhaps the biggest challenge, however, as the TPP could entail a longer monopoly period for big pharmaceutical companies, enabling drug companies to extend patents and delaying access to cheap generic drugs. State agencies such as the Government Pharmaceutical Organisation would also be barred from using information from clinical trials to register or produce generic drugs, even after patents have expired, under intellectual property provisions. In a country with a well-funded and robust public health system, these developments would prove deeply unpopular.
Despite these challenges, an October 2015 report released by the Ministry of Commerce found that there could be significant advantages for Thailand, and has announced it will continue studying the potential for TPP membership until June 2016.