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U.S. Statement on the Trade Policy Review of Thailand
November 28, 2011

Trade Policy Review logoDelivered by David P. Shark,
Deputy U.S. Permanent Representative to the World Trade Organization

November 28, 2011

as delivered

The United States warmly welcomes the delegation from Bangkok led by Director-General SRIRAT Rastapana of the Commerce Ministry’s Department of Trade Negotiations to this, Thailand’s sixth Trade Policy Review.  We thank the government and the Secretariat for the reports they prepared for this meeting; and, we welcome our discussant, Australia’s Deputy Permanent Representative Trudy Witbreuk, and thank her for her insightful contribution to this TPR.

We are acutely aware that this TPR is taking place at a very difficult time for Thailand and we convey the heartfelt condolences of the United States as your country struggles with a flooding crisis that has imposed a terrible cost in terms of lives lost, families uprooted and displaced, business disruptions, and job losses.  Our thoughts and prayers are with the Thai people as you seek to recover and rebuild after this difficult and tragic event.

Thailand is an important trading partner and ally of the United States.  The Secretariat Report notes that there has been a treaty basis to our bilateral relationship since 1966; in fact, the underpinnings of our relationship date back to the establishment of diplomatic ties in 1833 through our original Treaty of Amity and Commerce.  More than a century and a half ago, the King of Thailand offered to send elephants to President Lincoln to help with the Civil War effort.  Our trade has come a long way since then.  Last year, it reached $35 billion in two-way goods and services trade, with Thailand running a trade surplus with the United States of more than $10 billion annually during the time span of this review.  Thailand is currently the biggest beneficiary country of the U.S. GSP program, with more than $3 billion of Thai goods entering the United States last year under the GSP program.

Thailand is also a prominent destination of U.S. foreign direct investment, with many well-known American companies – including Ford, GM, and Dow Chemical – at home in the Thai market.  The U.S. Department of Commerce estimates that U.S. companies have invested more than $12 billion in Thailand, primarily in manufacturing, financing, and insurance enterprises, making Thailand the second largest host of U.S. foreign direct investment in ASEAN.

There is little doubt that Thailand continues to prosper from its participation in the multilateral trading system.  Real GDP growth was 7.8 percent last year, rebounding impressively from the contraction in 2009.  There is renewed investor and business confidence in Thailand, which the floods cannot extinguish.  The IMF projects Thailand’s real GDP growth to continue at a brisk pace – at least 5 percent annually – until 2016.  Inflation has been low and unemployment is at an enviable 1 percent.  Thailand’s progress in transforming and developing its economy over the past thirty years reached an important benchmark in August, when the World Bank announced that it was moving Thailand into the category of upper middle income countries.  This is an important achievement.

In the Government Report, Thailand conveys two important messages – first, it is committed to further opening of its markets through liberalization, and second, it attaches a high priority to strengthening the competitiveness of its domestic economy.  Thailand has taken some initial steps in these areas already, including in the insurance sector, where a program of liberalization is underway, and in telecommunications, where the government has created a new body to promote regulatory oversight.  These efforts have the potential to greatly benefit Thailand by attracting foreign direct investment for infrastructure development, including flood reconstruction projects, and by fostering a business climate in which domestic demand – not just exports – can be a strong engine of economic growth.  We wish the Thai government well with these initiatives, which will also benefit Thailand’s trading partners.

Looking ahead, we are particularly interested in Thailand’s plans for further customs reform.  As the Secretariat Report notes, some progress has been made in implementing the single window, which will facilitate trade within ASEAN and with third countries.  Yet Thailand has not completed the legal amendments necessary to comply with the revised Kyoto Convention on customs procedures, and a perception of corruption and unfairness about the decisions and activities of Thai customs continues to impede trade and damage Thailand’s reputation as a trading partner.  In particular, serious problems remain with the penalties and reward system, which causes conflicts of interest and an environment that is punitive and debilitating to trade.  While we were encouraged by Thailand’s efforts last year to propose legislation to address these issues, the legislation did not pass Parliament and has been returned to the Finance Ministry for reconsideration.  We hope Thailand will continue to make customs reform a high priority and we would appreciate an update from the Thai delegation on the government’s plans in this area.

We also hope that Thailand will continue to make intellectual property rights protection and enforcement a top priority.  We want to recognize the various commitments made by Thai authorities to strengthen their legal framework for intellectual property rights protection and enforcement, including by plans to advance legislation to implement the WIPO Internet Treaties, address landlord liability, prevent the unauthorized camcording of motion pictures in movie theaters, and provide customs officials and other law enforcement officials with ex officio authority to seize suspect goods absent a formal complaint by rights holders.  In addition, we welcome the government’s efforts to foster innovation and promote public awareness of the benefits of intellectual property protection through its Creative Economy initiative.  While the United States remains concerned about Thailand’s lack of sufficient copyright protection for digital and ecommerce activities, the pervasive availability of pirated and counterfeit hard goods, and the government’s ineffective enforcement system, we encourage Thailand to continue its important efforts to strengthen its IPR regime.  In particular, we are interested in learning about the government’s plans for resubmitting the legislation to the new Parliament for consideration.

We would welcome an update from the government of Thailand on its efforts to improve access to its telecommunications market, which lags other countries in deploying advanced wireless technologies.  The Secretariat Report notes that the Ministry of Information and Communication Technology is the one responsible for reflecting the direction of further liberalization of Thailand’s telecommunications services in Thailand’s GATS schedule.  We would like to know when Thailand will implement its 1997 commitments; specifically, when it will update its schedule to reflect the new foreign equity limits and attach to its schedule the Reference Paper on regulatory principles (developed in the Negotiating Group on Basic Telecommunications) which reflects the regulatory changes Thailand has already implemented.  Thailand has failed to reflect these changes in its WTO schedule, as it committed to do in 1997, when it pledged to introduce such changes into its GATS schedule no later than 2006.

The government of Thailand reports that it has taken steps to eliminate foreign ownership restrictions on some telecommunications activities.  We are concerned, however, that a new regulation – issued in August – is a setback in Thailand’s efforts to foster a more competitive and transparent business environment in this sector.  The proposed regulations prohibit foreign equity holdings of more than 49 percent, and they introduce imprecise new restrictions on foreign ownership, management, and shareholding structures that are not well understood by foreign investors.  We urge Thailand’s government to revise or suspend these regulations, which will have a deleterious effect on Thailand’s economy – especially at a time when Thailand needs the strongest possible communications network for its reconstruction efforts.

Another major theme of our questions relates to market access concerns in several areas, including the use of import fees, import permits, the administration of tariff quotas, and the use of SPS and TBT measures and non-science based regulations to restrict trade.  We look forward to reviewing Thailand’s responses and hope that Thailand will continue to work with us to try to resolve the underlying issues, including problems affecting our pork trade, as soon as possible.

In closing, we appreciate the opportunity to participate in this meeting and discuss Thailand’s trade and investment policies.  We also express our appreciation for Thailand’s responses to our written questions and look forward to reviewing them.  We look forward to working with Thailand and with other Members as we take steps together to strengthen the rules-based multilateral trading system.  We wish Thailand a successful review and thank the delegation for its attention to our questions and concerns.

Thank you.