BANGKOK -- Thailand's Ministry of Commerce made clear its intention on Monday to negotiate with the U.S. on a partial suspension of duty-free trade benefits, while seeking to mitigate its impact by exploring new markets.
"The U.S. has reviewed Thailand's special trade status through its own legal procedures," said Keerati Rushchano, acting director-general of the Department of Foreign Trade in the Ministry of Commerce. "We will do our best to negotiate before the suspension takes effect in six months."
The U.S. granted Thailand the tax-free status under the Generalized System of Preferences program enacted in 1974. The program was designed to promote economic growth in developing countries by giving them a competitive advantage through tax privilege. Some $1.8 billion worth of Thai products are eligible for this program, but it is actually used for only $1.3 billion worth, according to the ministry.
According to the U.S. Census Bureau, Thailand enjoyed a $19.4 billion trade surplus with the U.S. in 2018.
The suspension announced by the U.S. government on Friday will cover a total of 573 types of goods, or about a third in the program, from Thailand. Those goods will face a higher import tariff of 4.5%. The Commerce Ministry estimated that Thai exports to the U.S. could drop by $28.8-32.8 million, or 0.01%, next year.
U.S. President Donald Trump said the suspension, which is set to take effect on April 25 next year, came because the country had not taken steps to "afford workers in Thailand internationally recognized worker rights." Thailand's Labor Minister Chatu Mongol Sonakul insisted on Sunday that the kingdom's labor laws provide necessary protection for workers.
Some political specialists took the U.S. action as a retaliatory measure to Thailand's moves to ban certain chemicals. Thailand has banned the use of ractopamine in the swine industry for more than 15 years. The ban is blocking U.S. pork producers from Thailand's market, as the feed additive is widely used in the U.S. to enhance muscle leanness and growth rates.
On Tuesday, Thailand's National Hazardous Substances Committee voted to ban the use of three chemicals often found in pesticides and insecticides used by U.S. farmers.
Thailand's appeal may get results. Trump on Friday announced a lifting of Ukraine's duty-free treatment suspension. Ukraine was hit previously as the U.S. claimed the country was not adequately protecting intellectual property rights, but Trump said it had made progress on that front.
In Asia, India was stripped of the privilege on June 5 for not agreeing to provide equitable and reasonable access to its markets.
"While negotiating with the U.S., we will support Thailand-based companies to explore new markets such as the Middle East, Africa and Eastern Europe," Keerati said.
Thailand will host the ASEAN Summit and related meetings from Oct. 31 to Nov. 4. David Stilwell, U.S. Assistant Secretary of State for the Bureau of East Asian and Pacific Affairs, is scheduled to visit Bangkok during the period.
The assistant secretary will hold a bilateral meeting with Thai government officials. In this regard, the suspension could be seen as a typical bargaining tool by the Trump administration to extract a better trade situation for the country's sake.
Amid the U.S.-China trade war, Thailand has been trying to promote itself as a good destination for foreign companies to relocate their production from China. The kingdom has introduced a relocation package including tax benefits as part of its efforts to compete with regional peers such as Vietnam. Losing the GSP privilege may put a big smudge on its appeal as a destination for relocation.
The 573 types of goods include ceramic tableware, plastic products, reading glasses, motorcycles, and machinery and electrical equipment.