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Turbulent Thailand

Thailand's emerging trade hawks cloud TPP membership push

Cabinet reshuffle risks ousting officials promoting market opening

Thailand serves as a home to plants from several Japanese automakers that would benefit if the Southeast Asian country joined the TPP.   © Reuters

BANGKOK -- Thailand's prospective entry into the Trans-Pacific Partnership trade pact could be in jeopardy if a looming cabinet reshuffle removes the country's economic czar and brings in an administration stacked with military-backed protectionists.

An internal revolt roiling the ruling Palang Pracharat Party threatens to oust its leader, Uttama Savanayana, who supports economic liberalization, along with Deputy Prime Minister Somkid Jatusripitak, the man behind the country's push to join the free trade bloc. This could put Thailand's TPP membership up in the air.

Delays in Thailand's entry into the TPP will have broad repercussions for companies that have counted on the country's membership in mapping out their supply chains, including Japanese automakers. 

In early June, 18 senior Palang officials had quit, expressing grievances about Uttama. The resignation of a majority of the party's top officials triggers a leadership election, which will take place by mid-July.

The infighting stems from appointments made by Prime Minister Prayuth Chan-ocha, the former Commander in chief of the Royal Thai Army supported by Palang. Upon forming a coalition government in July 2019, Prayuth tapped Somkid, an academic, as his point man on the economy.

Palang Pracharat Party leader Uttama Savanayana, a supporter of economic liberalization, talks to reporters at the party head office in Bangkok.   © Reuters

Somkid enjoys significant clout within the party. He is closely aligned with Uttama, who doubles as the finance minister. And Sontirat Sontijirawong, who holds the powerful energy minister post and Palang's secretary-general, is also a Somkid ally.

The military figures who make up Palang's mainstream felt sidelined. The rebelling faction is now backing a deputy prime minister, Gen. Prawit Wongsuwan, for the new party leader. If Prawit wins, Prayuth will likely be forced into reshuffling the cabinet.

"It is the prime minister who will decide to reshuffle the cabinet," Prayuth has said, signaling that a shakeup would happen as early as July, when measures to contain the coronavirus outbreak will run their course.

When Somkid met in February with Yasutoshi Nishimura, Japan's point man on the TPP, the Thai official had said Bangkok would make the final decision on joining the TPP around April.

But Somkid and all of his allies could be driven out of the cabinet under a reshuffling, stalling the momentum for Thailand's participation in the TPP.

Prawit's clique has not expressed its stance on the TPP, but appears unenthusiastic about the trade deal.

Thailand's Deputy Prime Minister, Gen.Prawit Wongsuwan, is a military-backed candidate for the party leadership.   © Reuters

Commerce Minister Jurin Laksanawisit and Public Health Minister Anutin Charnvirakul have both expressed caution over Thailand's entry. They belong to the coalition partner Democrat and Bhumjaithai parties, respectively.

"Military figures who want to drive out the Somkid faction have exerted pressure within parties," a diplomatic source said.

Sensing the changes in political winds, Prayuth himself has modified his stance. He appointed Somkid precisely to ease concerns among foreign businesses, but at the end of May, the prime minister said Bangkok was still exploring whether to participate in the TPP.

In the lower chamber of Thailand's National Assembly, a committee to explore TPP membership said it will issue a decision at the end of this month after considering a wide spectrum of opinions. But if a cabinet reshuffle becomes likely, it is expected to put that announcement on hold.

The business community lacks a consensus on the TPP question. Few companies have a competitive advantage to rival foreign multinationals. Predee Daochai, chairman of the Thai Bankers' Association, told reporters Wednesday that he supports discussions on the trade pact, but that Thailand could withdraw at any time if there are problems.

The coronavirus pandemic has devastated Thailand's tourism industry as well as exports, the country's two main economic drivers. The government estimates that entering the TPP would boost foreign investment by 5% and expand exports by 3%.

The TPP forms a key part of Thailand's goal to become a developed nation by 2037. Thailand remains stuck in the "middle-income trap" in which the growth of average incomes has stalled. Somkid has sought to break out of the trap by drawing foreign investment to the country's Eastern Economic Corridor and by pouring resources into next-generation industries.

Several Japanese automakers have built plants in Thailand. Imports and exports of auto parts between neighboring countries have proliferated. Entry into the TPP is anticipated to expand the supply chain.

The 11 members of the TPP, formally called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, agreed to accept more members at a ministers' meeting in January 2019. Taiwan, Indonesia, the Philippines and the U.K. have expressed interest in joining.

But the TPP demands a high degree of freedom in trade and investment, prompting strong resistance to joining from protectionist factions with vested interests, especially in the developing world. These circumstances have proven to be one of the biggest reasons why the TPP has not expanded membership.  

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