20 October 2003

The Kingdom of Thailand and the United States of America have long enjoyed a mutually beneficial economic and trading relationship.  In recognition of this growing partnership, President George W. Bush and Thai Prime Minister Thaksin Shinawatra announced on 19 October 2003, their intention to launch negotiations for a comprehensive free trade agreement (FTA).

Following further consultations, Ambassador Robert Zoellick, United States Trade Representative, officially notified the Congress on 12 February 2004, of the Administration’s intention to initiate FTA negotiations with Thailand.  Under the Trade Act of 2002, the Administration will consult with Congress for 90 days before commencing formal negotiations by June 2004.  The FTA is expected to be concluded by 2005.

The US-Thailand FTA promises to strengthen even further the already close economic partnership between the two countries. Given the complementary nature of both economies, Thailand is already the US’s 19^th largest overall trading partner, with two-way trade in 2003 exceeding $21 billion.  US exports to Thailand last year rose over 20 per cent to $5.8 billion, making the Kingdom the US’s 23^rd largest export market.  During the same period, the US imported $15 billion worth of products from Thailand, making the Kingdom the US’s 16^th largest source of imports.  At the same time, the US is Thailand’s largest export market (accounting for 17 per cent of total exports) and second largest source of imports (9.5 per cent of total imports).  Top US exports to the Kingdom include IT products, transportation equipment, and agricultural products.

BUILDING UPON A 170 YEAR-OLD PARTNERSHIP

This agreement, however, would not be the first trade agreement signed between Thailand and the US.  Formal economic ties between Thailand and the US in fact date back over 170 years to 1833 when the Treaty of Amity and Commerce was signed—the first such treaty between the US and an Asian nation.  This treaty has subsequently been replaced by other treaties, the latest of which is the 1966 Treaty of Amity and Economic Relations between the Kingdom of Thailand and the US.  Under this treaty, the US is accorded national treatment with respect to all commercial, industrial, financial and other business activities in Thailand, with a few exceptions.

In view of this close economic relationship, Thailand and the US signed a Trade and Investment Framework Agreement (TIFA) in 2002.  Several meetings have since been held under the TIFA process with satisfactory progress being achieved in the three areas of intellectual property rights, customs facilitation, and investment.

Once concluded, the FTA is expected to result in many benefits and economic gain to both Thailand and the United States.  An independent report entitled US Free Trade Agreements with ASEAN by Dean A. DeRosa, a fellow of the Institute for International Economics (IIE), highlights “Thailand as the most appropriate next ASEAN partner for a US bilateral free trade agreement.”  The study calculated that a FTA with Thailand, compared with other ASEAN countries, would yield the largest gain in terms of economic welfare for the US, amounting to some $824 million.

In another study conducted by the Thailand Development Research Institute (TDRI), it is estimated that the FTA would increase Thai exports to the US by 5.4 per cent and US exports to Thailand by 5.0 per cent.

It is worth noting that many economic sectors of the US would stand to gain from the FTA.

Presently, the US is already Thailand’s largest supplier of agricultural imports, accounting for around 15 per cent of total Thai imports of agricultural products.  In 2003, US agricultural exports to Thailand rose over 10 per cent to $675 million, making the Kingdom the US’s 16^th  largest market for agricultural products.  With a FTA, it is estimated that

this figure could reach $900 million.

As noted by the White House, US exports of automobiles and automobile parts should also again from the FTA, benefiting from reductions on tariffs currently imposed.

In addition, the White House pointed out that the FTA would help protect US investments as it could preserve the preferential status (national treatment) of US business operating in the Kingdom under the Treaty of Amity and Economic Relations.

Other issues of interest to the US, including intellectual property rights, will also continue to be addressed under the FTA as it is under the TIFA.

Given its expected benefits, the FTA has attracted widespread support from US companies and industries, resulting in the establishment of the US-Thailand FTA Business Coalition (http://www.us-asean.org/us-thai-fta/).

Recognizing the importance of the FTA, the Congress has also expressed its support for the agreement.  In October 2003, 38 congressmen and 10 senators sent separate joint letters to the President encouraging the Administration the initiate FTA negotiations with Thailand.

In the US House of Representatives, a Friends of Thailand Caucus has been established.  Under the co-chairmanship of Rep. Jim Ramstad (R-MN) and Rep. William Jefferson (D-LA), this Caucus will help promote US-Thailand friendship and understanding, both of which are crucial for the passage of the FTA.  A similar caucus has also been established in the US Senate spearheaded by Sen. Gordon Smith (R-OR) and Sen. Max Baucus (D-MT).

The economic partnership to be created by the FTA will certainly complement the partnership between both countries that already exist in the political and security sphere.

Indeed, Thailand has been one of the US’s five treaty allies in the Asia-Pacific region since the signing of the Manila Pact in 1954.  Politically, Thailand and the United States have always been close, given the many common values and beliefs that both nations share, including those of freedom, democracy and free enterprise.  Thai troops have fought side-by-side with US troops in various wars—including Korea and Vietnam.  The US Air Force also used military facilities in Thailand during the Gulf War.

Thai and US troops participating in the Cobra Gold Joint Exercise, Thailand

President George W. Bush remarks to Thai Troops

at the Royal Thai Army Headquarters in Bangkok,

Thailand, 19 October 2003.

White House Photo by Paul Morse

Thailand and the United States have also been co-operating closely in the global fight against terrorism, as reflected by the arrest in Thailand of Mr. Riduan Isamuddin, a.k.a. Hambali, one of Jemaah Islamiya’s leaders.  Thailand also sent military engineers to help reconstruct Bagram Air Base in Afghanistan under Operation Enduring Freedom.  During the campaign in Iraq, Thailand sent humanitarian assistance to the country and has sent over 440 military personnel to Iraq to help with humanitarian and reconstruction efforts.

Thai UN Peacekeepers in East Timor

Over the past three decades, the Thai economy has been transformed from an agricultural one--exporting mainly rice, natural rubber, tin and teak wood--into a dynamic, modern, and well-diversified one.  Although Thailand remains one of the world’s few net exporters of food with an important agro-industrial base, the Kingdom’s industrial, manufacturing and service sectors have risen to the fore, accounting for well over half of GDP.  Indeed, many may be surprised to learn that the Kingdom’s exports of IT products, automobiles and automotive parts now exceed that of agricultural produce and ready-to-wear garments.

Thailand's growing IT industry

The economy itself has also rebounded strongly from the economic and financial crisis of 1997.  Given the restructuring of our financial and industrial sectors, the Kingdom has emerged more vibrant and resilient than ever before, with consumer and investor confidence on the rise, the baht currency stable, and our international reserves climbing.  At the same time, our inflation and current account deficit remain well under control.  In 2003, the Thai economy registered a growth rate of 6.7 per cent, the highest since 1997.  The Stock Exchange of Thailand was also the best performing stock market in the world in 2003, rising by 117 per cent, or even more in dollar terms given the appreciation of the Thai baht.

Economic Growth Targets for 2004

THAILAND AS A REGIONAL HUB

Strategically located in the heart of Southeast Asia, Thailand is a natural gateway to the region and beyond.  Manufactures made by US companies in Thailand and US products can therefore reach not only 62 million consumers in Thailand, but also over half a billion people in Southeast Asia and hundreds of millions more in southern China.

The Kingdom’s status as the region’s aviation and transportation hub will be strengthened even further with the opening of the New Bangkok International Airport in September 2005, complementing the comprehensive network of roads and rail links with neighboring countries already built and planned. 

In addition, during his visit to Thailand last October, Secretary of State Colin Powell signed with Foreign Minister Surakiart Sathirathai an open-skies air cargo agreement between both countries, which will help promote international all-cargo air services using the Kingdom as a gateway to Southeast Asia and beyond.

With Thailand fast developing as the region’s transportation hub, the Kingdom is also a center for international tourism, particularly given the country’s political stability as well as rich cultural and natural heritage.  Already attracting over ten million tourists a year, including half a million Americans, Thailand hopes to become one of the world’s top five tourist destinations in the not too distant future.

Thailand: Gateway to Mainland Southeast Asia

• Royal Thai Embassy
• Thailand-US FTA Negotiation (thai)
US-Thailand FTA Business Coalition
ASEAN
National Economic and Social Development Board Economic Outlook
U.S. Government Export Portal
U.S. Census  Bureau - Department of Foreign Trade
U.S. Trade Representative