Thailand INTERNATIONAL TRADE AND FINANCE
Phuket, a popular tourist destination and port in
southern Thailand
Courtesy Thai Airways International
International Trade
Thailand sustained a trade balance deficit from the early
1970s to the mid-1980s. Although the trade balance had improved
during the first part of the 1970s, it worsened after the oil
shocks of 1973 and 1979. In fact the net value of oil imports
went from US$52.5 million in 1970 to US$684.7 million in 1982,
with dependence on foreign oil reaching 75 percent in 1980 and
declining to 50 percent by 1985. Although there was a general
decline in the export performance of developing countries in the
early 1980s, Thailand's recovery from the oil shock was further
delayed by a loss in export competitiveness, a slowdown in the
economies of major trading partners, and a growing debt service
obligation resulting in part from rising interest rates. The
current account balance deficits were not as severe as the trade
deficits as a result of improving service balances. By 1986 the
balance of payments had moved into surplus on current account
(see
table 7, Appendix). The major contribution to the service
balance surplus was tourism, which increased from 630,000
tourists in 1970 to 2.6 million in 1986. Tourism was the top
foreign exchange earner from 1981 to 1986. The trade deficit was
caused in part by a decreasing growth rate of exports between
1980 and 1983, which improved slightly by 1985. The growth rate
of imports also declined, but at a slower rate. Despite an
increase in tourism, the trade deficit reached a peak in 1983 of
US$3.9 billion. In 1985 exports totaled US$7.1 billion and
imports US$9.2 billion, leaving an unfavorable trade balance of
US$2.1 billion. By 1986 the deficit had decreased even further,
with some of the reduction a result of the lower cost of imported
oil.
The composition or structure of merchandise exports changed
substantially between 1965 and 1985. Primary commodities
accounted for 95 percent of Thailand's exports in 1965, and
manufactured exports accounted for only 4 percent. By 1986
manufactured products comprised 55 percent of total exports, with
textile products increasing from less than 1 percent in 1965 to
13 percent by 1986 (see
table 8, Appendix). Other major
manufacturing exports in the mid-1980s included rubber products,
processed foods, integrated circuits, metal products, jewelry,
footwear, and furniture. Although agricultural exports as a
percentage of total exports declined during this period, rice and
other agricultural exports remained important for the Thai
economy. By the mid-1980s, rice took the highest share of total
agricultural exports. Cassava products, maize, sugar, rubber,
fruit, and marine products were the other main exports in this
category.
Between 1965 and 1985, the destinations of merchandise
exports shifted from 54 percent of 1965 exports destined for
developing countries to 56 percent of 1985 exports going to
industrialized countries. This increase in the percentage of
exports to industrialized countries, in combination with the
changing structure of merchandise exports from predominantly
agricultural to manufactured products, has fueled Thailand's
economic growth (see
table 9, Appendix). Thailand's major
industrialized trading partners included the EEC, the United
States, Japan, and the Netherlands. Furthermore, Thailand has
developed significant trade relations with the newly
industrializing countries (NICs) of Singapore, Hong Kong, the
Republic of Korea (South Korea), and Taiwan. Additionally,
Thailand has developed trade relations with Malaysia, the
Philippines, Indonesia, and China (see
table 10, Appendix).
Tariff barriers on imports from the developing countries had
dropped with the implementation of the Tokyo Round (1973-79) of
the General Agreement on Tariffs and Trade
(
GATT--see Glossary).
Rising nontariff barriers, resulting from domestic and
international economic conditions in industrial countries, had
more than offset the tariff reductions. In the United States the
proportion of imports subject to such barriers more than doubled,
and in the other industrial countries it rose by as much as 40
percent. Examples of nontariff barriers were quotas, voluntary
exports restraints, the Multifiber Arrangements, sanitation
rules, and subsidies.
Thai rice exports encountered the stiffest barriers in Japan,
where the tariff rate was 15 percent and a global quota was in
force. In the United States, tariff on rice was only 2.6 percent,
and no explicit nontariff barriers existed except for stringent
controls by the United States Food and Drug Administration. In
the other industrialized countries, Thai rice exports faced
varying levies. Thai agricultural exports to the developing
countries met with stiff competition from subsidized United
States cereal exports. Thailand entered into a voluntary export
restraint with France for its cassava exports because of strong
resistance to imports from the French producers of cereal-based
animal feed. Rubber did not face major barriers except for quotas
imposed by Japan. Maize exports did relatively poorly because of
subsidized production and high tariffs in the industrialized
countries. Sugar exports also faced subsidy problems in Western
Europe and a 50 percent quota reduction by the United States.
Despite nontariff barriers, Thai agricultural and manufactured
exports faced less protectionism than the NICs in the early
1980s.
Of Thailand's manufactured exports, textiles were most
affected by barriers because Thailand had to enter into bilateral
agreements with industrial countries, which were similar to the
voluntary export restraints under the Multifiber Arrangements. In
addition, tariffs escalated with the degree of processing. For
example, in the United States the average tariff for cotton
fabrics was 9.6 percent, whereas it was 18 percent for garments.
The United States imposed countervailing duties on Thai textile
exports in protest against Thai government subsidies to textile
exporters in the form of export packing credits, rediscount
facilities for industrial bills, electricity discounts, and tax
certificates.
Tariffs in Thailand before the 1970s were primarily used to
generate revenues rather than to influence domestic production.
The rates ranged from 15 to 30 percent, with higher rates applied
to finished consumer goods imports. In the 1970s, however, tariff
rates on finished consumer goods imports increased 30 to 50
percent. Rising protectionism continued in the late 1970s and
early 1980s, with high tariff rates and the application of
surcharges, quantitative restrictions, price controls, and
domestic contents requirements (see
table 11, Appendix).
Data as of September 1987
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