Thai exports will rise on recent WTO agreement

Thailand’s agricultural exports will become even more competitive when a newly concluded World Trade Organization agreement comes into effect that bans subsidies on agricultural commodities, according to an analysis released last week by Kasikorn Research Center.

Meanwhile, Thailand’s automobile exports to Viet Nam overtook those of South Korea to become the leader in that country for the first time, as the Thai vehicle industry continues to grow and gain strength from overseas shipments. Thailand exported 1.1 million vehicles during the first 11 months of 2015, a 7.6 percent increase over the same period last year, and a new record for the industry.

The Ministry of Commerce is forecasting that Thai exports should grow by 5 percent next year to $225 billion. To support that growth, the ministry will adopt a five-year export strategy that will focus on market access and economic cooperation, demand-driven marketing, trade promotion with Cambodia, Laos, Myanmar, Vietnam, China and India, outward investment promotion, trade in services, innovation-driven enterprises, and value creation.

Thailand is the only net food-exporting nation in the Asia-Pacific region and is among the global leaders in exports of food and agricultural commodities such as rice, sugar, pineapples, rubber, cassava, chicken and seafood. The Kingdom’s commodity exports amount to 11 percent of total exports and are solid contributors to food security in the Asia-Pacific region and the world, while also bringing in foreign exchange.

After five days of talks in Nairobi, Kenya, earlier this month, WTO member countries agreed to end all agricultural subsidies, with developed nations pledging to end subsidies immediately, and developing nations given until 2018 to stop subsidizing the sector.

WTO Director-General Roberto Azevedo called the agreement the “most significant outcome on agriculture” in the organization’s 20-year history.

Thailand’s food exports go to both developed and developing nations, and the Kingdom voted in support of repealing subsidies. Subsidies take the form of direct payments, export credits, guarantees and insurance, food aid, state trading enterprises, and export restrictions and taxes.

“These export-subsidy measures involve the distortion of agricultural prices by selling the products for less than the market price, and Thailand does not have such a measure in place,” said Pimonwan Mahujchariyawong, deputy managing director of Kasikorn Research, an arm of one of the country’s largest banks.

Her view on subsidies aligns with that of the Food and Agriculture Organization of the United Nations, which also urges and end to subsidies saying they distort the market and contribute to food insecurity.

Commerce vice-minister Winichai Chaemchaeng hailed the farming subsidy deal, saying it was vital to regain members’ confidence in the WTO’s mechanisms. “The deal is considered as a great success for developing nations who have long called for scrapping farm export subsidies to raise their bargaining power with developed countries,” he said.

Other industry analysts cautioned, however, that developed nations might still seek to create new forms of subsidies not described in the agreement in an effort to set up non-tariff barriers and protect their own agricultural sectors.