Thailand will lose an estimated US$3.62 billion worth of trade in the Chinese market to Cambodia, Laos, Burma [Myanmar] and Vietnam over the next five years due to their better labour competency and higher manufacturing quality.
“The influx of foreign investors both from ASEAN and beyond ASEAN, such as South Korea and Japan, will help to reinforce the labour capability and manufacturing quality of those countries,” said Aat Pisanwanich, director of the Centre for International Trade Studies at the University of the Thai Chamber of Commerce.
“As a consequence, this will definitely affect existing ASEAN players, particularly Thailand.”
ASEAN members have a 10 percent market share of trade in China valued at $250 billion a year. Among ASEAN, Thailand is now second only to Malaysia in the Chinese market, with a 1.95 percent share.
In 2019, ASEAN’s market share in China is expected to grow to 11 percent, with China’s trade amounting to $2 trillion. During the period, Thailand’s market share is forecast to grow to 1.97 percent, but the nation’s ranking is projected to slip to fourth place, as Indonesia and Vietnam are expected to overtake Thailand in 2019.
According to the latest study on Thailand’s product competitiveness against ASEAN in the China market between 2015 and 2019, Thai products that are expected to become less competitive include rice, fishery products, textiles and apparel, shoes, gems and jewellery, electrical appliances and electronics.
Products with promising prospects are rubber and rubber products, tapioca, fruits and processed food.
ASEAN and China agreed to launch negotiations for an ASEAN-China Free Trade Area (ACFTA) in November 2001.
In the following year, ASEAN and China signed the Framework Agreement on Comprehensive Economic Cooperation, with the intention to strengthen and enhance economic, trade and investment co-operation; progressively liberalise and promote trade in goods and services as well as create a transparent and liberal investment regime; explore new areas and develop appropriate measures for closer economic co-operation; facilitate more effective economic integration of the newer ASEAN member states; and bridge the development gap among parties.
The Agreement on Trade in Goods was signed in 2004 and implemented on 1 July 2005 by ASEAN members and on July 20, 2005 by China. Under this agreement, the six original ASEAN members and China have to eliminate tariffs on 90 percent of their products by 2010, while Cambodia, Laos, Burma and Vietnam have until 2015 to do so.
According to Mr Aat, Thai exporters and authorities need to conduct more in-depth studies of China’s market and its consumers’ demands, tastes and consumption behaviour in each province, set up distribution centres in key cities and maintain the standard of Thai products.
This article was originally published in the Bangkok Post on 26 November 2014.