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“73461”,”8/2/2006 12:06″,”06BANGKOK4685″,

“Embassy Bangkok”,”UNCLASSIFIED”,””,




DE RUEHBK #4685/01 2141206


R 021206Z AUG 06














E.O. 12958:N/A




1. Summary: Thai manufacturers exporting to the U.S. under the

Generalized System of Preferences (GSP) program predict that if GSP

benefits are redirected from Thailand, the primary beneficiary would

be China rather than other GSP users. China competes fiercely with

Thai exports and is already quickly dominating many of Thailand\’s

traditional export markets despite preferential tariff treatment.

For the U.S., the net result of eliminating GSP benefits for

Thailand would likely be a broadening of our substantial trade

deficit with China and little change in trade with other GSP users.

Thailand would likely see curtailment of certain export industries

and a serious blow to many small and medium-sized enterprises (SME)

that both directly export and support export industries. One means

to limit the inevitable political and economic fallout, and

distribute benefits more widely, would be to target GSP

restructuring to product categories where less developed countries

have a demonstrated production capacity and potential to compete in

export markets. End Summary.


2. Thailand is one of the top users of U.S. GSP benefits, exporting

more than USD 3.5 billion in products tariff-free under the program

in 2005, 18 percent of Thailand\’s total exports to the U.S. Exports

under GSP through May of 2006 are up 32.6 percent year-on-year from

2005, placing Thailand just behind India as the leading user of GSP

worldwide. Chief exports under the program include jewelry,

televisions, radial tires and a host of other diverse products. Two

top exports for 2005, plastic sacks and bags and aluminum cookware,

were eliminated as GSP-eligible products for Thailand on July 1

after the 2005 GSP review.


GSP removal a gift to China



3. Leading exporters in the electronics, jewelry and plastics

industries made clear to Econoff that elimination of GSP benefits

for their exports would greatly affect their competitiveness and

quickly lead to a loss of export market share to their fastest

growing competitor, China. In nine out of Thailand\’s top ten

exports under GSP, which together account for more than one-third of

Thailand\’s GSP exports, China is one of the top three exporters to

the U.S.


4. The jewelry industry, which incorporates nearly a quarter of all

Thailand\’s GSP exports, competes directly with China and India in

numerous export categories. The three competitors have long

traditions of jewelry craftsmanship and strong export industries,

but industry experts see China as the chief beneficiary of export

growth if GSP benefits are eliminated. Although Thai exporters

naturally consider their workmanship superior to that of China\’s,

jewelers complain that China\’s substantial mineral resources give it

a natural advantage, and their undervalued currency give it an

artificial advantage over Thai exports. Although the jewelry

industry is well entrenched in other export markets, nearly half of

Thailand\’s jewelry exports are to the U.S. and are a vital part of

the industry\’s revenues.


5. Electronics industry representatives told Econoff that TV

manufacturers had already lost price competitiveness to China and

were competing for the moment on superior quality, but were

convinced their survival depended in large part on continued GSP

benefits. Manufacturers pointed to China\’s rapid growth in market

share as a foreboding portent of things to come (In 2001, China

exported USD 141 million in color televisions (HTS 852812) to the

U.S.; in 2005 the number was USD 2.2 billion. 2006 exports are up

nearly 70% yoy.)


Other GSP users won\’t even get the crumbs



6. Thailand competes very infrequently in GSP categories with other

GSP users (with the exception of the other top users of GSP, Brazil,

India and Indonesia) and virtually not at all with least developed

countries. In examining trade statistics on Thailand\’s top 25

exports to the U.S. under GSP, it is clear that Thailand\’s primary

competition is from China, the developed world, and other top users

of GSP. In only two categories out of Thailand\’s top 25 GSP exports

could it remotely be said that another non-top GSP user is

considered a competitor. Removal of GSP benefits for Thailand would

likely increase export share for its current competitors, but hardly

at all for any other GSP user.


7. As an example, Thailand\’s second largest export under GSP is

televisions incorporating a VCR or player (HTS 85281228). The

export market is completely dominated by only three countries,

Malaysia, Thailand and China; no other country has exported TVs

under that category thus far in 2006. Thai TV manufacturers told

Econoff they faced little overall competition from other GSP users

and were confident that any loss of market share for Thailand would

inevitably pass to China. None were able to point to a least

developed country with sufficient manufacturing capacity to pick up

any decline in Thailand\’s exports.


SMEs will take the hit



8. Thailand\’s major GSP users are typically SMEs in labor-intensive

industries. The jewelry industry employs nearly one million people

working in thousands of small factories around Bangkok and a number

of other nearby provinces. Nearly 80 percent of jewelry

manufacturers are SMEs, most employing between five and thirty

craftsmen. With a small domestic market, nearly every jewelry

manufacturer produces for export, primarily to the U.S. The

plastics industry calculated that five percent of plastics

manufacturers were considered large (more than 500 employees), 30 to

40 percent medium-sized and the rest small (10 – 50 employees).

Industry leaders predicted that large firms could survive a loss in

GSP, but that SMEs would be hit the hardest, estimating that 30,000

of the industry\’s 200,000 workers would be affected.


9. Although the electronics industry is dominated by large,

foreign-invested firms, industry reps pointed to their supply chain

as predominantly SMEs which would suffer from a loss of GSP for

electronics exports. Television manufacturing, once little more

than assembly of imported parts, now sources 80 percent of its

component parts from Thai-owned domestic suppliers. Including the

supply chain, the industry employs approximately 100,000 workers.


Some CNL waivers outlived their usefulness



10. Thailand currently receives Competitive Need Limit (CNL) waivers

in ten export categories, though only a few appear to be necessary.

For buffalo leather (HTS 41071940 and HTS 41079940), Thailand has

not exported under this customs heading for years. In two others

(ceiling fans HTS 84145130 and electrostatic photocopying apparatus

HTS 90091200), trade statistics for 2006 show Thailand\’s once

vibrant export market has been lost almost completely to China. In

two other categories (ignition wiring sets HTS 85443000 and

artificial flowers HTS 67029065), exports have declined and appear

to be safely under the maximum export limits under GSP rules.


11. Thailand\’s remaining CNL waivers are in jewelry (HTS 71131120,

71131150 and 71131950) and televisions (HTS 85281228). Although

Thailand surpasses value or percentage limits in three of these

categories, keeping GSP treatment appears to be crucial to

maintaining market share against strong competition from China in

these categories as noted previously.


12. Comment: Consideration of GSP restructuring has focused on

shifting benefits to the least developed countries and those with

weaker export industries. However, eliminating Thailand\’s GSP

benefits would appear to be counterproductive, resulting in

production shifting largely to China rather than other GSP users.

Net results for the U.S. would be an even wider trade deficit with

China and a smaller trading relationship with our long-time key ally

in Thailand. In contrast to a number of other trading partners,

Thailand has been a constructive partner in bilateral and

multilateral trade arenas. However, we have heard rumors that the

RTG is considering tying renewal of U.S. investment privileges under

the Treaty of Amity and Economic Relations (AER) to renewal of GSP



13. The Thai public will inevitably consider an end of GSP benefits

as retribution for lack of progress in bilateral FTA talks with the

U.S. To limit political fallout, and better distribute benefits, a

restructured GSP program could target product categories where less

developed countries have an established industry and the potential

to effectively compete if leading GSP users, including Thailand,

were withdrawn from those categories. Alternatively, or perhaps

additionally, GSP benefits could be expanded to products where less

developed countries have shown export potential but continue to face

tariff barriers. End Comment.



Written by thaicables

July 13, 2011 at 5:04 am

Posted in Economy, Unclassified

One Response

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  1. 13 th point is very sensible

    Gap year Thailand

    July 13, 2011 at 9:01 am

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