Trading with the U.S.: Waking the Thai Tiger
In 1995, Thailand was an investor’s dream; 8.5% GDP growth, 6 million tourists per year and over $32 billion in foreign reserves. It enjoyed an economic miracle – and then everything collapsed overnight in the 1997 Asian Financial Crisis.
The whole country went bankrupt and Thailand has not experienced an economic boom since. Investors believe that this Asian tiger is dead and that nothing will bring it back to life. Now, Thailand must tell the world the tiger is alive and it is awakening.
Thailand must change its current economic policies to increase its economic competitiveness. Thailand should shift its trading patterns from heavy trade with Asian countries to heavy trade with the United States. This change will improve Thailand’s competitiveness and overall economic performance, and increase its international influence.
Thailand can reap the comparative advantages resulting from ASEAN economic integration only if its trade is highly competitive. However, Thai trade heavily depends on Asian countries while neglecting the biggest consumer market, the United States. Meanwhile, neighboring countries have adopted opposite policies and have improved their performances. Thailand needs to change its trading patterns. It can sustain its strategic trading ties with Asian countries, but it must trade more with the U.S.
More trade with the U.S. will increase Thailand’s innovation. Investments from the U.S. generate more foreign direct investment (FDI) and facilitate knowledge and technological exchanges. These exchanges are significant in injecting innovation. Innovation from FDI influx is more immediately visible than innovations from other long-term developments. Such innovation makes the Thai market less monopolistic and more competitive.
More trade with the U.S. means Thailand can expand its global market share, giving opportunities to more investors. Not only is the U.S. the world’s biggest consumer market, its citizens have higher purchasing power than the citizens in Asian countries. Trading with the U.S. will generate far more trading opportunities than countries with a smaller GDP.
More trade with the U.S. will force Thailand to address poor manufacturing processes and the problem of labor abuse. Both contribute to a negative reputation and investment climate. They lead Thai investors to invest abroad instead of at home, causing a huge amount of money leakage per year. Trading more with the U.S. will require Thailand to solve these reputational problems, whereas trade with other partners will not. Hence, trading more with the United States will significantly improve Thailand’s investment climate.
The overall benefits from the FDI outweigh sectorial losses. The investment influx will increase benefits to those who participate in U.S. supply chains but also increase competition for local producers, such as agricultural products. Nonetheless, the supply chain sector accounts for 60% while the local producer sector accounts only 40% of the U.S.-Thai trading volume. Furthermore, there have been agreements between Thai governmental sectors, private sectors and international institutions to help the local producers, such as introducing the biological technology to local industries and expanding their global market sales.
Together, all Thai economic sectors must maneuver the country towards the right direction. The ghost of 1997 crisis has haunted Thailand, stopped it from opening up to the Western partners and caged it in the comfort zone called “trading with Asian countries.” However, experience is the mother of wisdom. Thailand must not be afraid to change. Only through the U.S.-Thai trade can Thailand eliminate obstacles, inject innovation, and release its true potential. Only through these new policies can this South East Asian tiger awaken from sleep.