Recalibrating Thai-US ties (once again)

Bangkok Post

6 days ago

It is about time for Thailand to discard the two-century-old euphemism about enduring Thai-US ties and be brutally realistic. It is about time for a blunt question -- what can Thailand offer to reduce its soaring trade surplus of US$43 billion with the US? If Thai negotiators don't come up with any interesting offers, then the tariff for exported goods from Thailand to the US will be 36% across the board after Aug 1.
Currently, negotiations between Washington and the government are progressing. The outcome, expected next month, will have far-reaching impacts beyond trade and the economy. The deal will directly affect the stability of this weak government. From a broader perspective, the tariff figure will serve as a barometer of future Thai-US relations in this era of geopolitical turbulence.
It is worth noting that Deputy Prime Minister and Finance Minister Pichai Chunhavajira has instructed related ministries to prepare the Thai agricultural and industrial sectors for the impact of US tariffs, but he has yet to explain why and how. Mr Pichai was quoted as saying that local industry has to upgrade and realign itself with global trends and become more competitive.
Mr Pichai revealed that the US plans to require a local content requirement in products sold in the US of as much as 80% to prevent transhipped goods from entering its market under false rules of origin. He reiterated that Thailand must proactively negotiate to protect mutual and sustainable interests, while urgently addressing three key issues.
First, Thailand must present concrete and enforceable measures to reduce the trade surplus. Secondly, the country needs to provide broader market access to US goods. Third, Thailand needs to remove non-tariff barriers (NTBs). Among Asean members, Thailand has the toughest sanitary and phytosanitary (SPS) measures and other regulatory frameworks intended to protect consumers, agriculture and the environment.
Under the Trump administration, the US is pursuing a unilateral approach under what it calls "US preferential treatment". If countries refuse the terms, they may face steep tariffs and other retaliatory measures. Mr Pichai also admitted that a non-disclosure agreement (NDA) is already in place, limiting the release of some information pertaining to the deals. Amid the secrecy, the finance minister assured the public that negotiations are guided by long-term shared benefits and regional balance. He did not elaborate how.
President Donald Trump's reciprocal tariffs are indeed perceived as a plan to rein in the ripple effect of the China Plus One supply chain model.
China Plus One is a supply chain diversification strategy that emerged in 2014 and 2015 due to the escalating cost of labour in China, leading multinational companies to seek alternative manufacturing and sourcing options in other Asian countries.
Throughout the Biden administration, the so-called China plus one formula has been beneficial to key Asean members such as Vietnam, Malaysia, Thailand and Indonesia, where investors opened their factories after pulling out from China. With Mr Trump's team in charge, Mr Pichai admitted that transhipment, where products are rerouted through third countries to evade tariffs, is the most difficult as it is closely linked to local content rules.
Previously, the transhipment threshold was only 40 per cent, but this could rise to 60-80%, forcing countries to redefine what counts as actually Made-in-Thailand materials. According to Mr Pichai, countries with low levels of local manufacturing, such as those with production bases just starting up, will be hardest hit regardless of the tariff rate. For instance, Vietnam, which has low local content, is facing high transhipment tariffs.
In the case of Thailand, the country could also suffer due to the downturn in authentic local manufacturers and the influx of investment and transhipments from China. In short, despite Thailand's export volume surging, the share of local manufacturing production in exports remains unchanged.
The real challenge for Thai industry is to boost its local capacity and improve the level of local content. If not, Thai exporters will face higher tariffs on transhipped goods.
Mr Pichai admitted that the US wants Thailand to open its market and remove NTBs on agricultural products and meat, especially pork and offal. One new feature in the negotiations is in the energy sector. Thailand has offered to purchase natural gas and shale oil from the US, which have a lower price than on the global market. In this respect, Thailand is also considering more energy-related investments in the US.
Mr Pichai defended Thailand's offer of zero tariffs for certain US products, as other countries, including China, have already been given the same privileges under existing FTAs. Many Thai exports under existing FTAs are not competitive or undersupplied domestically. "This offer is not being made to just any country-- it is unique to the US," he said, adding the deal could empower farmers and boost Thailand's competitiveness, serving as a platform for national reform.
Once the tariff debacle has been concluded, it should be Thailand's turn to renegotiate its strategic relationship with the US. In the post-Cold War era, the US has benefited tremendously from Thailand's strategic values and locations. As an ally, Thailand has hosted the Cobra Gold military exercises nonstop for 44 consecutive years. It remains one of the largest multinational training operations in the world, especially for the American armed forces.
More than the US Indo-Pacific Command would like to admit, this annual exercise provides the opportunity for the US to simulate "command and control" operations involving over 30 participating nations. It also promotes interoperability of foreign troops, whose countries procured American weapons. On paper, Cobra Gold positions Thailand as a central node in regional security. But in reality, Thailand has only benefited marginally. It is time to push for a new arrangement that aligns with the country's security needs. At the very least, there should be more Thai-led planning and command roles.
Thailand has been a non-Nato treaty ally since 2003, without consequential benefits. The country does not enjoy defence guarantees, robust arms transfers or significant technology sharing. The US side often complains that Thailand is too close to China, which it has denied. Deep down, Washington does not trust Bangkok's alliance. Some glaring evidence is the Royal Thai Air Force's need to purchase Swedish Gripen jets, after the US refused to sell F-35 jet fighters, citing concerns about Thailand's ability to handle such advanced aircraft and its relationship with China.
President Trump's new term is a different game. In engaging with Mr Trump, Thailand must be more assertive in demanding greater technological sharing, joint capability building, and access to US strategic platforms. For instance, Thailand should have been a recipient of US space technology and cyber surveillance, which are not forthcoming. The US halted its international military education and training program for Thailand a decade ago. The programme used to be a primer for the person-to-person network among the Thai-US top brass. Now, this bilateral link is waning.
In future Thai-US strategic meetings, Thailand must not be shy or submissive. The US has been pressing the rest of the world for its own economic stability at the peril of allies and friends, and Thailand has a track record of yielding to US demands on defence and even made economic concessions. Now it is time for a new red line and a new game for Thailand to redefine its security cooperation with the US, aligning the ties with Thailand's strategic autonomy. Perhaps, the next question is what the Trump administration wants from security engagement with Thailand.