Thailand’s Tariff Revenues

Thailand’s average applied Most Favored Nation (MFN) tariff rate was 12.5% ad valorem in
2017. Approximately one-third of Thailand’s MFN tariff schedule involves duties of less than
5%, and 30% of tariff lines are MFN duty free, including chemicals, electronics, industrial
machinery, and paper. Thailand has bound all tariffs on agricultural products in the WTO, but
only around 70% of its tariff lines on industrial products are bound.

Thailand has bound its agricultural tariffs at an average of 39.5% ad valorem, compared with its
average applied MFN tariff on agricultural products of 25.1%. MFN duties on imported
processed food products range from 30% to 50%, which limits the ability of U.S. exporters of
such products to compete in the Thai market. Tariffs on meats, fresh fruits (including citrus
fruit and table grapes) and vegetables, fresh cheese, and pulses (such as dry peas, lentils, and
chickpeas) are similarly high.

Thailand’s average bound tariff for non-agricultural products is approximately 25.6%. Thailand
levies high tariffs on goods such as: 80% on motor vehicles, 60% on motorcycles and certain
clothing products, 54% to 60% on distilled spirits, and 30% on certain articles of plastic and
restaurant equipment. Further, the country charges tariffs of 10% to 30% on certain
audiovisual products, and applies a 10% tariff on most pharmaceutical products, including
products on the World Health Organization list of essential medicines.

Thailand maintains the same list of tariff-rate-quota (TRQ) from its commitments under World
Trade Organization (WTO) agreement on agriculture since 2004. Thailand imposes domestic
purchase requirements for several tariff-rate quota products, including nonfat dry milk,
soybeans, soybean meal, and fresh potatoes.

Reference:
International Trade Administration (2019). Thailand - Import Tariffs.
https://www.export.gov/apex/article2?id=Thailand-Import-Tariffs

Thailand’s Export Processing Zone

The Thai government created the EPZ scheme to improve the competitiveness of Thailand-
based manufacturers and encourage the exports of various industries by removing tariffs for
parts, materials, machines or components imported for use in the manufacturing process.
Thailand’s EPZ, currently known as “Free Zone”, is in charge of the Industrial Estate Authority of
Thailand (I-EA-T). The I-EA-T is in charge of the establishment of industrial estates throughout
the country. Moreover, the government declared its intention to set up EPZs inside the
industrial estates to improve the competitiveness of export goods. The first EPZ in Thailand was
established in 1982 at the Lat Krabang Industrial Estate. Up until now, Thailand is an export
reliant country with 65% of its GDP coming from international trade activities.

In 2007, Thailand changed the name (as well as regulations) of the EPZ to the Industrial Estate
Authority of Thailand (I-EA-T) Free Zone due to the adoption of the ASCM and to be in
accordance with the TRIMs agreement at the conclusion of the WTO Uruguay round. According
to the Customs Department of Thailand, the Free Zone scheme is intended to improve the
competitiveness of Thailand-based manufacturers and encourage exports by removing tariffs
for parts, materials, machinery or components imported for use in the manufacturing process.
At the same time, Thailand can benefit from the use of Thai labor, services and inputs.

Reference:
Vasikasin, P. (2016). Impact Assessment of Export Processing Zone on Thailand’s Gem and
Jewelry Industry Case Study: Gemopolis Free Zone

Thailand’s Trade
Extending its worse year-on-year contraction since the 2009 global financial crisis, export
posted a 23.2% YoY fall in June, following 22.5% fall in the previous month and steeper than the
consensus of a 15.0% YoY fall. However, the negative print is mainly down to the base effect,
while the monthly export level of $16.44 billion was marginally higher than $16.28 billion in
May. As for imports, the base effect was rather favorable and together with a 9% month-on-
month bounce it produced a much smaller year-on-year fall by 18.1% than 34.3% fall in May
2020.

By-products, key export drivers – electronics and vehicles and parts posted strong month-on-
month rebounds in June, although yearly growth rates stayed negative for both. Agriculture and
jewellery were the weak spots with declines on monthly as well as yearly basis. On the imports
side, it was an across-the-board improvement in fuels, capital goods, raw materials and
consumer goods.

Month-on-month recovery in both exports and imports is a hopeful sign of the current trade
slump being close to its bottom. But the recovery is nowhere in sight just yet given that
worsening Covid-19 situation globally foreshadows a prolonged weak export demand ahead.

Adding to the length of recovery is drought across the country that’s hurting the agriculture
production and exports. Earlier this week the Thai Rice Exporters Association cut its export
target by 13% to 6.5 million tons, the lowest annual volume in two decades that could displace
Thailand from its position as the world second-biggest rice exporter.

The trade surplus narrowed to $1.6 billion in June from $2.7 billion in May 2020, bringing the
surplus in the first half of 2020 to $10.7 billion, or $6.2 billion wider than a year ago. At this
rate, we would see the annual trade surplus this year rising to about $16 billion from $9.6
billion in 2019.

Even so, our forecast of a near-halving of the current surplus this year to about $20 billion
remains on track. This is because net services outflow due to weak tourism offset wide
merchandise trade surplus. Still, close to 4% of GDP, it will remain a relatively large current
surplus among Asian peers.
The persistently large external trade surpluses support currency appreciation. Authorities have
been cranking up the volume of their rhetoric on the strong Thai baht hurting the recovery.
They should be relieved to see the currency has shifted to be Asia’s weakest currency in July
with 2.5% month-to-date depreciation after strong gains in May-June 2020.

Reference:
Sakpal, P. (2020). Thailand’s trade slump may have troughed. ING Bank Economic and Financial
Analysis Division