The development, over the weekend, to postpone the decision on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) must be looked at both from a geopolitical point of view and the real concern of vested interests in Thailand who question the road to increased GDP at any cost and uniform governance standards. These are questions that have also been belatedly asked in both the United States and Europe where despite initially representing populist sentiment, valid issues and mistakes have been identified and accepted by many observers.
Thailand is ready to ink a new free trade pact with Hong Kong, a move which will draw the kingdom even closer to China and Beijing in terms of trade. The announcement was made last Thursday as well as confirmation that Minister of Commerce Jurin Laksanawisit has been invited to address the 6th annual Chinese Belt and Road Summit being held in the territory in September. The move comes as disquiet is rising about Hong Kong’s future after the US moved last year to withdraw its special status following the enacting of a special security law and significant reversals of the ‘one country two systems’ policy commitment from Chinese authorities in Beijing in addition to a faltering economy. This commitment from China was seen as a guarantor of the civil rights of Hong Kongers when the world trading hub passed from British sovereignty in 1997. It also coincides with Thailand’s announcement last weekend that it was postponing a decision on joining the CPTPP or Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a trade pact supported by many in the Thai business community but also opposed by activist groups and which would represent a step away from China’s influence.
On Thursday last, the Minister of Commerce, Jurin Laksanawisit, announced that Thailand was ready to sign a Free Trade pact with Hong Kong.
The move follows a visit by Hong Kong Chief Executive Carrie Lamb to Bangkok In November 2019 and at a time when the international free trading and financial hub is facing growing questions due to political changes that have brought it closer to direct rule from Beijing with the passing of the Hong Kong security law last year.
The draconian new law criminalised activity deemed by Beijing as subversive or threatening to Chinese rule over the former British colony whose sovereignty was ceded by the United Kingdom in 1997 on the understanding that Hong Kong would remain autonomous under a ‘one country, two systems’ principle until at least 2047.
Hong Kong is home to tens of thousands of US nationals and firms active in the international services sector linked with global finance
This led to counter moves last year by the United States under the Trump administration and continued by new US Secretary of State, Antony Blinken, to rescind special privileges to Hong Kong which is home to 85,000 US nationals and thousands of US firms, especially in the legal, banking and internationals services sector.
The Ministry of Commerce, on Thursday, also revealed that Hong Kong has shown an interest in joining the Regional Comprehensive Economic Partnership (RCEP), one of the world’s biggest free-trade pacts which includes 13 countries as well as Thailand and China.
The news came after a meeting between the Minister of Commerce and his Hong Kong counterpart Edward Yau.
Trade with Hong Kong down since the visit of unpopular Chief Executive Carrie Lamb to Bangkok in 2019 at the outset of free trade deal talks
The ministry published details showing Thailand’s trade with Hong Kong was worth ฿413 billion last year.
This was down from the ฿455 billion quoted by officials in 2019 when the deeply unpopular Ms Lamb visited Bangkok at the invitation of then Deputy Prime Minister, Somkid Jatusripitak, and met Prime Minister Prayut Chan ocha at Government House in November of that year.
This was at the height of violent protests against her tenure as Hong Kong’s chief executive and civil unrest in the territory against Chinese rule.
At the time, it was envisaged that negotiations for a Free Trade pact between Thailand and Hong Kong would commence in 2020 and that the deal would be in operation by 2023.
Hong Kong’s economy contracted by 7.3% in 2020 and the first quarter of 2021 as public distrust grows
The Covid-19 pandemic combined with civil unrest and disturbances has seen the former British colony’s economy in 2020 and so far in 2021 contract by a substantial 7.3%.
The current tension and deep mistrust between the territory’s Chinese controlled government and the majority of the population because of the new security law and a crackdown on pro-democracy dissent, is currently being blamed for hindering vaccination plans in Hong Kong where, despite a stockpile of vaccines and a network of centres with a choice of free vaccines between the Sinovac jab and the Pfizer BioNTech product, only 11.6% of the population have so far taken up the offer according to research by Bloomberg, the New York-based news agency.
Still a world trading power, 86% of its economy in the tertiary or higher added value activity sector
Nevertheless, the trading city is still the tenth-largest trading power in the world and the fifth largest financial centre.
The territory’s economy is driven primarily by tertiary activities such as international trading and the provision of services which account for 86% of its GDP while the manufacturing sector accounts for 6.5% but employs 11.5% of the workforce.
The territory has seen growing inequality problems as limited property space has zoomed in value with poor, uneducated workers as well as those on lower salaries finding it impossible to earn enough money to pay for even minimal housing.
Hong Kong remains, nonetheless, a magnet for larger firms and corporations around the world including many in Thailand and the wider Asian region, as a centre of corporate governance and services with over 900,000 companies registered there while the population is just over 7.45 million.
Promising market for Thai agricultural produce as well as Thailand’s skilled and talented creative industry
On Thursday last, Thai officials highlighted the potential for the exports of Thai agriculture produce to Hong Kong where concern over food safety from mainland China is a pressing issue.
They highlighted a 345% increase in the kingdom’s exports of frozen pork, a 400% surge in mango exports and a 216% increase in the sale of soap and cosmetics to Hong Kong as harbingers of future success for a free trade pact.
It is also known that there are opportunities for Thailand’s innovative and highly regarded film and animation industry to work with Hong Kong firms who have a global reach and access to world networks.
Bangkok’s film and animation sector is increasingly recognised as both highly talented and skilled with many international advertising firms availing of its services including for the production of short films, advertising commercials and other creative projects.
Thai Minister of Commerce to address Chinese Belt and Road summit in Hong Kong in September
The Minister of Commerce, Mr Jurin, has been invited by the Hong Kong delegation to attend and give an address at the 6th Belt and Road Summit from September 13th to 14th to be held at the Hong Kong Convention and Exhibition Centre in the city.
The Chinese Belt and Road initiative, promoted by Beijing, is targeted at investment in up to 70 countries but is increasingly being viewed with scepticism and suspicion by western powers as an attempt not just to project trade and development with China but also its political and military power across the world.
Wealthy, senior Hong Kong tourists to visit Thailand as part of ‘travel bubble’ initiatives says the ministry
It was also highlighted on Thursday that Hong Kong could become another key point of origin for foreign tourists to Thailand particularly among the well off senior segment of the territory’s population who may avail of Thailand’s health and wellness industry.
Mr Jurin said that ‘travel bubbles’ were being discussed with Hong Kong, Australia, New Zealand and Singapore at this time.
Thailand’s links with Hong Kong must be seen also in the context of China’s plans for its southern provinces and what it terms its Greater Bay Area
The forging of a closer trade relationship between Thailand and Hong Kong is also linked to efforts by China to create a high-powered trade area focussed on what China refers to as the Greater Bay Area.
Thailand and Hong Kong plot closer economic ties and free trade pact as the city is mired in political crisis
This includes 9 Chinese cities and provinces in the southern region of the communist country as well as Hong Kong and Macau, another former colony which was returned to China from Portugal in 1999.
Thailand postpones decision on CPTPP membership
News of the proposed finalisation of the pact between Thailand and Hong Kong was announced at the end of the week just as the Thai International Economic Policy Committee announced that it would take another 50 days to consider if Thailand should apply for membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an alternative pan Asian trade pact which does not include China.
The key committee, which operates from the Finance Ministry, is chaired by Minister of Foreign Affairs Don Pramudwinai.
In February, it also asked for a three-month extension to further consider the matter after it received a report from the House of Representatives which was asked to examine the trade agreement in May 2020 in the light of public concerns raised by activist groups.
The CPTPP had included the United States until it withdrew from the trade pact in one of then US President Trump’s first acts after coming to power in 2017.
Public opinion in Thailand divided sharply over the more demanding trade pact which has long-term implications for the kingdom and its economy
Public opinion in Thailand is divided on the pact which is strongly supported by the business sector but just as strongly opposed by activist groups and representatives of a range of specific interests.
The CPTPP or Comprehensive and Progressive Agreement for Trans-Pacific Partnership is known to be more demanding in its requirements than the Regional Comprehensive Economic Partnership (RCEP).
Its remit includes social considerations, worker’s rights protection, the protection of intellectual property rights and limits on state subsidies to industry.
It comprises of Asian countries and those on the Pacific rim including Australia and South American countries. It also includes Canada as a member.
The United Kingdom submitted a formal application for membership on the 1st of February 2021.
It is thought that there may be differences of opinion within the government coalition on the issue which has been seen as a watershed decision on which way Thailand will develop not only economically but in social terms in the decades ahead.
Decision not to join the CPTPP will leave Thailand closer to China and business leaders fear it may signal an inability to progress and develop economically
A decision not to join the CPTPP will, whether intentional or not, signal another shift towards China’s orbit and away from creating a more competitive and liberal economy with deeper access to world markets.
The current GDP of existing member states represents 13.40% of the world’s output.
Business people in Thailand fear that failure to ‘grasp the nettle’ now because of sectoral and vested interests will mean that Thailand will remain unprepared to face difficult and even unpopular change which is required to move the country forward and that this will, ultimately, stymie economic progress.
Japan, the largest investor in the kingdom, has also been urging Thailand to join the pact.
Those who opposed the CPTPP pact have valid grounds outside geopolitical considerations
On the other hand, activists and those opposed to the pact argue that not all progress in the name of GDP growth is good and that many sectors unique to Thailand should be protected.
These arguments hold more weight internationally since the growth of populist movements in western countries which ultimately led to the United States withdrawing from the plan in favour of more bilateral trade deals with individual countries rather than complicated and dangerous multi lateral trade pacts which can often have unforeseen consequences.
Many now accept that such pacts, in both the United States and Europe, have, in the past, got things wrong, despite their success in boosting growth and efficiency of markets, something that decades ago would have been considered heresy by economic planners and thinkers.
A move to postpone a decision in principle by Thailand was made in April by the government committee and this was endorsed when it came before the cabinet this week.
Foreign Minister says a decision can now be expected in June which must then go to cabinet for approval
Minister of Foreign Affairs Don Pramudwinai explained the outcome.
‘In the last 90 days, we had three meetings, but when it came to the final meeting on April 22, we saw that there were still many points that had not been discussed, and that it is necessary to consult with more of the sectors involved,’ he said. ‘So, we’ve asked for another 50 days to do more research for a more well-rounded and comprehensive decision.’
A final decision on the matter will be made by the committee on June 25th which will then be brought before the cabinet for final approval.
Even if the decision is made to go ahead, there will follow years of negotiations to allow for an agreement between Thailand and the other current 11 nations of the pact which offers a potential market of 500 million consumers.
Thailand will almost certainly be looking for opt-outs and delayed implementation on a range of provisions that may or may be agreed with other member states.
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Further reading:
RCEP deal agreed as India opts out – busy Bangkok ASEAN summit concludes on a low key
Chinese FM to visit Thailand in a Covid battered world of raised tensions and potential conflict
Prime Minister indicates that the cabinet reshuffle will be complete very shortly with no problem
Thailand’s economy has become dependent on government expenditure to stay above water
Thailand and US aim for a new more ‘proactive’ trading relationship as ambassador meets Prayuth
Rice price spike but drought conditions to recede – security concern for the Mekong river
US suspension of Thai preferential trade partner status part of Trump’s ongoing trade war
