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3 May 2007

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US-Thailand Trade: Impacts after Thailand Placed on ‘PWL’(Business Brief No.1984)

In the US government's announcement on IP (intellectual property) protection with trade partners shown in their ‘Special 301' report disseminated in April 30, 2007, Thailand's IP status was downgraded from a former ‘WL' (Watch List) status cautioned since 1995 to the ‘PWL' (Priority Watch List) on which 12 countries are also currently included, i.e., China, Russia, Argentina, Chile, Egypt, India, Israel, Lebanon, Thailand, Turkey, Ukraine, and Venezuela. Notably, Thailand is the only one among the twelve countries that they have on their PWL that had to be downgraded from the ‘WL', and is also the only country in ASEAN that has been added to the ‘PWL'.
It is believed that Thailand's action to proceed with compulsory licensing of three drugs, including 2 AIDS palliatives and 1 medication used to treat coronary thrombosis, may have been a significant point that the US had considered before downgrading Thailand's IP protection status.
KASIKORN RESEARCH CENTER (KResearch) holds the view that the US downgrade of Thailand's IP status this year from the former ‘WL' that we had been on for more than 10 years since 1995 to the ‘PWL' may impact Thailand's trade and investment as follows:
Impact on Thailand's Image toward Investment
The US downgrade of Thailand's IP status not only affects Thailand's image toward investment by American businesses, but also harms the view of other foreign investors. Specifically, if comparing Thailand with other countries in ASEAN where violations of intellectual property rights are less serious than Thailand, this downgrade may cause foreign businesses who produce patented or copyrighted goods (or have registered trademarks) to invest in other countries instead. In addition, Thailand's legal amendments are still unclear, i.e., the Foreign Business Act B.E.2542 (A.D.1999) and the Retail Business Act. Therefore, these factors may cause foreign investors to reassess investments in Thailand this year.
Impact on Thai Exports to the USA
The fact that the USA has reassessed the intellectual property protection status of Thailand to a lower level this year may influence revisions in the granting of their Generalized System of Preferences (GSP) to Thai exports. The US has established that protection of intellectual property rights as one of their more important conditions for consideration in granting GSP privileges to developing and undeveloped countries, including Thailand. The US will announce the new GSP list on July 1, 2007. It is expected that Thai gems and ornaments made from precious metals will be deprived of the US' GSP benefits this year because they are within the scope of exclusion as regulated by the US in 2007. As a result, Thai gems and jewelry made from precious metals exported to USA would be levied import tariff at the most-favored nation rate (MFN rate) of 5.5 percent (in the past, these products were duty-free). Hence, the price of Thai exports such as gems and jewelry will be at a disadvantage to rivals in the US market, such as India and China, which also have lower labor and production costs than Thailand. In addition, they currently dominate larger market shares in gems and jewelry than Thailand in the US market.
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Disclaimer: This research paper is arranged for public information, which has been obtained from sources believed to be reliable. KResearch does not warrant its completeness, reliability or accuracy for commerce or fitness for a particular purpose. The information contained herein may be subject to change at any time without notice. Reliance upon any information contained herein shall be undertaken at a user's own risk. KResearch shall not be liable to any user, or anyone else for any damage occurring from the use of any content herein. Nothing in this research paper shall be counted as containing any advice, recommendation or opinion for decision making in business.

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