TAX AND LEGAL

CPTPP Revisited: Will Thailand still Join?

Tanva Mahitivanichcha Tanva Mahitivanichcha

The Story Thus Far

Negotiations for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) concluded in March 2018 with 11 member nations signing off on the free trade agreement. Following the signing of the CPTPP, each member must then modify its domestic procedures to follow the agreement.

The CPTPP entered into force on 30 December 2018 with 6 members having completed ratification of the agreement.[1] As of January 2019, 7 members including Australia, Canada, Japan, Mexico, New Zealand, Singapore and Vietnam ratified the CPTPP. Only 4 members, Brunei, Chile, Malaysia and Peru, are still in the process of ratifying the agreement.

When the CPTPP was concluded, Thailand expressed an interest in joining the free trade bloc.[2]  Since then, its Ministry of Commerce has conducted a study on the impact of the CPTPP, and the country continued moving forward with the intention of participating in the free trade agreement.[3]  Joining the CPTPP seemed inevitable.  Even as the country moved into its first general election in 5 years, Deputy Prime Minister Somkid Jatusripitak affirmed the government’s intention to seek CPTPP membership.[4]  However, merely days before Thailand’s recent national election, the government suspended its application to join the CPTPP.[5] 

The decision whether Thailand will participate in the CPTPP will now rest with the new government.

 

Joining the CPTPP: Possible but Uncertain

The Thai political landscape remains in flux following a tight election race.  Nonetheless, it is apparent that the next government will be a coalition of political parties – each with diverging political and economic stances.  In such an environment, the government’s appetite to join a free trade agreement will be diminished.  A coalition leader might find little value in expending “political credits” to persuade protectionist coalition members to vote in favour of the country’s participation in the CPTPP.  Maintaining the status quo might be the path of least resistance and the least political stake.

Whether Thailand will join the CPTPP could also depend on external factors.  Since 2018, other nations in addition to Thailand have expressed interest in the CPTPP.  These include South Korea, the world’s 11th largest economy, and Indonesia, the world’s 16th largest economy as well as the 4th largest population.  If these two countries join the CPTPP, all major economies – with the exception of China – on the Asian side of the Asia Pacific rim would be a member of this regional trade bloc.  In such a case, the Thai government should find it more compelling and economically expedient to sign up for the CPTPP; Thailand would want to have the same access to the Canadian and Mexican markets offered by the CPTPP as its other ASEAN partners.

 

Keeping an Eye Out for the Wild Cards

As mentioned in our prior articles on the CPTPP, the wild card is the possibility that the United States might step back into the CPTPP. Since 2018, another wild card has emerged in the form of the United Kingdom.  With the uncertainty of Brexit, the UK government had publicly issued statements on its participation in the CPTPP as a means to hedge against adverse post-Brexit economic effects.[6] 

While the probability of the United Kingdom’s participation in the CPTPP may not be high, the “pivot of interest” in the Asia Pacific by both the United States and the United Kingdom underscores the economic and geo-political importance of the Asia Pacific trading bloc.  Thailand, with its strategic location in South East Asia, must exercise foresight and vision in positioning itself economically within the region. Whether it ultimately makes sense for Thailand to join the CPTPP should be a decision based on economic rationale and not a matter of political convenience or expediency.

 

[1] See Pacific Forum, CPTPP: New Key Player in International Trade, 23 Jan 2019. 

[2] Refer to our series or articles beginning with The CPTPP: What is it and should Thailand join?

[3] See Bangkok Post, Somkid presses Commerce Ministry on CPTPP, 9 Feb 2019.

[4] See Bangkok Post, Thailand preparing CPTPP application, 2 Mar 2019.

[5] See The Mainichi, Thailand delays application to join trans-Pacific FTA, 19 Mar 2019.

[6] See GOV.UK, CPTPP will be a ‘force for good’ in promoting free trade, 30 Dec 2018.