TTB Analytics believes that the competition of Thai exports in the global market will become more challenging in the future, both from the dimension of major export products with more competitors and the dimension of stricter global trade regulations, especially industries that rely heavily on exports and imports from China, including industries that have significantly increased imports from China in the past, accounting for almost 70% of all Thai entrepreneurs. Therefore, Thai entrepreneurs should quickly adjust both their trade strategies and accelerate product development in order to be in line with the rapidly changing global trade context.
– The competitiveness of Thai exports has declined in every dimension.
ttb analytics stated that in the past few decades, the export sector has become increasingly important to the Thai economy. However, what is interesting is that the market share of Thai exports in the global market has hardly changed over the past 3 decades, as reflected by the proportion of Thai
exports to the global market of approximately 1% in 1993 and increasing to only 1.2% in 2023. Meanwhile, the role of Thailand’s major export products, which have been considered “Product Champions” for decades, has continued to decline and is likely to become more difficult to compete due to 2 factors:
Low value-added export products cannot expand to new markets. Although agricultural products and processed foods are gaining more market share, they are concentrated in only 2-3 markets, which together account for 30-90% of the export value of this product group, especially the US and Chinese markets. This is consistent with Thailand’s trade surplus with both markets in many product groups that have been continuously increasing, such as rubber products, fruits, processed meat, rice, and cassava products. These products are low value-added products with fluctuations in both price and volume. Meanwhile, competitors are increasingly competing for Thailand’s market share by accelerating the development of agricult
ural product quality, such as rice, vegetables, and fruits.
Export products with higher added value are difficult to compete with and are at risk of being easily replaced, such as electronic products and electrical appliances, such as air conditioners, refrigerators, semiconductors, circuit boards, and hard disk drives (HDDs). Although Thailand can export to many more markets, Thailand’s share in the world market tends to decrease due to the low added value of the products due to the complexity of low production technology.
For example, Thailand’s share of the refrigerator export market has decreased from 4.7% in 2013 to only 3.3%. Similarly, integrated circuits (ICs) and printed circuit boards (PCBs) are facing the same situation. In addition, major competitors such as Vietnam and Malaysia have the advantage of being production bases for electronic products, including mobile phones and important communication devices for world-class manufacturers.
In the past, the Thai export sector may have benefited fro
m the trade war between the United States and China by increasing exports to the United States, but it was not enough to significantly revive economic activities. According to the figures, Thai exports to the US market grew by an average of 11.2% over the past 5 years. However, when compared to exports to other markets, which grew by only 2.1%, Thailand’s trade surplus with the US almost doubled from US$34 billion during 2015-2017 to US$87 billion during 2021-2023.
However, Thailand has not been able to compensate for the widening trade deficit with China. This is because the increase in Thai products exported to the US market is partly due to the diversion of export routes by Chinese manufacturers to use Thailand as a transit point for exports to the US (Trade Diversion), which may not have a positive effect on the Thai economy. This is reflected in the industrial production index, which has continued to contract for 7 consecutive quarters since Q4/65.
At the same time, Thailand faces increased risks from
additional anti-dumping (AD) and countervailing (CVD) measures from the US, such as solar panels, steel and aluminum, and tires.
Thailand is already at a disadvantage in price competition due to trade agreements with major trading partners of neighboring countries, resulting in Thailand’s average weighted tariff rate for all types of products being as high as 3.49%-7.12%, compared to Vietnam’s 2.74-5.85% and Malaysia’s 1.89-4.67%. Moreover, the current international trade measures, which have become almost 6 times more stringent over the past 10 years, have become a significant obstacle for Thai entrepreneurs to enter the market, whether they are non-tariff measures (NTM), technical measures (TBT) related to the environment and sustainability, health, human rights, as well as measures specific to certain types of products, such as the EU Deforestation Regulation (EUDR), Carbon Border Adjustment Mechanism (CBAM), and Sanitary and Phytosanitary Measures (SPS) for Chinese agricultural products, etc.
Currently,
NTM measures applied to Thai exports cover approximately 11.4% of the export value, especially food products where Thailand has a competitive advantage, covering 28.2% of the export value in the food category, or as many as 205 products. Amidst Thailand’s competitiveness on the world stage that has declined in all dimensions, including more stringent international trade measures, coupled with trade barriers between the United States and China that are expected to continue amid China’s economic slowdown, all of which will further impact the competitiveness of Thai entrepreneurs, making them worse.
ttb analytics has analyzed the risks (Exposure) of entrepreneurs in each industry according to the level of dependence on foreign markets, considering the proportion of total exports and the proportion of imports from China compared to total sales, which can be divided into 4 groups as follows:
– Group 1: High reliance on exports and high imports from China (High Exposure), accounting for 16% of all Thai entreprene
urs, from a high proportion of income from exports and a high proportion of imports from China, including the electronics, electrical appliances, computers and components, and fashion products industries. This group is highly vulnerable because most of them are OEMs, which import raw materials or intermediate goods from many countries, including China, to enter the production/assembly process or may use Thailand as a transit point to export to third countries.
– Group 2: Low reliance on exports but high imports from China (High Exposure), accounting for 12% of all Thai entrepreneurs, from a high proportion of imports from China, but the proportion of income from exports is still relatively low compared to total sales, including the steel, furniture and household goods, and machinery industries, which are also highly vulnerable because they mainly import goods from China to support domestic industries. As a result, some Chinese manufacturers have turned to investing in businesses in Thailand and directly impo
rting goods from China to sell themselves. This has affected domestic manufacturers and traders throughout the production chain from upstream to downstream.
– Group 3: Moderately dependent on exports and imports from China (Medium Exposure), accounting for 40% of all Thai entrepreneurs. From a moderate proportion of imports from China and/or a moderate proportion of export revenue, but imports from China have begun to grow rapidly, contrary to the country’s capacity utilization rate, which has significantly decreased recently. For example, in the chemical, packaging, automotive and parts industries, if they cannot further develop their products or expand their markets both domestically and internationally, it is expected that this group will be affected by both trade patterns and competition from imported products from China, which will intensify in the future.
– Group 4: Low dependence on exports and imports from China (Low Exposure), accounting for 32% of all Thai entrepreneurs. It is expected that this g
roup will be affected to a limited extent, as it is an industry that mainly uses domestic raw materials to support domestic economic activities, such as the food, tourism, and medical industries.
Source: Thai News Agency