IN FOCUS
04 November 2019
EIC views that GSP privilege cuts will hurt export products with high GSP dependency, though impact on overall exports remains limited.
Unlike in April 2017, the cut in bond issuance in early July 2019 was not officially announced by BOT as a program
On October 25, 2019, the office of the U.S. Trade Representative (USTR) announced a planned suspension of GSP trade preference on Thai exports valued at USD 1.3 billion due to Thailand’s failure to adequately provide internationally-recognized worker rights.
Products that will be disqualified from GSP privileges account for 4.1% of total Thai exports to the US or equivalent to only 0.5% of total Thai exports. Key export products that are at high risk of being affected (based on the proportion of GSP privilege used to GSP granted and/or additional tariff that will incur) are sanitary ware, plastic in primary form, some food (bean products, pasta, crab meat), and jewelry (gold necklaces and gemstones).
If the GSP privileges are eliminated, disqualified products will be taxed an additional 3.9% on average (weighted effective tax rate). EIC estimates that the impact of the privilege cut is limited to approximately 0.01% of the total value of Thai exports. Although impact of GSP suspension is limited, sluggish global economic growth and strengthening baht will suppress businesses that rely on GSP privileges, especially small businesses with lower adjustment potential.