Thought this Was Easy? U.S.-Thailand Free Trade Agreement

20 Pages Posted: 5 Apr 2010

See all articles by Peter Marcel Debaere

Peter Marcel Debaere

University of Virginia - Darden School of Business; Centre for Economic Policy Research (CEPR)

Christine Davies

University of Virginia - Darden School of Business

Abstract

This case describes and analyzes the negotiations surrounding the U.S.–Thailand free trade agreement (FTA) that never materialized. The case offers an excellent opportunity to discuss the complexities of trade negotiations, the welfare analyses of FTAs (with trade diversion and creation), and the growth of FTAs and customs unions (CUs) as opposed to multilateral trade liberalizations.

Excerpt

UVA-G-0621

August 14, 2009

Thought This Was Easy? U.S.–Thailand Free Trade Agreement

Chin Som raised his megaphone to his mouth as he marched past the U.S. Embassy in Bangkok, Thailand, on June 20, 2004. “No trade is good trade!” he shouted. Som, a farmer from northeast Thailand's province of Chiang Mai, had seen the price for which he was able to sell his garlic crop tumble from (Thai baht) THB27 per kilogram to THB19 per kilogram by the end of 2004. He figured this was due to competition from Chinese garlic imports that had begun to flood into Thailand due to an agricultural trade promotion agreement between Thailand and China that was negotiated at the end of 2003 (Exhibit 1). Som had been recruited by the Thai Farmers Cooperative to join its protest in Bangkok that day against the free trade agreement (FTA) that was currently being negotiated between the United States and Thailand. He had ridden in the back of an open-air pickup truck all night with 25 other Chiang Mai farmers to do so, meeting up with large groups of protesters from other groups opposed to the FTA, such as Doctors Without Borders. The People's Network Against Free Trade Agreements, which claimed to represent the 600,000 Thais living with HIV/AIDS, was also against the free trade agreement; it believed antiretroviral drug prices would skyrocket if the agreement were enacted.

Meanwhile, Stephen Cook watched the protest through his office window at the U.S. Embassy. Cook, a young U.S. diplomat who was currently serving his first tour as an economic officer, was baffled by the anti-FTA sentiment that had been brewing for the past several weeks. In 2004, the United States was Thailand's largest trade partner, and Thailand was the United States' 18th-largest trading partner; (U.S. dollars) USD19.7 billion in two-way trade was reported in 2002. A free trade agreement would allow Thailand to become a “preferred supplier” to the United States, in a sense, and create hundreds of jobs and support thousands of Thais in the process. Sure, there would be increased domestic competition from U.S.-made goods, but wouldn't that make Thai industry stronger and better in the long run? Cook could not figure out what all the fuss was about.

. . .

Keywords: international trade, customs union, free trade area, protectionism

Suggested Citation

Debaere, Peter Marcel and Davies, Christine, Thought this Was Easy? U.S.-Thailand Free Trade Agreement. Darden Case No. UVA-G-0621, Available at SSRN: https://ssrn.com/abstract=1583771

Peter Marcel Debaere (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://www.darden.virginia.edu/html/direc_detail.aspx?styleid=2&id=5794

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Christine Davies

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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