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US to halt preferential treatment for $1.3bn of Thai goods

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Via Financial Times

The Trump administration has said it will suspend preferential trade treatment for $1.3bn of goods from Thailand, including all seafood products, after accusing the south-east Asian nation of falling short on workers’ rights.

The move against Bangkok came in a statement on Friday by the office of Robert Lighthizer, the US trade representative, which also said that a very small trade benefit to Ukraine, worth $12m, was being restored at a sensitive time in the impeachment investigation targeting Mr Trump because of his dealings with Kiev.

The US move on Thailand comes as the kingdom’s economy is slowing and the strong baht is weighing on exports. The Thai foreign ministry said it was consulting on the measures with the ministry of commerce.

The country has faced criticism from the US and EU for its tolerance of human trafficking, forced labour, and modern-day slavery, notably in the seafood and fishing industries — practices Thai authorities and companies have since taken steps to combat.

While the Trump administration has focused its punitive actions on trade primarily on China, it has also put Beijing’s smaller south-east Asian neighbours on notice that they should not seek to profit in ways it sees as unfair from the trade war.

Mr Lighthizer’s crackdown on Thailand, and partial reprieve for Ukraine, were part of a series of actions taken by Washington to amend its so-called “generalised system of preferences”, which offers tariff-free access to the US market for certain goods from developing countries.

In the same announcement, Mr Lighthizer’s office said it was placing the preferential trade treatment of goods from South Africa and Azerbaijan under review, based on concerns about intellectual property and workers rights respectively.

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The decision to halt the preferential treatment for $1.3bn of Thai products represents a warning for south-east Asian countries that Washington will not necessarily go easy on them on trade even as it focuses all of its energy in confronting China.

It is also a cautionary tale for US importers and multinational companies who are shifting their supply chains out of China to other south-east Asian nations in the hope of being shielded from Mr Trump’s tariffs, that they might not face a more predictable environment.

The move — which will take effect in six months, allowing some time for negotiation — follows a petition by the AFL-CIO, the largest US trade union federation.

Mr Lighthizer has been seeking the support of labour unions in his bid to get congressional approval of USMCA, the revised Nafta deal signed with Canada and Mexico last year, but so far failed to clinch their backing amid concerns about labour standards and enforcement in the agreement.

The restoration of some trade benefits for Ukraine, even if extremely small in scale, came as all US policies towards Kiev are facing heavy scrutiny because of the impeachment inquiry against Mr Trump sparked by allegations that he withheld aid to force the country to investigate Hunter Biden, the son of vice-president Joe Biden.

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