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Fears over Obama's protectionism

Businessmen, fretting over the US president-elect's protectionist bent, which could lead to further delays in bilateral free trade talks, are hoping that the US' business policies would not change much in the year to come as the financial crisis at home is the most urgent challenge for the new leader.


They said yesterday that incoming president Barack Obama's economic policies would sweep clean bilateral free trade agreements with trading partners and also discourage American investment abroad not only Thailand but also in many other countries.

They pointed out that Obama's "Change" election campaign would turn the US to promoting domestic trade and investment to solve its "twin deficits". The new administration will have to shore up economic growth to rebuild the wealth of the American people and the United States.

They also worry that exports will fall victim to the protective policy, under which negotiations on free trade pacts will be reconsidered but multilateral trade negotiations will be favoured. They also hope to unlock the stalled World Trade Organisation trade talks.

Pramon Suthivong, chairman of the Board of Trade, admitted that Obama's economic policies would be different from those of the Bush government to some extent. While Obama may not adopt a total protectionist policy on trade, he may raise some barriers against emerging markets to protect local industries, Pramon said.

"Yet, as his main task is to restore the domestic economy, the US' policies towards other nations should remain unchanged for at least a year," he said

 However, orders of Thai products would drop in line with declining demand, he said

"On FTA? Now that the US and Thailand are not ready, this should be further stalled," he said.

Santi Vilassakdanont, chairman of the Federation of Thai Industries, noted that it's common knowledge that Democrats are protectionist, but he is hopeful that Thai exports would face no trouble given that they are not threatening employment in the US. He foresees more troubles for China and Japan, which rely more on US orders.

Though talks on the free trade agreement with Thailand would be reviewed by the Obama administration, Santi is optimistic that Obama would emphasise more on Asean.

Chutima Bunyapraphasara, director-general of the Trade Negotiations Department, said Thailand and the US would have to revise their stance on whether to step forward with the Thai-US free trade agreement.

The two countries should show their intentions to confirm that they want to further negotiations. The bilateral free trade pact has been suspended for two years. If both sides want to renegotiate, they have to restart the talks because the US needs to seek its congressional approval and Thailand also needs to have the green light from Parliament under the new Constitution.

Thailand should closely monitor Obama's trade policy, what will be drawn up and what will be the conditions, particularly on labour and environmental issues, she said.

The Asean-US free trade agreement has high potential for a restart to negotiations, but it will be a long-term goal, she said.

Prakit Apisarnthanarax, chairman of Prakit Holdings Plc, said investment and exports will be hit by Obama's economic policy, which is designed to protect American industry.

"We believe that the new US president will protect domestic industry rather than promote bilateral free trade agreements between region and region. The policy will raise negative repercussions for Asia and Thailand, in particular exports will drop," he said.

Siripol Yodmuangcharoen, permanent secretary to the Commerce Ministry, said Obama's presidential victory was good news for the global economy. American consumer confidence should also recover following his economic policies to promote domestic growth.

However, as some protective measures in particular non-trade barriers were likely, companies should develop their production with more concern for the environment and labour.

Pimpapaan Chansilpa, deputy permanent secretary of the Commerce Ministry and the leader of the North America team, said the government is promoting organic methods for food and non-food products in preparation for stringent import regulations of the US. The ministry has also set up a trade alert system to learn of new trade barriers.

The US is Thailand's major export market accounting for 11.3 per cent of the total.

Virachai Vongbunsin, vice chairman for the committee on trade rules and international trade of the Board of Trade of Thailand, said the private sector expects that the US would conduct free trade talks with Asean as way to promote trade amid the slowing economy. The US relies on imports to meet domestic consumption. This pact should benefit Thailand, as it is one of the biggest suppliers among Asean countries.

Krisda Piampongsant, inspector-general of the Commerce Ministry, said the standstill in the Doha Round of free trade talks sponsored by the World Trade Organisation should show progres soon as the Democrats policy is to promote economic growth and focus on multilateral trade pacts.

Simon Matthews, country manager of Manpower (Thailand) Co Ltd, said Obama's victory was positive for not only Thailand but also the rest of the world. The global economic crisis could be partly blamed on the US presidential election, he said.

However, yesterday's outcome will give corporations more confidence and encourage them to concentrate more on doing business.

"I believe that there will be more transactions to ensure business growth," he said.

Anake Srishevachart, advisory chairman of the Thai Travel Agents Association, said the tourism industry might not gain much benefit from the change in administrations, because the new president is speculated to launch a series of economic resolutions soon.

Obama is likely to make reviving the American economy his top priority, so Americans might hesitate about going on overseas trips. That would hurt the inbound business.

Markus Platzer, general manager of the InterContinental Bangkok and Holiday Inn Bangkok, said hotel operators were waiting to see what the new president would do.

"At this time, it is too early to comment on that," he said.

Adirek Sripratak, president and CEO of Charoen Pokphand Foods Plc, drew attention to Obama's five-year experience in Indonesia, saying that would allow his administration to understand Asian culture better, and that would be helpful for the region and Thailand.

The US will also work harder to tie up with Asian economic superpowers like China.

"Obama won the popular vote, which means that he will not represent business groups, and that will allow him to work more independently," Adirek said.

Darmp Sukontasap, senior vice president of Tesco Lotus, said Obama's policies would place more conditions and restrictions on exports to the US. That would be an additional challenge for exporters on top of the trend of declining consumption in the US and Europe.

Despite all of the reservations, exporters should remain optimistic mainly for three reasons.

First, Thailand has always been a major trading partner of the US, ranking 18th. This year, trade between the two countries should increase to US$40 billion from $31 billion last year.

Second, Obama has made it clear that he will fight for free and fair trade, albeit as a tool for strengthening the American economy and creating more American jobs. And, third, his administration is all about "change" and people change mainly to better themselves and the people around them.

Bloomberg quoted Kongkiat Opaswongkarn, CEO of Asia Plus Securities Plc, the country's third-largest broker, as saying many Thais think Obama will reduce tensions in the world. Still, others preferred McCain because they saw him as being more committed to free trade.

"A lot of people who are not focused on exporting to the US want Obama as president. People are tired of Bush, they want more peace talks, more words of negotiation rather than pointing weapons at each other. Obama's character is very appealing," he said.

Pongsak Assakul, vice chairman of the Thai Chamber of Commerce in Bangkok, said an Obama presidency would slow trade.

"It's known that the Democrats are more anti-trade and they are trying to protect jobs in the US, so there could be some sort of reaction or delay on free-trade agreements and negotiations," he said. "It will affect the whole world. More protectionism will happen under Barack Obama."

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