‘Pol.’ expects Thailand to receive benefits After Americans shoot down a Chinese balloon Confirmed that export targets have not yet been adjusted. advised the state to prepare for

“Commerce” expects Thailand to benefit from the impact of the tech war after the US hit a balloon in China. Confirmed that export targets have not yet been adjusted. Advises the state to be prepared

PM expects Thailand to benefit from tech war impact after US hits Chinese balloons The 2013 export target has not yet been adjusted to grow by 1-2%, believing that investors may move bases after this. affecting the automotive industry Thai electrical appliances and electronics Advises the state to be prepared

On February 7, the Macroeconomic Research Division Office of Trade Policy and Strategy Ministry of Commerce Published a document on the impact of tech war after the US took China’s balloon on the Thai economy, consisting of 5 items: 1. The impact on trade, investment or the Thai economy. 2. Which sectors do you think will have the greatest impact? 3. How should Thai entrepreneurs prepare to mitigate the impact and how would they want the government to help? 4. How does the state itself, especially the Ministry of Commerce, realize this impact? What measures will be taken to help or avoid it so that Thai exports can continue? 5. How will the overall export be? Because seeing many parties say that there may be a negative this year, etc.

However, from such an event, it will be divided into 2 issues: the issue of technology war (Tech War) and the issue of the United States firing a balloon from China that floats over US airspace.

Regarding the issue of Tech War between the US and China, the FTI evaluates as follows:

1. Impact on trade, investment or the Thai economy where Tech War may affect the Thai economy. Here are some issues to keep an eye on/watch out for:

Promoting the relocation of US production bases (Reshoring) by using the special economic zone mechanism (Foreign-Trade Zone-FTZ) has attracted investment back to the United States. may affect foreign investment in Thailand in the future

controversy over Taiwan Taiwan is an important country in the supply chain. In 2021, Taiwanese companies accounted for more than 60% of the world’s semiconductor manufacturers. In particular, TSMC (the world’s largest semiconductor manufacturer) produced more than 90% of advanced semiconductors. in the world If the conflict situation becomes more serious It may be a sub-war on technology. It will accelerate the separation of the semiconductor industry’s supply chain. including technological deprivation (Since semiconductors are strategically important technologies in US-China competition), this could lead to disruption of the global supply of semiconductors. Affecting countries producing related products. Including Thailand, which is the production base of electrical equipment. electronics, and automotive, where semiconductors are key components in such industries.

The tech conflict between the US and China could slow or slow growth in the global economy and trade. according to the severity of countermeasures between the two main economic poles Growing geopolitical tensions Inflation Accelerates as Costs Increase and capital flow volatility. However, Thailand may benefit from relocating US production bases to partner countries. and moving or expanding production bases out of China for multinational businesses to reduce the risk of global geopolitical conflict between the US and China

News reports also indicate that Tech War will affect Thailand as follows: 1. The United States has developed a more diverse supply chain structure. Both in production, processing and distribution. It will be an opportunity for Thailand to become an alternative production source that can support US goals.

2. Promoting the US biotechnology industry This is in line with Thailand’s BCG policy, which will provide an opportunity for Thailand to become part of the US supply chain. Thailand is a source of quality agricultural raw materials. which is an important upstream industry for bio-based industries

3. Increased production base relocation out of China to diversify risks according to China Plus One strategy after the COVID-19 situation Including entrepreneurs aiming to adjust their supply chains to be more flexible (Resilience) by diversifying production bases to destination countries close to production sites. It will be an opportunity to attract Thai investment.

2. Which sectors do you think will be most affected?

The Mid-Decade Challenges to National Competitiveness report, produced by The Special Competitive Studies Project (SCSP), reveals that at the heart of the US-China technology conflict in the short term (now-2025) are artificial intelligence (AI), wireless communications. Fifth Generation (5G) and Microelectronics and in the medium term (currently – 2030), namely artificial intelligence (AI), new era, microelectronics/processing wireless communication biotechnology New energy generation and storage and intelligent manufacturing, which the FPO views that such conflicts may change or affect investment, production, trade and supply chains. Including the blocking of advanced technology between the supply chains of the two nations and allies that are likely to separate. This is expected to have a significant effect on Thailand’s target technology industries in the electrical and electronic appliances field. and future vehicles

3. How should Thai entrepreneurs prepare to mitigate the impact and how would they need government assistance?

Thai entrepreneurs can prepare/implement as follows: 1. Adapt to the supply chain polarization of key technologies between the US and China by attaching to the supply chains of the two countries through (1) sending Export raw materials/intermediate goods (2) Invest in the US and China, as well as countries in the US supply chain (e.g. Mexico, Canada, Latin America) and China (Asian countries). and countries along the BRI) The Regional Comprehensive Economic Partnership (RCEP) is one way that Thailand will connect with China. and (3) to be part of the key supply chains (e.g. semiconductors, and clean energy technology) with the United States and its allies under the IPEF framework. 2. Not relying too much on any one country. To reduce fluctuations in the supply chain and diversify business risks. Especially the technology industry in the United States. Or China aims to expand production in the country or promote the relocation of production bases back to the country (Reshoring), including building trade alliances. and looking for new partners

For the government’s response, it must prepare and proceed as follows: 1. Promote and attract foreign investment. This is because the targeted technology industry requires high investments and Thailand relies on advanced technology from foreign countries. It may provide investment tax benefits. or the establishment of a factory so that Thailand can develop/jointly develop their own technology and be able to expand production bases and continue to compete in the future 2. Prepare in terms of infrastructure and investing in innovation and advanced technology necessary to develop the industry of the future. including accelerating the development of skilled workers and vocational training in targeted technology industries 3. Promote cooperation in research and development of Thai technology industries that are in line with the goals of the US and China, such as the electronics group. (including semiconductors) and electrical appliances and electric vehicle groups Including the basic technology related to the aforementioned industry. 4. Accelerate the promotion of trade and economic cooperation related to targeted technologies.

4. How does the state itself, especially the Ministry of Commerce, realize this impact? What measures will be taken to help or avoid it so that Thai exports can continue?

The Ministry of Commerce has promoted the utilization of benefits from regional and sub-regional economic cooperation frameworks. to promote Thai exports By taking advantage of tax exemptions/low taxation and Rules of Origin for key technology products This will help benefit both Thai exporters in terms of increasing the handicap and competitive opportunities of Thai products. And importers in terms of seeking raw materials to further increase the production and export of products, for example, computer products, equipment and components. where the import duty of Thailand and partner countries is already 0, or the tax is gradually reduced to 0 in almost every product and in almost all free trade agreements (FTAs) or automotive products where the import duty of Thailand and partner countries Parties are already 0 in many FTAs ​​such as ASEAN, ASEAN-Australia-New Zealand. and Thai-Australia

The Ministry of Commerce Realizing the importance of Tech War, the FPO has conducted a study and analysis of Tech War and its possible impacts, both positive and negative. You can read more at http://www.tpso.moc.go.th/th/node/12150 It has also initiated a project to study the decoupling of key industries between the US and China and its implications for the Thai economy and trade. which was conducted in the fiscal year 2023 in conjunction with Thammasat University To study and analyze trends in supply chain separation and potential impacts. Including making policy recommendations to determine Thailand’s approach to dealing with and making use of the separation of the supply chain. in order for Thailand to receive maximum benefits and minimize negative impacts

5. How will the overall export be? Because seeing many parties say that there may be a negative this year, etc.

Although Thai exports in 2023 will have Tech War as a challenging factor. including other factors must be monitored, such as the slowing global economy Oil prices are still high. and the trend of the baht appreciation This may affect Thai exports as a whole. However, there are still positive factors such as global food demand still has a positive effect on Thai exports. Freight back to normal The freight cost is reduced. In addition, the economies of the target markets are growing well such as the Middle East, South Asia, ASEAN, especially CLMV and China. 15%. The Ministry of Commerce has discussed with relevant agencies, namely the Thai Chamber of Commerce. Shippers’ Council of Thailand The Federation of Thai Industries The 2023 export target is still expanding by 1-2% or worth 289,938-292,809. million US dollars

for US issues Shoot a Chinese balloon flying over US airspace.

In the case of Chinese balloons flying over US airspace, US Secretary of State Anthony Blinken has postponed the scheduled visit to Beijing indefinitely And one day later, the US shoots down a Chinese balloon. by reason of spying over US airspace

The Chinese side issued a statement expressing regret over the crash of a civilian balloon flying into US territory. Due to uncontrollable factors, however, China condemned the shooting down of the US balloon. by seeing that it is an action that is beyond reason

The US and China have yet to take any action. that affect or relate to trade/investment between the two countries, which the FPO is closely monitoring the situation If the two countries take any additional measures to further assess the potential impact on the Thai economy