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Trade Liberalization in Thailand and its Economic Effects on the Rice, Rubber and Sugar Industries
Dissertation Abstract:
This study assessed the economic effects of trade liberalization on the rice, rubber and sugar industries in Thailand using time series data from 1976 to 1996. Specifically, it examined the government policies/programs and trade reforms, and compared the level of export competitiveness (proxied by the revealed comparative advantage index), foreign trade (proxied by net trade value), domestic production (proxied by area productivity and plant productivity), and domestic consumption (proxied by per capita consumption) of the three agri-based products before and after the second trade liberalization, which was intensively implemented in the 1980s. A multiple regression model was employed to evaluate economic effects of trade liberalization, represented by the nominal protection coefficient, on the export competitiveness, foreign trade, domestic production, and consumption of these products. Macroeconomic policy (proxied by the exchange rate liberalization index), technology (proxied by capitallabor ratio and irrigated-total area ratio), commodity price (proxied by export price and world price), and consumer income (proxied by per capita GNP) were also included in the regression analysis with time added as dummy table.
Results of the study revealed that the nature and extent of trade liberalization in Thailand varied by type of agri-based products. Rice export was almost absolutely free from all types of trade restriction in 1986 while rubber export restrictions were reduced at a low level in 1990. A clear-cut direction in sugar trade was established in 1983 under the revenue sharing system.
As expected, there were significant improvements in foreign trade and domestic production of all commodities after the second trade liberalization. Rubber showed the highest improvement in foreign trade and domestic production, followed by sugar and rice. Rice consumption declined, but rubber and sugar consumption increased partly due to an increase in consumer income. All these agri-based products were still competitive in the export market, although their export competitiveness declined through time due to high competition in the world market as a result of the entry of other foreign suppliers. This implied that Thailand has to further increase the level of productivity and improve product quality. The country cannot just rely on the export of its raw products or the simple processed products such as milled rice, rubber smoked sheet, and raw and refined sugar in the long run. It has to give more emphasis on product development so that high-value processed products such as block rubber or automobile tires and other spare parts may be introduced.
Trade liberalization exhibited positive and significant effects on the foreign trade of rice and domestic production of rice and rubber. The export competitiveness, foreign trade, and domestic production (at the farm level) of sugar were also significantly affected by trade liberalization, but with negative effects. On the other hand, the influence of trade liberalization on the level of export competitiveness of rice and rubber, foreign trade of rubber, domestic production (at the plant level) and domestic consumption of the three agri-based products in Thailand were insignificant.