Trade policy, trade performance and firm’s productivity in Thailand

This paper examines impacts of trade policy in Thailand, both in terms of tariffs and non-tariff measures (NTM), on trade performance and firm’s productivity during 2012 – 2021. This study considers tariff protection both in terms of nominal and effective rate of protection as well as applying utilization rates of in-effect FTA to adjust the protection in Thai industries. Non-tariff measures, especially in terms of technical barriers to trade (TBT) and sanitary and phytosanitary (SPS) measures, which have aggressively increased over the past decade, are employed in the study through analyzing a frequency ratio, coverage ratio and ad valorem equivalent. The results show that an effective rate of protection reveals a greater impact on import volume than nominal rate of protection. Preferential tariff rates under free trade agreements also play an important role in helping amplify the positive impacts of trade liberalization on import volume, though utilization rates are relatively low. NTM policies support the improvement in quality of imported products which stimulate the imported demand in Thailand, especially in terms of technical barrier to trade (TBT). Tariffs and NTM policies show the different effects on each product with the greatest impacts on intermediate products, followed by finished and capital products, respectively. For country-wise analysis, the positive and significant impact of NTM is revealed only in developed countries while the negative and significant impacts of tariffs on imported products are founded in LDC and developing countries. In addition, the result shows that both tariff reduction and free trade agreement can boost firm performance, especially tariff on intermediate input. The result also confirms us that NTMs policy in Thailand does not create the excessive responsibility to the domestic industry but can be used to increase the product quality that can help to improve firm productivity.