Canada, Thailand and ASEAN

By Paulo Guedes Moreau

In mid-November of 2018, Prime Minister Justin Trudeau attended the 33rd Association of Southeast Asian Nations (ASEAN) Summit in Singapore. This diplomatic action was viewed as a strategic move to uphold Canada’s commitment to strengthen economic ties with South East Asia as well as to promote Canada’s trade diversification agenda. This year, Thailand will host the 34th ASEAN Summit and the opening ceremony was recently held in Bangkok on June 23. Going forward, what can Canadians expect from Thailand as well as ASEAN and why is this important?

ASEAN is made of 10 of the 11 countries in South East Asia: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. Timor Leste is the final missing piece towards an ASEAN that encompasses all of Southeast Asia. The ASEAN Statistics Division estimated that the combined GDP of ASEAN member states amounted to approximately USD 2.7 trillion (nominal) at the end of 2017 would make it the 3rd largest economy in Asia after China and Japan. Moreover, the Research Division at the United Overseas Bank (UOB) indicates that this combined GDP (nominal) of ASEAN would make ASEAN’s economy the 5th largest in the world for 2017.

The Kingdom of Thailand is strategically located at the heart of ASEAN and sits at a unique crossroad between the two great ancient oriental powers. India’s economy continues to grow and its population of 1.3 billion is on track to surpass China; China continues its Belt and Road Initiative (BRI); and Thailand sits in-between these two economic powerhouses and is surrounded by some of the world’s fastest-growing economies: Cambodia, Myanmar, Lao PDR, and Vietnam.

The Kingdom has recognized its strategic centrality and is therefore in the process of developing its Eastern Seaboard under the its Eastern Economic Corridor (EEC) plan. Thailand’s Eastern Seaboard is home to 3,788 factories and contains the region’s most significant industrial clusters with petrochemical investments that rank in the top 5 in Asia. It is also a major global production base for motor vehicles and electronics with integrated deep seaports. In 2016, the Thai government reaffirmed its commitment to developing its Eastern Seaboard by announcing that the EEC was a key component of its “Thailand 4.0” economic policy.

Within ASEAN, Thailand is Canada’s 2nd largest merchandise trading partner after Vietnam. Canada’s bilateral merchandise trade with Thailand totaled over C$4.3 billion in 2018, with C$780.2 million in exports to Thailand and C$3.56 billion in imports from Thailand. The Kingdom is Canada’s 3rd largest trading partner when it comes to importing Automatic Data Processing Storage Units (HS Code 847170) with a total value of C$227 million for 2018. One of Canada’s most valuable exports to Thailand are items relating to chemical wood pulp (HS Code 470200) with a total value of C$73 million for 2018 and would place Thailand as Canada’s 4th largest trading partner after China, India, and Indonesia for this commodity.

There is great potential for Canadian business in ASEAN as exemplified by the success stories of Bombardier in Thailand’s transportation industry or the National Bank of Canada’s involvement in Cambodia’s banking industry. There is also Canadian government support for Canadian businesses in ASEAN. Canada has offices for the Canadian Trade Commissioner Service (TCS) as well as diplomatic representation in all 10 member countries. Furthermore, Canada appointed a dedicated ambassador to ASEAN in 2009 and in 2012 the Canada-ASEAN Business Council (CABC) was established by Canadian private sector companies at the request of Canada’s Minister of International Trade.

Canada must look to Asia to diversify its trade policy as was done in 2015 with the signing of the Canada-Korea Free Trade Agreement (CKFTA). The signing of the CKFTA was encouraging, however, Canada’s next step in Asia should be to secure an FTA with ASEAN. In 2018, Statistics Canada calculated that Canada’s bilateral merchandise trade with ASEAN reached over C$25.1 billion. Although this amount only accounts for 2.13% of Canada’s total bilateral merchandise trade for 2018, it would make ASEAN Canada’s 6th largest trading partner. However, there are ongoing efforts to make ASEAN a more significant trade partner through the creation of a Canada-ASEAN free trade agreement.

It is predicted that such an agreement would create between $C4.8 billion and $C10.9 billion in additional bilateral trade according to The ASEAN Advantage: Exploring Canada’s Trade Potential. The report indicates that this agreement would diversify Canada’s foreign trade, raise Canada’s credibility in Southeast Asia and reduce the dependence on its traditional markets like the United States and China. Furthermore, if Canada and ASEAN sign this deal, it would give Canada access to a market of more than 642 million consumers with an average annual GDP growth of 5.4% in recent years which is expected to become the 4th largest by 2030.

The modern era of international trade is changing and taking a shift back to the Far East. Canada’s trade policies must adapt to these changes to remain competitive on the international stage, especially when our southernmost neighbour is adopting protectionist trade policies. Canada must look elsewhere, and ASEAN is a natural first choice for Canada’s next FTA.