Assignment 2. Thailand Manufacturing Analysis. Economics Essay

Thailand Manufacturing Analysis
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Thailand Manufacturing Analysis
Globalization has prompted companies to look for opportunities in other countries. The need to expand to foreign markets has been a priority to a majority of U.S. manufacturers. Before beginning operations in foreign nations, it is critical to undertake an analysis to determine the suitability of the country. This analysis focuses on the shoe industry in Thailand to enable the U.S. shoe manufacture to determine the suitability of the market.
The economy
Over the last four decades, Thailand has made considerable social and economic development. The nation has managed to move from low-income to an upper-income country. Thailand has become among the countries with sustained economic growth and impressive policies on poverty reduction (World Bank, 2019). Nonetheless, the second quarter of 2019 saw the slowest economic growth. The government has attributed the slow economic growth to the slowing exports, the struggling agricultural sector, and the U.S.-China trade tensions (Reed & Shane, 2019). Despite the slow growth in the second quarter, economic growth is expected to accelerate next year. Experts predict an expansion of 3.1% in 2020 (Focus Economics, 2019).
The currency
In Thailand, the currency the Thai baht (TBH). Currently, 1 THB = 0.0331176 USD (1 USD = 30.1954 THB). The Thai baht has soared against the dollar this year compared to the currencies of other emerging markets (Tan, 2019). The strengthening of the currency is a major concern, given the weakening economy in the country. The strengthening of the currency has been attributed to the large trade surplus. A stronger currency has adverse effects on the exports of Thailand. It makes the country's exports more expensive, hence making them less attractive in the international markets (Tan, 2019).
Barriers to trade
Currently, Thailand is not a signatory to the WTO Agreement on Government Procurement. As a result, some sectors have high tariffs, which impedes access to the market. Other non-tariffs exist like licensing requirements. The presence of price controls and excise taxes hurt international trade (Export.gov, 2019). Currently, the U.S.-Thailand Free Trade Agreement (FTA) has not been ratified. Negotiations have been ongoing since 2004. Once implemented, the U.S.-Thailand FTA will increase trade between the two countries and create other commercial opportunities.
Import duties
Thailand has taken steps aimed at increasing exports to international markets. While the country imposes heavy taxes on imports, it has more favorable terms for exported products. Hence, a company wishing to set up a manufacturing base in Thailand would pay fewer duties to ship to the U.S. and other countries.
The shoe manufacturing sector
The rising interest in active lifestyles has led to the excellent performance of footwear in the country. The high demand for footwear has attracted various companies to set up operations in Thailand. The number of brands manufacturing shoes has increased to take advantage of the available opportunity (Euromonitor, 2019). This has intensified the competition for the local marke...