Thailand moves closer to US currency watchlist designation

Thailand’s 12-month trade surplus with the U.S. exceeded $20 billion, raising the chances it will be added to the U.S. Treasury’s watchlist of currency manipulators.

The surplus reached $20.05 billion in the 12 months through November, according to U.S. Census Bureau data released Monday in Washington. That exceeds the $20 billion limit the U.S. Treasury has set for bilateral goods trade deficits, and means Thailand now violates two of the three criteria the Treasury uses to add a country to the watchlist.

The latest development increases scrutiny on Thailand’s currency policy at a time when officials are scrambling to rein in the baht’s almost 6% gain against the dollar over the past year, the fastest appreciation among major Asian currencies. The U.S. is Thailand’s third-biggest trading partner, with total trade of $47 billion in 2018.

Critical Report

The U.S. Treasury publishes a twice-yearly report designating countries of concern for currency manipulation if it meets two of three criteria:

• a trade surplus with the U.S. of at least $20 billion
• a current-account surplus of at least 2% of gross domestic product
• persistent, one-sided intervention in the currency equivalent to 2% of GDP in six months of a year

Bank of Thailand Governor Veerathai Santiprabhob said in a Bloomberg Television interview with Haslinda Amin on Wednesday that Thailand is engaged in a “close dialogue” with U.S. officials about Thailand’s performance on those measures. He said Thailand had yet to verify a breach of the $20 billion trade surplus threshold with its own official data.

Speaking to the other criteria, Veerathai said the baht’s move in 2019 should show that “no one should consider Thailand as one that has tried to manipulate” the currency to gain an export advantage. He cited Thailand’s progress in trimming its current-account surplus over the past few years, including efforts to boost both public and private investment.

Current Account

In the May 2019 report, three Southeast Asian nations—Singapore, Malaysia and Vietnam—were cited for the first time with two violations each, while Thailand was charged with one: for its current-account surplus.

Thailand’s current-account surplus has stayed above 2% of GDP for every quarter since the end of 2014, according to Bloomberg calculations.

The most recent Treasury report is overdue, having been delayed in late 2019 as the U.S. and China worked on a “phase one” trade agreement that’s expected to be signed Jan. 15.

Thailand has already been targeted by the U.S. for its trade policies. In October, the U.S. said it would suspend $1.3 billion in trade preferences that Thailand had enjoyed, citing failure to provide worker rights such as freedom of association and collective bargaining.

While Thailand’s Commerce Ministry said the impact of the move would be limited, it nonetheless put officials on guard as Asian exporters brace for crossfire in the ongoing U.S.-China trade war.