For a very extended period of time, Siam/Thailand managed to figure out ways to effectively preserve its independence, primarily by appeasing the strongest powers of the time. Up until the 1850s, this strategy revolved around appeasing China due to it most definitely being the elephant in the room. As of that point and until the let’s say 1930s, this strategy shifted to appeasing European powers, primarily the British and French. What followed was a proverbial short-term pivot to Japan and, finally, a shift to the United States after the end of World War II.
During this time, relations with China haven’t always been stellar, with formal relations having only been re-established as of 1975, when (just as when it came to the re-establishment of China’s relations with other nations) Thailand shifted from the Republic of China to the People’s Republic of China in terms of diplomacy.
As time passed, however, for primarily economic reasons that revolve around the ascension of China, relations between the two entities kept improving, with Thailand arguably representing a pillar of stability as far as Sino-ASEAN relations are concerned in light of the fact that its relationship with China isn’t nearly as plagued by issues such as the South China Sea one as the relations between China and some of the other ASEAN nations.
Fast-forward even closer to the present and, of course, the need to re-calibrate has arisen.
Simply because the United States has embarked on a more than obvious mega-trend of taking its foot off the proverbial pedal when it comes to its involvement and especially spending abroad during the Donald Trump administration. As such, Barack Obama’s pivot to Asia ended up being all but canceled out in an “America First” framework, with the US deciding to focus more on cashing in (by “convincing” fellow NATO members to up their contributions, by tacking the deficit with China as well as other trading partners and so on) than investing in strategic partnerships.
The exact opposite principle is valid when it comes to China.
Beijing not just noticed this vacuum but has been actively trying to fill the void by stepping in whenever the United States exits, in an effort toward essentially buying its way toward geopolitical influence. How? First and foremost, by enticing partners with precisely the type of investment a country considers desirable: sustainable infrastructure-driven investments through projects such as the BRI and AIIB rather than speculative Wall Street-type “hot money” that can be here today but gone tomorrow.
At this point in time, based on 2019 data, the United States still represents the #1 trading partner of Thailand, with approximately 12.8% of Thailand’s exports (roughly $31.4 billion) heading toward the United States last year. However, China is only a percentage point away, accounting for 11.8% of Thailand’s exports, or approximately $29 billion.
It is important to understand that Thailand is most definitely not interested in choosing between China and the United States anytime soon.
Even if current trends persist and China ends up becoming the number one trading partner of Thailand, a little bit of digging quickly reveals that the structure of Thailand’s relations with the US and China tends to favor the US dimension quite strongly. For example, the US is the country with which Thailand experienced the largest trade SURPLUS, approximately $13.7 billion. The exact opposite is true when it comes to China, with it representing the number one country with which Thailand experienced a trade DEFICIT in 2019, approximately $22 billion.
As time passes, it is difficult to imagine that the following two trends will not materialize in light of the recent attitude of the United States in terms of trade:
- The trade surplus Thailand experiences with the United States will most likely be pressured into coming down, with US rhetoric revolving around the fact that trading partners have received a “free ride” from the US for far too long
- Trade with China will expand, a trend which will lead not just to China becoming the number one trading partner of Thailand (after all, it isn’t exactly that far away in the present) but to it happening by a very wide margin
Of course, trade is not the only variable which dictates relations between two nations, with other aspects oftentimes proving to be equally important, for example the military dimension. Furthermore, even when it comes to trade, it is worth pointing out that as robust as certain trends may seem, absolutely nothing is set in stone in the world of economics.
What if China experiences a major recession in the future, whereas the United States does comparatively better? Then again, perhaps the exact opposite may happen.
The same way, geopolitical black swans (perhaps something even more serious than the 2014 situation, which resulted in Thailand “suspending” democracy and being on the receiving end up quasi-unanimous criticism from the West) that render our analysis obsolete may very well emerge. As always, “prudence” is the operative word and as such, keeping our fingers firmly on the pulse of China as well as its trading partners is a must. Should you be in need of assistance when it comes to doing just that, the ChinaFund.com team is only a message away and can be reached through the Contact section of our website.
As conclusion, however, let’s just say that yes, Thailand currently represents something that can be described as an ASEAN pillar of stability when it comes to the Sino-ASEAN perspective and it is well aware of the advantages it has in the equation. Furthermore, both the United States and China understand that pressuring Thailand into picking a proverbial side and burning bridges with the other party would be anything but wise and as such, the country can be considered quite well-positioned.