Trade Relations between Australia and Thailand: 1990 to 2011

This paper examines the trade relations between Australia and Thailand over the period 1990-2011 with special emphasis on the trade patterns and trade performance of these two nations. The trade patterns are examined with regard to the changes in trade composition, the intra-industry trade index and trade intensity index. Trade performance is measured with the aid of standard techniques used in the literature such as the revealed comparative advantage index, the cosine index of trade similarity, net exports ratio and constant market share analysis (CMS). The findings of the paper suggest that the composition of bilateral trade has changed significantly since the 1990s. These changes have resulted from the economic and trade reforms that have taken place in these two countries during the period under review. The changes reflect shifts in the production structures of each economy which are indicative of long-term economic structural changes. It is evident that the Thai-Australian trade relationship has undergone further adjustment since the establishment of the Thailand Australia Free Trade Agreement (TAFTA) in 2005. However, the changes in trade patterns are not necessarily due to TAFTA but, rather, part of a long term trend. With regard to the trade performance of each nation, the strongest trade link between the two countries has been the export of automotive vehicles from Thailand to Australia. Moreover, the CMS analysis indicates that Thailand’s export competitiveness significantly contributed to the remarkable growth of exports to Australia it experienced over the period. In comparison, Australia’s export growth to Thailand did not result from any improvements in its competitiveness. In fact, Australian exports to Thailand have suffered; the main reason being that Australia enjoys competitiveness in commodities, which are not in big demand in Thailand.