No.63 Between Economic and Political Crises:Thailand's Contested Free Trade Agreements

Notwithstanding the unavoidable adverse impact on its export sector, Thailand weathered the Global Financial Crisis in the late 2000s better than many of its emerging-market peers, owing to structural adjustments and recovery dynamics in the aftermath of its crippling financial crisis a decade earlier. Thailand’s political crisis also dampened what otherwise would have been a more exuberant risk-taking financial sector, thereby keeping exposure to the GFC relatively minimal.Instead, the Thai growth story in the 2000s was dominated not by financial crisis but by political polarization and turmoil arising from former Prime Minister Thaksin Shinawatra’s wide range of policy innovations and adjustments that provide the basis for this paper. His government’s pace of policy formulation and implementation with the aims of structural change and economic upgrading in the Thai economy amidst globalization challenges was bold and unprecedented.This paper sets out to examine the underpinnings, dynamics and implications of Thaksin’s policy platform. Why were such adjustment and upgrading policies considered, formulated and implemented during the Thaksin years but not as much before or after? What were the roots and dynamics of this upgrading? A principal component among the host of such policy innovations and adjustments was Thaksin’s preference for bilateral free-trade agreements. Thaksin’s FTA strategy thus serves as a policy case study. It was instructive of Thailand’s global trade constraints and of Thaksin’s policy assertiveness. Ironically, it ended up providing a rationale for the coalition that deposed him. The overarching aim here is to show how the 1997-98 crisis augured well for Thaksin’s rise, his policy innovations with particular reference to FTAs, and how the subsequent global economic crisis in 2008-09 was incidental to Thailand’s political crisis surrounding Thaksin’s fall.

Keywords: financial crisis, Free Trade Agreements (FTA), political polarization, Thaksin Shinawatra, Thailand