Effects of September 11 Terrorist Attacks on the Thai Food Industry -Market Changes   Published on October 29, 2001

The September 11 attacks on the United States shook the world. Six weeks after the initial attacks people around the world are looking for ways to restore shattered consumer confidence in a weakening economy. Thailand, an export-oriented country, depends on international demand for its products. In a time of unusual circumstances, the Thai food industry will have to adjust its trade patterns, products, markets, logistics, tourism and travel so they can remain competitive in a changing world market.

Market Changes
(Country alliances, sanctions, political factors and exports to Islamic or Middle Eastern countries)

During the 'war against terrorism', countries are expected to re-evaluate their standpoints, both in political and economic terms. Economies will inevitably be influenced by political factors. As has already been seen, the U.S. has recently lifted trade sanctions against Pakistan and India to show its gratitude towards their cooperation in the war against the terrorist Osama Bin Laden, his terrorist network Al Qeada, and the Taliban regime which shelters him and his cohorts. The sanctions were previously imposed after Pakistan and India conducted nuclear weapon tests in 1998. Trade preferences, such as a reduction in import tariffs and relief of previous debts, were also granted to the two countries. These changes would not have happened under normal circumstances.

The U.S. has worked hard to build an international coalition against the terrorists. Obviously, the U.S. has granted allies 'rewards' in terms of trade preferences. Despite the rewards granted, some Islamic countries, such as Indonesia, found their people boycotting U.S. products following the attacks by the U.S and the U.K. in Afghanistan. Even in the South of Thailand, Muslims are boycotting U.S. products and fast food chains.

Many Islamic countries are under a lot of political pressure in deciding whether to support the 'war against terrorism', or their Muslim brothers and sisters. An obvious example can be seen in Pakistan, where people are protesting against their own government for supporting the U.S. in attacking the Taliban, while economically Pakistan has gained a huge advantage from trade preferences by the U.S. for its support.

The U.S. and its allies, such as the U.K., Australia, France and Russia, have also urged other governments to avoid supporting the terrorists by isolating Afghanistan. The U.S. has made it clear that any country that supports terrorism will face sanctions from the U.S. and its allies.

Thailand has clearly stated its opposition to the terrorists' acts. However, the country is not involved in military action against terrorism, so it has not been granted any additional trade preferences from the U.S., unlike Pakistan, India and Indonesia. This has put Thailand at a disadvantage when compared with some of its rivals, who also export mainly agricultural products to the U.S. market, since Thailand has not been a beneficiary of any special political and trade alliances with the U.S. during the current conflict.

Exports of shrimp, for example, are facing tough competition from cheaper products from India, Pakistan and Bangladesh. In the short-run, the immediate effect of the 'war against terrorism' has already caused a slowdown in exports. Usually, the last quarter of the year is supposed to be the peak period for shrimp exports, but this year orders have slowed down. U.S. importers are being conservative, and are looking towards cheaper products from India, Pakistan and Bangladesh. Thailand will have to face tough price competition due to the political and trade alliances existing between U.S. and some of its competitors.

For food exports in general, Thailand's exports worldwide are currently expected to reach $ 10.01 billion this year, a significant drop from the previously estimated figure of $ 10.10 billion. The drop of $ 90 million, or 4 billion baht, is expected due to the effects of the terrorist attacks on the U.S. and the subsequent military action.

This situation is likely to cause an increase in some export products, such as rice, canned foods and canned seafood, as people tend to stock up on these items during times of conflict. However, many countries are also likely to increase their own domestic food production in order to support themselves in case of emergencies. No one wants to be too dependent on other countries during a time of worldwide political uncertainty. Moreover, exports of luxury food items are likely to experience a significant drop due to weaker demand, while fresh food exports are experiencing an increase in the cost of transportation due to the rise in airfreight charges. Therefore, Thailand's overall food exports are expected to drop significantly from the previously estimate.