As America’s Commercial Counselor, or Senior Commercial Officer, Karen Ware is the counterpart to most countries’ Trade Commissioner. She works for the US Department of Commerce, so her boss is Donald Evans, not Colin Powell.
Karen arrived in September of 99, on a three-year posting, which she hopes to extend to four. Her job is not dependent on the current ambassador, Richard Hecklinger, so if he does leave, because of the change of administration in Washington, she can stay on to continue her work.
Karen tells us the US Foreign Commercial Service is represented in over eighty countries and has offices throughout America. “We have a domestic and foreign network of offices to help US companies export overseas and that’s what our principal objective is here in Thailand as well as in our counterpart offices in US embassies around the region,” she says. “So we are an integral part of the embassy here as well as in most countries, where we also have offices in US embassies. I come under the Ambassador’s supervision, I’m part of his country team, and part of his senior staff.”
But how and why did the US Commercial Service come about? “It was created in 1980 because US businesses operating overseas told the US Congress that they needed a core of US government people who understood their needs and the issues they faced in foreign markets. So the Service was created to provide business assistance to US companies operating abroad. We basically help US companies find business partners in Thailand through specialized services like our Gold Key Service where we try to identify qualified potential business partners for US companies so they can sit down with Thai businesspeople and talk about forming relationships.
“Our clientele are companies coming into the marketplace for the first time as well as those already operating here. There’s a large American Chamber of Commerce here with several hundred members. We work on behalf of Amcham members to help them resolve market access problems. For example, if an American company is bidding against another foreign company for a project, we can weigh in by having the Ambassador write a letter on their behalf. Or if a company has a problem with customs or intellectual property protection we try and assist them where we can.
“Besides our matchmaking services, we also do market research and specialized reports for companies who may have a particular interest in how their product will sell in this market. We try to provide business solutions for companies, so in a sense we are the government’s consulting service to US business. We look at individual US companies’ needs and try and come up with solutions for them.
“And we organize trade missions. We had an automotive mission of nine American companies arrive here last April looking for local partners. And we have organized participation in local trade fairs. We recently had a US Pavilion, which featured nineteen US companies, at an environmental show called AQUATECH, which was held at BITEC here in Bangkok.”
What can the US Commercial Service do better? In one of his first speeches after coming into office, new US Commerce Secretary Donald Evans, said, “We (the Commercial Service) are the world’s best kept secret for US business.” “He’s going to try and kept the best part, but change the secret part,” Karen says.
The recently launched website, www.buyUSA.com, is a worldwide joint venture between IBM and the Department of Commerce, which we hope will serve to attract US companies to register with this global database of US companies, so they can put links into their own home pages. It is hoped that this will become the premier sourcing database where foreign companies can go in and look for sources of supply. The US Commercial Service is located throughout the United States, and has offices in virtually every state capital so that helps us to get the word out, but Karen says it needs to do more. “The statistics on how many small and medium-sized companies (SMEs) are exporting compared to those that don’t is really quite astonishing. A very large percentage of our exports are accounted for a small number of firms.”
Karen says that the recent change in administration hasn’t affected the Commercial Service’s mission or objectives. During the recent election campaign both George W.Bush and Al Gore came out in favor of free trade and supported looking for opportunities to open new markets. Both also supported a new round for the WTO and looking for more opportunities on a regional or bilateral basis to expand free trade agreements. The Bush Administration is going forward with the Singapore and Jordan Free Trade Agreements and the Vietnam Bilateral Agreement. There has also been a push for trade promotion authority (formerly known as fast track authority), which would give the administration a freer hand in negotiating trade agreements.
The US enjoys a special trading relationship with Thailand, which dates back to the Treaty of Amity and Economic Relations from the previous century, and which was renewed in 1966. It allows Americans to come in and establish companies, basically on the same basis as Thais and in most sectors they can have 100% American ownership. The US is the only nation that has this advantage. But under the WTO by 1 Jan 2005 Thailand has to offer the same privileges to other countries.
Has this created any animosity from Thailand’s other trading partners? On the contrary, Karen says, “Some companies actually benefit from the preferential treatment given the Americans. For example, in the automotive sector, the Eastern Seaboard here is known as `the Detroit of the East’ and we have two major American manufacturing plants there – GM and Ford - that benefit both Japanese and European companies who supply them with components. So it can be a symbiotic relationship.”
Karen points out that in the mid 80s the Japanese started investing heavily in Thailand, followed later by the US in the 90s. As a result, Japan is the largest single foreign investor here with over US$20 billion, followed by the US at close to US$15 billion. Foreign investors in general have found Thailand to provide a highly hospitable investment climate, with an abundance of educated, relatively low-cost labor, good infrastructure, attractive investment incentives, and close proximity to foreign markets. US investment has taken place in a number of sectors, including automotives, electronics, consumer goods, energy development, and financial services.
BoI statistics cite that approximately one-fourth of the new foreign investment coming into Thailand last year was American, with the BoI listing thirty-eight American start-ups, which are companies that actually committed capital here. These include both new investment and the expansion of existing investment, with the latter having the most activity, particularly in the electronics sector.
For examples of new investment Karen cites Seagate, which has expanded its hard disc drive and gimbal assembly here. Seagate is the largest foreign employer in Thailand. ReadRite has also invested Bt$8 billion in its gimbal assembly. Celistica Electronics, which makes printed circuit board assembly, is expanding its operations too. And Agere Systems (formerly Lucent Technologies Micro-Electronics) is planning to build a US$12 million opto-electronic components to supply the fiber optic market. So there are several new electronic expansions.
General Electric is also in a joint venture with a Japanese company called Shin-Etsu Chemical in Rayong to manufacture silicon products, which will create about 100 new jobs, and Bt5 billion in exports.
Where do the products manufactured by American companies here in Thailand end up? “Many companies like GE will be exporting to other markets in Asia where they have an upstream plant that will use the intermediate products to make other products that have higher value added. Seagate is exporting primarily to four markets in Asia. GM is sending its sport utility vehicle, the Zafira, to Europe and elsewhere in Asia.”
As stated above, these companies typically come here to take advantage of lower costs and the incentives that BoI offers in order to use Thailand as a platform for exporting to markets in Asia that they would otherwise be serving from some other overseas location or the US.
The ASEAN free trade agreement (AFTA) helps this because it provides for a scheduled reduction of tariffs on products shipped between the 10 members countries of ASEAN. Some companies are consolidating and doing regional sourcing in Thailand for some of their product lines. For example, Proctor and Gamble is sourcing its hair and skin care products from here while Colgate Palmolive is doing the same for its toothpaste and soap.
Karen says that one feature of American investment here is that the GM plant in Rayong looks exactly the same as a GM plant in Germany or Detroit. There is a real push to have that kind of standardization here because it allows for easier access to components and it allows for quality control systems to be put in place that are consistent from country to country. It also allows a plant in Germany to supply a plant in Thailand or South America because the same set of standards is being followed. So you can have a product that is made in Thailand but satisfies US standards of safety, quality and reliability. There is this real effort to duplicate systems and that’s why ISO standards of certification have been established for quality and environmental management, and American companies here strive to obtain and uphold these quality control systems.
What about Thai investment in America? “One of the more interesting programs is ‘Thai Restaurants in the US’ an initiative started by the Ministry of Commerce, which is part of a global campaign to open 8,000 Thai restaurants worldwide in the next couple of years. In the near future the Ministry is leading a delegation of Thai investors to the US to invest in Thai restaurants. The Ministry sees this as way to increase the export of Thai food products.”
You’ve had a lot of prominent people come there in the last little while; do you want to mention a few? “Last year we had a lot of visitors. Within a five week period we had the Chairman of the FCC, William Kennard; the Deputy Secretary of Commerce, Robert Mallett; the Undersecretary of Commerce, Robert La Russa, who came here to focus on e-commerce; the Governor of North Carolina, Jim Hunt, who had a very trade orientated purpose; and we had a trade mission led by the head of the Federal Transit Administration who was here leading a mass transit mission. So there is a lot of commercial interest in Thailand. And once we get more people in the new administration confirmed we will see even more people coming here. As of now, Phil Agress, a Department of Commerce official, who is head of the Korea-South-East Asia office is due her soon as is Deputy Assistant US Trade Representative Barbara Weisel. They will talk about issues such as intellectual property protection and customs evaluation.”
What about prospects for future investment and exports? “Our job is US export promotion although we facilitate investment, which is also important for Thailand’s recovery. The exports that are arriving are capital equipment and components for plants that already here. With regards to the new airport that will eventually be constructed; last year we brought over a US Trade Mission of suppliers with everything from steel and glass to baggage handling equipment. So we are looking at this as something that US companies can participate in, not only from the construction materials end but also with the baggage handling systems, the security and safety systems and the air traffic control system because our companies are truly global leaders in these areas.”
Other areas? “Well, about twenty-five percent of our trade is in electronic components and the automotive parts and accessories industry is still growing, so is after market accessories. Educational training is important as well as we just had a fair where we seventy-three schools participating, with the focus on ESL.
“Food safety in the agro-business sector is another area we are looking at, by bringing in processes and equipment that will help Thai companies meet international food safety standards. And we are bringing in some companies in September to help us with this.”
Karen’s parting thought on American firms operating here in Thailand? “I think it’s important to note that many American companies here do much more than come in, make profits and repatriate them. They perform community support services as well as providing a safe workplace, worker training and opportunities for advancement for Thai managers. They are good corporate citizens.”