US embassy cable - 05BANGKOK5671

UNCLAS BANGKOK 005671 
 
SIPDIS 
 
DEPARTMENT PASS USTR FOR BWEISEL AND LCOEN 
COMMERCE FOR ITA JBENDER AND JKELLY 
GENEVA FOR USTR 
DEPARTMENT PASS INTERNATIONAL TRADE COMMISSION 
 
E.O. 12958: N/A 
TAGS: EAGR, ETRD, TH 
SUBJECT: EU GRANTS GSP TO THAI SHRIMP IMPORTS 
 
 
1.    Summary:  The EU,s reinstatement of Generalized System 
of Preferences (GSP) benefits for shrimp imports should be a 
high note for an otherwise hard-hit Thai shrimp industry this 
year.  The reduction in duties for Thai shrimp broadens a 
previously small market for exporters, but supply issues and 
the time necessary to reenter the European market in strength 
means the windfall from duty reduction will not be felt for 
the near future.  End Summary. 
 
2.    In a potential boon to Thai shrimp exporters, the 
European Union announced September 1 that it would 
temporarily grant GSP treatment for shrimp imports, to become 
permanent at the end of the year.  The EU had promised 
earlier this year to renew GSP treatment for shrimp imports 
by April 2005, but then postponed the implementation.  The 
duty on shrimp will be reduced from 12 percent to 4.2 percent 
for fresh shrimp and from 20 percent to 7 percent for 
prepared shrimp (Thailand is a major exporter of fresh 
shrimp).  The EU will apply the new duties retroactively to 
August 1. 
 
3.    Somsak Paneetatyasai, President of the Thai Shrimp 
Association, said he was optimistic that Thai shrimp 
exporters will be able to regain their former market share in 
Europe with the lower duties.  Before 1997, when GSP benefits 
were halved, later to be eliminated completely in 1999, Thai 
exporters controlled nearly 10% of the European market, 
exporting 33,000 metric tons of shrimp to the EU annually. 
The loss of GSP benefits slashed imports from Thailand; the 
export figure for 2004 was only 7,688 metric tons, barely one 
percent of the EU market.  Regaining a 10% market share in 
Europe would translate into exports of over 70,000 metric 
tons, approximately 20% of Thailand,s current worldwide 
shrimp exports. 
 
4.    Somsak qualified his prediction of a regained market 
share, saying that since the EU had been such a minor market 
for Thai exporters the past six years, the industry would 
need approximately a year to carry out research and 
additional marketing before it could rapidly increase 
exports.  Despite this, however, he predicted that exports to 
the EU would likely double for the rest of 2005 compared to 
2004.  Somsak was also confident that earlier hygiene 
difficulties involving antibiotics in shrimp were no longer 
an obstacle for exports to Europe.  Nevertheless, some shrimp 
exporters were still wary of Europe,s hygiene standards. 
 
5.    Shrimp exporters had cited the EU postponement of the 
reintroduction of GSP benefits as a notable hardship.  EU 
promises to apply GSP in April had led to a stockpiling of 
inventory among Thai shrimp exporters in anticipation of 
lower duties.  When the GSP benefits failed to materialize, 
exporters were forced to sell the excess inventory on the 
U.S. market at reduced prices.  Shrimp exporters told Econoff 
that the continued high EU duties were a significant factor 
in the reduction in Thai shrimp production for 2005. 
 
6.    Shrimp exporters predicted a slight increase in shrimp 
prices as a result of the reduced duties.  Due to predicted 
continued declines in shrimp production for the rest of 2005, 
increased demand in Europe will likely result in an upward 
tick in export prices. 
ARVIZU