Determinants of Cross-Border Trade in Thai Agricultural Products

Abstract

Background and Objectives: Cross-border trade plays an increasingly important role in supporting agricultural exports in Southeast Asia, particularly for countries with extensive shared land borders. For Thailand, agricultural trade with neighboring countries—Cambodia, Lao PDR, Myanmar, and Malaysia—has become a critical alternative market that helps reduce reliance on traditional export destinations and enhances regional food security. Despite the long-standing implementation of tariff liberalization under the ASEAN Free Trade Area (AFTA), cross-border agricultural trade in the region continues to face significant structural and institutional constraints, including inadequate border infrastructure, complex customs procedures, political instability, and evolving non-tariff barriers. Existing empirical studies on Thailand’s border trade have largely focused on traditional gravity variables or qualitative assessments, while relatively limited attention has been paid to the comparative role of trade facilitation mechanisms and governance-related factors. This study aims to examine the structural and institutional determinants of Thailand’s cross-border agricultural exports and to identify the most effective mechanisms for promoting trade expansion under conditions of logistical constraints and regional uncertainty. By distinguishing between traditional economic drivers and modern trade facilitation and institutional factors, the study seeks to provide policy-relevant insights for strengthening Thailand’s role as a regional food hub.

Methodology: The study employs an augmented gravity model estimated using the Poisson Pseudo Maximum Likelihood (PPML) method with fixed effects. This estimation technique is chosen to address heteroskedasticity, mitigate Jensen’s inequality bias, and accommodate zero trade flows without losing information. The empirical analysis covers the period from 1989 to 2024 and focuses on Thailand’s agricultural exports to its four neighboring countries with shared land borders. Agricultural products are classified into five major groups: live animals and animal products, plant products, animal and vegetable fats and oils, prepared foodstuffs, and rubber and rubber products. The model incorporates conventional gravity variables—such as GDP, population, and distance—alongside border-specific and institutional variables, including the number of border crossing points, the implementation of AFTA, the establishment of the ASEAN Trade Facilitation Joint Consultative Committee (AFTJCC), and governance indicators. Major macroeconomic shocks, including the 1997 Asian financial crisis, the 2008 global financial crisis, and the COVID-19 pandemic, are also controlled for to capture external disruptions affecting regional trade dynamics.

Key Findings: The empirical results reveal that the expansion of border crossing points is the most influential determinant of Thailand’s cross-border agricultural exports, particularly for live animals and animal products. This finding underscores the critical importance of physical accessibility and border infrastructure in facilitating agricultural trade, especially for perishable and time-sensitive products. Among institutional factors, the establishment of the AFTJCC has a significant positive effect on rubber exports, while the impact of AFTA tariff liberalization appears relatively limited across most product groups. This pattern suggests a structural shift from tariff-based barriers toward non-tariff obstacles, such as customs procedures, regulatory complexity, and infrastructure bottlenecks. In addition, the study finds a positive association between political instability in neighboring countries and Thailand’s exports of live animals and plant products, reflecting heightened demand driven by food security concerns during periods of regional uncertainty. Governance-related variables exhibit heterogeneous effects across product categories, indicating that improvements in government effectiveness, political stability, and regulatory quality influence agricultural trade in different ways depending on product characteristics and destination markets.

Policy Implications: The findings suggest that Thailand should prioritize strategic investment in border infrastructure by increasing the number of border crossing points and upgrading temporary checkpoints to permanent facilities, as physical access remains the most decisive factor in promoting cross-border agricultural trade. Given the diminishing marginal impact of tariff liberalization under AFTA, trade policy should increasingly focus on reducing non-tariff barriers through streamlined customs procedures, harmonized sanitary and phytosanitary standards, and enhanced trade facilitation mechanisms. Thailand can further strengthen its position as a reliable regional food hub by ensuring continuity in the supply of essential agricultural products during periods of political and economic instability in neighboring countries. Commodity-specific policies are also recommended, such as reinforcing AFTJCC-related mechanisms for the rubber sector. Finally, improving governance and transparency at border points through digitalization and the full implementation of Single Window systems will be essential for fostering long-term trade trust and sustainable cross-border economic growth.