Thailand resumes FTA talks with the EU - what could this offer the country?

Industry News | | MIC Customs Solutions |

Thailand and the EU are to resume talks into an FTA after they were cancelled when a military coup took power in the ASEAN nation.

Talks between Thailand and the EU on a free trade agreement (FTA) have resumed after a seven-year hiatus. The consequences of fruitful negotiations could be beneficial for both parties, so how could this shift trade in the southeast Asian country, what products are likely to be most affected, and what issues still remain to be solved?

Submitting a negotiating framework

Thailand’s Commerce Ministry is putting together a negotiation framework on a direct FTA with Europe to submit to the nation’s cabinet for approval. An agreement with the 27-state EU represents an opportunity to boost exports to what is Thailand’s fifth most lucrative trading partner.

It comes behind ASEAN, China, Japan and the US, with bilateral trade worth in excess of $33 billion last year. That equates to 7.56 per cent of Thailand’s global trade with computers, jewellery, rubber items, air conditioners, motorcycle components and parts for electrical equipment all being exported to the EU.

Jurin Laksanawisit, the commerce minister, said: “The government has been doing its best to speed up negotiations on a free trade agreement, especially an agreement with the European Union to boost exports, which is the only engine for the country’s economic growth this year.”

Moving away from Beijing and Washington

Original negotiations between Thailand and the EU collapsed in 2014, when a military coup was staged in the country. Completing a deal now would enable the nation to diversify its trade and move it away from being so centered around China and the US.

Paul Chambers, from the Center of ASEAN Community Studies at Thailand's Naresuan University, told DW: "As China becomes a larger economic partner with Thailand, potential dependency is offset by economic relations with the US, Japan and the EU."

The EU already has FTAs with Singapore and Vietnam, giving Thailand the potential to be the third ASEAN nation to sign such an agreement. It’s already an attractive prospect for many European companies to have a base due to its geographical location and large economy.

Access to production opportunities, as well as trade and investment would only be further improved by an FTA.

What stalled the original talks?

Talks between Thailand and the EU to work towards an FTA began in 2013, as the ASEAN country was set to lose access to trade aid via the EU’s Generalized System of Preferences (GSP) scheme. By 2015, the nation was too wealthy to qualify for the GSP scheme to offer low or zero tariffs to developing countries.

In the interim, a military coup had occurred in Thailand, suspending the constitution, cutting ties with the EU and leading to the abandonment of trade talks. While the EU stated in 2017 it would be happy for talks to resume as long as a democratically elected civilian government was formed, it wasn’t until 2019 that a pro-military coalition government was formed after an election.

What are the current sticking points?

In June this year, it was agreed that negotiations could resume and talks are scheduled to take place in 2022. They will be based around a joint understanding document with goods, services, investment, intellectual property, e-commerce and government procurement all on the agenda.

The areas that are most likely to need resolving for the EU include Thailand’s high level of tax levied on alcohol, a lack of transparency in government procurement procedures and market access concerns for a number of industries. It is also unlikely the EU will be willing to increase agricultural and fishing market access for Thai products.

Thailand’s concerns are mainly centered around the EU’s higher regulatory standards and a desire to remove non-tariff barriers. Labor and environmental standards will be highly scrutinized by the EU, with Thailand’s treatment of migrant workers due to be given particular focus.