Key government advisers and experts are encouraging the government to pursue a free trade agreement with both the United Kingdom and the European Union at this time. A cabinet decision on Thai EU negotiations is due early in 2021 after a study was completed late last year and is currently being reviewed by the Minister of Commerce Mr Jurin Laksanawisit.
A key unit within Thailand’s Commerce Ministry is heralding Brexit as already a golden opportunity for Thai exporters with lower tariff access now in place to the United Kingdom over a wider range of products and a more competitive environment because of new Brexit trade rules and procedures which make trade between the UK and the EU more cumbersome.
As the new Brexit regime for trading between the UK and the European Union embeds itself, Thailand’s trade experts at the Ministry of Commerce are eyeing up the prospect of a future trade deal between both the United Kingdom and the European Union and they like what they see.
Thailand’s trade with the United Kingdom in the first eleven months of 2020 took a battering due to the Covid-19 crisis recording a near 21% drop in exports corresponding to a 26.7% hit on imports.
Trade surplus in the first eleven months of 2020 at over ฿35.7 billion was down 10.8% on 2019 figures
However, the kingdom still recorded a trade surplus of $1.19 billion or ฿35.7 billion which in itself was down by 10.8%. The kingdom exported $2.83 billion in goods and services to the UK in the first 11 months of 2020 making it Thailand’s 20th largest export market.
However, it still only accounted for 1.3% of Thailand’s exports and this was down from 1.6% in 2019.
Brexit trade deal unveiled on Christmas Eve
This week, however, Pimchanok Vonkorpon, the Director-General of the Trade Policy and Strategy Office at the Ministry of Commerce revealed that a close study of the recently announced trade deal between the European Union and the United Kingdom, as well as announced UK tariff structures and rules, show an opportunity for Thailand and Thai exports.
The deal unveiled by UK PM Boris Johnson on Christmas Eve in Downing Street struck many as a breakthrough in that the UK premier managed to achieve a full separation of the UK’s trade affairs from the European Union as well as continued tariff-free trade between the UK and EU bloc
Deal invites competition from third-party countries such as Thailand while lowering taxes on products
From the onset, the new regulatory regime, while it excluded tariffs between the UK and the European Union, did invite competition from third-party countries as the ease of doing business between the two blocs has decreased. Trade between the UK and EU is now a more expensive and laborious process.
In respect of the United Kingdom, there are also gains for Thai firms with a simpler and lower tariff regime for exporters into the UK. Added to this, the new framework makes 732 new product areas exempt from tax in addition to the 792 which existed before the new deal came into effect.
Ms Pinchanock said the research into a proposed free trade agreement between the United Kingdom and Thailand shows that such a pact would boost Thailand’s exports and see a net gain for Thailand’s positive balance of trade between the two countries.
Fiscal Policy Office unit encourages free trade pact between both the UK and the European Union
In December, the Director of the Macroeconomic Policy unit at the Fiscal Policy Office, Pisit Puapa, urged the government to act decisively to implement a free trade deal between the UK and Thailand to fully take advantage of the current opportunity.
He said that such a deal should aim to make trade and commerce easier to conduct between the two countries as well as lowering taxes at both ends. This was how to open up any potential gain. Mr Pisit also encouraged the kingdom to re-energise ongoing talks with the European Union concerning a long-proposed free trade pact.
This was supported by Suphant Mongkolsuthree, the Chairman of the Federation of Thai Industries.
Report on Thai European Union free trade pact being reviewed by the Commerce Minister with cabinet green light for negotiations due early this year
The Department of Trade Negotiation has already presented its report on the effect of a free trade deal between the European Union and Thailand to Minister Jurin Laksanawisit following independent expert analysis. The document has also been made available to the public.
In 2018, two-way trade between the kingdom and the European Union was worth $42 billion but 2020 has seen trade between Thailand and the bloc particularly badly hit by the virus.
Talks with the European Union resumed at the end of 2020 with online video conferences between high-level representatives of the Union in Asia and Thai government officials.
In December, Ms Auramon Supthaweethum, the Director of the Trade Negotiation Department at the Ministry predicted that the cabinet would make a decision on full negotiations between the country and the European Union on a free trade deal in the early stages of 2021.
Thailand will face stiff resistance from a vocal and quite progressive European Parliament to any free trade deal which is finally negotiated on a range of issues from women’s rights in Thailand to the government’s handling of the recent student-led street protests.
Declining trade with the European Union
Thailand’s trade with the EU dropped sharply in 2020 according to the Bangkok based Kasikorn Research Centre despite a rise in exports to the United States up to and including October 2020. Exports overall for the year are expected to have fallen by 7% with tougher conditions in the fourth quarter.
In 2018, Thailand exported $25.67 billion in goods and services to the European Union and imported $16.55 billion. In 2019, two-way trade had dropped by over 16% with $22.11 billion in exports and $15.32 billion for imports respectively.
Thailand is already behind Vietnam and Singapore
The study undertaken by the Institute of Future Studies for Development projected that a free trade pact between Thailand and the 27 member European Union bloc excluding the UK would boost Thai exports and contribute an additional 1.2% to the country’s GDP value at ฿205 billion per year.
Thailand is behind its arch competitor in Asia, Vietnam, which has a free trade deal with both the European Union and the United Kingdom signed, sealed and delivered already. Singapore already has a free trade pact with both the UK and EU bloc.
Thailand lost out when the European Union suspended talks with the kingdom following the 2014 coup.