The European Commission this week spoke of an ‘ambitious’ free trade deal with ‘sustainability’ at its core. This particular trade pact is a key one for Thailand’s manufacturing and export sector with the European Union not only being the kingdom’s fifth largest trading partner but also a key market for industries considering Thailand as a base as firms move production from China and Taiwan into the ASEAN region.
Thailand and the European Union are to commence formal talks on a free trade agreement, the European Union confirmed this week following a formal approach in January by the Minister of Commerce Jurin Laksanawisit on a visit to Brussels. However, the elusive trade pact, the absence of which has left Thailand at a disadvantage to both Singapore and Vietnam in attracting inward investment, will take a long time to finalise and the kingdom may well be faced with a range of onerous demands.
Thailand and the European Union, this week, announced the beginning of formal talks towards a free trade agreement between the kingdom and the 27-member bloc.
The decision from the European Union came following a formal request from the Minister of Commerce Jurin Laksanawisit to the European Commission while on a visit to Brussels in January where he met Valdis Dombrovskis, the European Commissioner for Trade who also heads up a body known as Commissioners’ group on an Economy that Works for People.
European Union raises the bar high when it comes to fair trade, labour rights and social responsibility
In a statement from the commission, it talked of an ‘ambitious, modern and balanced’ trade pact which is sure to have an emphasis on subsidiary issues such as social development and human rights as well as reducing barriers to trade between Thailand and the bloc.
The proposed new trade deal will also be aimed at advancing environmental standards and fighting climate change with ‘sustainability at its core’ while being very wide-ranging in particular at addressing the obstacles to an expanded digital sector and the technological access needed to bring about a new green world economy.
The finalisation of a free trade deal with the European Union is a key demand from Thailand’s business sector which to some extent has lost out due to the hiatus created by the 2014 coup with the bloc signing a free trade agreement with Singapore which came into effect in November 2016 while in August 2020, a similar free trade agreement came into force between the EU and Vietnam, a one-party communist state.
Thailand has been developing its trade network under the current government to now include 18 countries
Thailand has since then conducted its own internal analysis of the prospects for a free trade deal with the European Union which does present the kingdom with key challenges as well as opportunities.
Thailand, from the beginning of 2022, has been part of the Regional Comprehensive Economic Partnership (RCEP), the biggest free trade deal in the world between China, the 10-nation ASEAN community and Pacific countries such as Japan, Australia, New Zealand and South Korea.
The pact has already come into force in all 15 countries except for Myanmar which is in the throes of a civil war.
60% of Thailand’s GDP comes from the manufacturing and export sector and an open world for trade is good news for the country’s economy.
Thailand has 14 free trade deals in place spanning 18 countries including the Regional Comprehensive Economic Partnership (RCEP) and in 2021 became the first ASEAN country to sign a trade compact with the United Kingdom when both countries agreed to establish a Joint Trade Committee to facilitate easier and more efficient trade between the kingdoms.
In December 2022, Thailand signed a partnership and cooperation agreement with the European Union as a first step towards the new trade deal.
Minister Jurin requested formally for Thailand and the European Union to open free trade talks in January while on a two-day visit to Brussels for talks
In January, before he visited Brussels on the 25th and 26th, Minister of Commerce and Deputy Prime Minister Jurin Laksanawisit acknowledged how important a free trade pact with the European Union was to Thailand’s future business prospects and particularly to inward foreign investment not just from Europe but from industries currently shifting from China to the Asean countries who require easy access to key markets.
‘Currently, we see it as proper to start the official negotiations on the Thai-EU free trade agreement,’ Mr Jurin explained. ‘The Thai-EU free trade agreement, once implemented, will definitely increase trade volumes between Thailand and the EU and expand trade opportunities for Thai export products.’
However, he warned that the finalisation of the free trade deal would still take some time. It may also address key obstacles given the ancillary demands which will be made by the European Union in areas such as workers’ rights and other social issues.
The European Union pushes to ensure that its trade pacts include provisions related to core principles of the International Labour Organisation (ILO) as well as efforts to combat climate change.
European Union is Thailand’s fifth largest trade partner with the ASEAN bloc emerging as number one
The European Union is Thailand’s largest trade partner after the ASEAN bloc, China, the United States and Japan.
It accounted for $41 billion of trade in 2022 or 7% of the total.
This included exports of $22.7 billion which was a 5.2% improvement on 2021 across a range of products from computers to components, gems and jewellery, air conditioners, rubber and electronic circuit boards.
The European Union is Thailand’s third largest foreign direct investor accounting for 10% of the total while the bloc is the second largest target for Thai outward investment.
Trade deal an opportunity to forge stronger ties between Europe and Thailand which may perhaps benefit European expats and businesses in the country
Thailand is also home to a large expat community of foreign retirees and business people from the European Union which may have implications for the type of broader-based trade pact being proposed in terms of social affairs and reciprocity of benefits with European officials already highlighting the importance of universal health care as a principle and stronger human rights protection.
In figures released by the government just weeks ago regarding the country’s new long-term visa programme offering 10-year visas and privileges to high net worth individuals seeking to either retire, invest and engage in highly skilled workers from Thailand, it was found that 940 of those who applied since late last year up to February 28th out of 2,920 applicants or 32.14%, were European nationals.