EU Deal Promises Doubled Thai Exports, Booming Economy
Thailand anticipates a significant surge in trade and investment following the expected signing of a free trade agreement (FTA) with the European Union (EU) later this year. The agreement, long sought by Thailand, is poised to reshape the nation’s economic landscape, potentially doubling trade with the EU and attracting substantial foreign investment. This optimistic forecast comes from Somjai Phagaphasvivat, an independent political and economic analyst, who cites a compelling confluence of factors driving this landmark agreement.
The path to this pivotal moment has been challenging. Negotiations, initially suspended following the 2014 coup, resumed after Thailand enacted a new constitution and held elections, fulfilling the EU’s democratic and human rights prerequisites for an FTA. The current momentum, however, is largely attributed to the ripple effects of former U. S. President Donald Trump’s trade policies. These policies, according to Mr. Phagaphasvivat, have spurred both Thailand and the EU to diversify their trade relationships, lessening reliance on the U. S. market. He draws parallels with the expedited FTA negotiations between the EU and the Mercosur bloc (Argentina, Brazil, Paraguay, and Uruguay), previously stalled for over a decade, illustrating the powerful impact of global trade dynamics.
Thailand’s pursuit of this agreement stems from a competitive disadvantage compared to neighboring countries like Vietnam, which already benefits from an EU FTA. Previously, Thailand’s approach to negotiations focused heavily on potential benefits while downplaying potential drawbacks, hindering progress. Mr. Phagaphasvivat emphasizes that acknowledging both the gains and losses inherent in any FTA is crucial for a balanced and ultimately successful agreement. This shift in perspective has paved the way for the current optimistic outlook.
The elimination of import duties, with few exceptions, is expected to be a key driver of increased trade, opening doors for Thai businesses to expand their reach across all 27 EU member states. Currently, trade with the EU represents 8% of Thailand’s total exports, with Thailand consistently maintaining a trade surplus. Mr. Phagaphasvivat predicts this figure could double post-FTA, pointing to the ASEAN Free Trade Area as a precedent demonstrating how such agreements can dramatically boost intra-regional trade.
Beyond trade, the FTA is expected to fuel foreign direct investment (FDI). Companies can leverage Thailand as a production base, exporting goods to the EU under preferential terms, similar to the current scenario with Vietnam. This will likely bolster Thailand’s share of FDI, currently at 15% from EU sources. Furthermore, the FTA will drive up technological standards for Thai products, requiring compliance with stringent EU regulations, including the Carbon Border Adjustment Mechanism. While acknowledging potential challenges for some Thai sectors, such as wine and certain agricultural goods, Mr. Phagaphasvivat underscores the competitive advantages Thailand enjoys in sectors like seafood.
This positive outlook is echoed by government officials. Finance Minister Pichai Chunhavajira recently confirmed the expected completion of the FTA this year, contributing to Thailand’s broader trade strategy. Nalinee Taveesin, chair of the Thai Trade Representatives, emphasized the priority both sides place on these negotiations, recognizing the EU as a significant market with high purchasing power. She highlighted the progress already made, with two chapters—good regulatory practices and transparency—already finalized.
The FTA is not simply about boosting trade and investment figures; it represents a strategic move for Thailand, especially considering its loss of Generalized System of Preferences status with the EU in 2015, a benefit still enjoyed by regional competitors like Indonesia and the Philippines. The agreement will not only enhance Thailand’s competitiveness but also foster the development of domestic regulations to meet international standards. In a globalized economy increasingly shaped by regional trade agreements, the Thailand-EU FTA promises a new era of economic prosperity for the Southeast Asian nation.
