Thai exports to major markets are under pressure from the escalating trade war, which is likely to linger through the end of the year.
Moreover, Thai exports may lose market share in the European Union (EU) to neighboring ASEAN countries in the near future, if the EU can conclude bilateral trade deals with them.
In particular, there are expectations of an imminent free-trade agreement between the EU and Vietnam as the talks are nearly wrapped up, with only the investment clause left to be sorted out.
Vietnam – EU exports challenge ahead
The FTA between the EU and Vietnam, signed on the 1st of July, is likely to pose a big challenge for Thai outbound shipments to the EU market.
KResearch views that one of the priorities of the incoming Thai government should be the conclusion of an FTA between Thailand and the EU.
The FTA would serve not only as a mechanism to maintain the market share of Thai exports in the EU, but also support the future development of the Thai manufacturing sector.
The FTA would be an incentive for the retention of existing investments, while also luring new investments from businesses planning to use Thailand as their manufacturing and exporting base to capture high purchasing power markets, the EU in particular.
A clear-cut timeframe would be key to the success of free trade talks between Thailand and the EU, because if the liberalization timeframe in the Thai-EU FTA were similar to that of the FTA agreements between the EU and other neighboring countries, it would benefit Thailand in the long run.
During the initial stage, the FTA would save the tariff costs for importing products into the EU market by USD1 billion per year, opening up new markets for potential Thai exports including processed food, electronics and automotive parts.
Thailand as an attractive destination for high-tech investment
Additionally, the FTA would make Thailand an attractive destination for a new wave of high-tech investment in categories such as integrated circuits, circuit boards, diodes, semiconductors and automotive parts, and enhance the capacity of Thailand’s supply chains to support the manufacturing of advanced-technology products in the future.
Consequently, Thailand would have a better chance of being a regional manufacturing center for innovative high-tech products.
If Thailand and the EU cannot reach an agreement on an FTA deal with a clear timeframe, Thailand could lose an opportunity to upgrade its manufacturing industry towards the technologies of the future. Moreover, Thailand would lose investment money from existing tech businesses to other production bases in ASEAN.
Thus, Thailand might no longer be able to maintain its role as the regional production and export hub of ASEAN.
EU to revive free trade talks with Thailand
Free trade talks between Thailand and the EU started in 2013 but were put on hold after the 2014 military coup that ousted the elected government of Yingluck Shinawatra.
Commerce Ministry to revive Thai-EU FTA talks
The EU is a big market with some 513 million population, and was Thailand’s 4th biggest trading partner last year with 47 billion U.S. dollar in trade value.
BANGKOK (NNT) – To cope with economic uncertainties and fluctuations caused by international trade issues, the government is aiming to establish Free Trade Agreements (FTAs) with other countries as a tool to promote Thai exports.(more…)
Thailand and EU ready to sign a Strategic Partnership
Both sides have endorsed the resumption of FTA negotiations between Thailand and the EU and between ASEAN and the EU. In addition, the Strategic Partnership and Cooperation Agreement is designed to promote bilateral trade and investment.
BANGKOK, 2nd August 2019 (NNT) Thailand and the European Union are ready to sign a draft Strategic Partnership and Cooperation Agreement to promote bilateral trade and investment in the future.(more…)
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