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EU and Thailand cap turbulent decade with a partnership agreement

Bangkok Post | 8 September 2022

EU and Thailand cap turbulent decade with a partnership agreement

The European Union (EU) has finally sealed a Partnership and
Cooperation Agreement (PCA) with Thailand, its sixth with a Southeast
Asian country, as both sides seek to repair relations that frayed following a
military coup in Bangkok eight years ago.

It may provide the needed momentum to relaunch talks over a full free
trade agreement.

The PCA, which is still awaiting a formal signing, improves bilateral ties
on a range of issues, from human rights to counterterrorism. Brussels sees
it as yet another step in its path to boosting relations with countries in Southeast Asia, an increasingly important region economically and geopolitically for the bloc.

Negotiations for an EU-Thailand Free Trade Agreement (ETFTA) were
launched in March 2013 but put on hold following a military coup in
Bangkok in May 2014, after which bilateral relations remained frosty for
several years. The coup also put the brakes on the initial PCA deal — more
limited than a full free trade agreement — which had been agreed in 2013.

Partnership agreement returns to the table

The European Council, the EU’s main decision-making body, gave the
green light in late 2019 to restart formal talks again following a long-
delayed general election in Thailand, which was won by the same military
leaders who took power during the coup.

The first round of preparatory talks for the revised PCA began in July of
last year. It was concluded after a seventh meeting this June. The two
sides also renewed talks regarding the possible ETFTA.

EU looks East for free trade deals

"The PCA will enhance the political dialogue on issues of global concern
and will give more scope for mutually-beneficial cooperation in a wide
number of policy areas," the European External Action Service (EEAS),
responsible for the EU’s foreign and defence policies, said in a statement.
"It will be a roadmap, which will positively frame EU-Thai relations in the
years to come," it added.

Paola Pampaloni, the deputy managing director of the EEAS, and
Chulamanee Chartsuwan, deputy permanent secretary for Thailand’s
foreign affairs, closed the negotiating process for the PCA deal on Friday.
Pending institutional procedures from the EU and Thailand, it will be
formally signed at a later date, David Daly, EU ambassador to Thailand,
told DW.

Mutually beneficial deal

The PCA is an "important vehicle to strengthen the dialogue in the
economic and trade domain," said Guillaume Rebiere, executive director
of the European Association for Business and Commerce in Thailand.
Bilateral trade in goods between the EU and Thailand rose to €35.4 billion
in 2021, up from €29.3 billion the previous year, according to EU data.
The EU is the second-largest investor in Thailand, after Japan.

"Thailand is an important trade and political partner and, therefore, this
agreement is also important in strengthening the role of the EU within
Southeast Asia," Rebiere added. "Both businesses and investors will be
encouraged by the signing of this agreement."

The deal makes sense for both sides, noted Trinh Nguyen, a senior
economist covering Emerging Asia at Natixis, an investment management
firm. "It would signal a boost to relations from both sides as they both are
more willing and eager to work with one another to diversify sources of
growth and investment," she added.

Partners in diversification

For Thailand, long reliant on its vast tourism industry, the decline of
Chinese visitors since the pandemic has forced it to rethink its dependence
on Beijing and find other sources of growth. Bangkok is also conscious of
the need to seek out trade links away from the United States and China,
two of its main partners.

"Expanding access to trade and investment with the EU, the largest economic bloc in the world, is part of that strategy," said Nguyen.

The EU is also "warming up" to Thailand as it seeks to diversify from
China as geopolitical risks rise and as Brussels increasingly views Beijing
as a competitor, she added.

"The willingness to negotiate with Thailand through the signing of the
Framework Agreement is part of that growing closer in relations not just
to Thailand but also to the rest of Southeast Asia and India," Nguyen said.
In December, the European Union and the Association of Southeast Asian
Nations (Asean) will hold a summit of national leaders for the first time in
Brussels, a milestone in bloc-to-bloc relations that celebrate their 45th
anniversary this year.

A free trade agreement next?

The PCA’s conclusion may also indicate that both sides are inching closer
toward a free trade agreement (FTA), which would be the third the EU has
struck with a Southeast Asian country after landmark deals with Singapore
and Vietnam.

"There is no immediate link between the PCA and the FTA process,"
stressed Daly, the EU ambassador to Bangkok.

But judging by how the EU has negotiated FTAs with other Asian
countries, the timeline would suggest that a trade deal with Thailand
would follow a PCA, said Nguyen. Vietnam, for instance, signed a similar
PCA with the EU in 2015, four years before their landmark FTA was
approved. "We’ve still got other hurdles to cross but certainly [an FTA] is
closer," she added.

Bryan Tse, lead analyst for Thailand at the Economist Intelligence,
reckons the FTA would be signed between 2024 and 2026 unless politics
"gets in the way."

Bangkok is currently on edge after the country’s Constitutional Court ruled
on Aug 24 that Prime Minister Prayut Chan-o-cha must temporarily step
down as it considers whether he has exceeded an eight-year term limit in
office that his own government introduced. Gen Prayut was the army chief
who took power after the 2014 coup.

"The EU and Thailand are not particularly close economically, compared
to China, US or other Asean members, so this is more of a diversification
tactic for both parties and a reflection of the growing importance of
Southeast Asia in terms of global trade for other countries," said Tse.

 source: Bangkok Post