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EU, Thailand eye ambitious trade deal

DW - 24 January 2024

EU, Thailand eye ambitious trade deal
By David Hutt

Europe is building stronger trade partnerships in Southeast Asia, and a trade pact on the table with Thailand is its most comprehensive yet.

This week, the EU will hold a second round of talks on a free trade agreement with Thailand, with Bangkok keen on wrapping up negotiations by early 2025.

The Thai economy, which has been languid for years, could be given a shot in the arm by the trade pact.

The pact would also solidify the EU’s pivot to Southeast Asia, with Brussels already having secured trade deals with Vietnam and Singapore. Other agreements with Indonesia and the Philippines are currently under negotiation.

But the latest discussions between the EU and Thailand are likely to be tense.

Both sides want to protect their own fishery industries, which has proved to be major stumbling block. And Bangkok has said the EU is asking for a more comprehensive and higher-caliber deal than Thailand has entered into with any of its existing free trade pacts.

The first round of negotiations took place last September in Brussels. The EU is Thailand’s fourth-largest trading partner, after China, the US and Japan, and bilateral trade was worth around €32 billion ($34.8 billion) in the first 10 months of 2023.

Speaking after a meeting with the EU-ASEAN Business Council and the European Association for Business and Commerce in December, Thai Commerce Minister Phumtham Wechayachai said he thinks "it’s feasible for the EU-Thailand trade talks to be concluded by 2025, assuming the Pheu Thai party stays in power throughout and has a relatively stable political outlook," said Syetarn Hansakul, senior analyst at the Economist Intelligence Unit.

Pheu Thai is the largest party within the 11-member ruling coalition that controversially came to power last August, following a general election in which the largest nationwide party was prevented from forming a government by military-appointed senators.

"They are keen to have the EU-Thailand free trade agreement signed, hoping that it will be a big win for the coalition government," Hansakul added.

Thailand seeks economic boost
Brussels and Bangkok agreed to relaunch negotiations last March, almost a decade after an earlier talks collapsed because of the EU’s opposition to a military coup in Thailand in 2014.

Thai Prime Minister Srettha Thavisin, who is also finance minister, held talks with European Commission President Ursula Von der Leyen on the sidelines of the World Economic Forum in Davos earlier this month. Other high-ranking trade officials from the European Parliament visited Bangkok in December to discuss the trade pact.

Prime Minister Srettha has put trade deals at the heart of his economic policy. Bangkok intends to conclude free trade talks this year with Sri Lanka, the United Arab Emirates and the European Free Trade Association, a trade bloc of Iceland, Liechtenstein, Norway and Switzerland.

Thailand’s economy has been in the doldrums for several years because of a particularly bad experience during the COVID-19 pandemic. It grew by just 2.5% in 2023.

Among Southeast Asian nations, Thailand currently faces one of the highest import duty rates from the EU, at 11.5%, compared to 5.6% for Malaysia and 8.1% for Indonesia, according to the Economist Intelligence Unit.

A free trade agreement with the EU would boost Thailand’s annual economic growth by 1.2%, while yearly exports and imports would grow by 2.8%, according to the Institute of Future Studies for Development, a Thai nonprofit academic research organization.

EU seeks a ’comprehensive’ deal with Thailand
Chotima Iemsawasdikul, director of Thailand’s Trade Negotiations Department, admitted there are "challenges."

She said a trade agreement with Brussels "would be comprehensive and [of a] high standard in all areas," particularly in intellectual property, state-owned enterprises and market access for government procurement.

These are areas that "have never been committed" to by Bangkok before in its existing free trade agreements, she told DW.

According to sources familiar with the negotiations, Brussels wants Bangkok to make the bidding process for government contracts more transparent. The EU is also looking for better market access for the service sector and improved environmental standards.

Meanwhile, Thai negotiators want the EU to ease restrictions on agricultural and fishery imports, the latter of which is likely the biggest source of contention.

Deal getting caught up on fisheries
Last June, months after the resumption of the trade deal talks, the European Parliament passed a resolution arguing that "a free trade agreement with Thailand could pose a serious threat to the EU canned fish and seafood industry," which is a leading source of wealth and employment in coastal regions.

Equally, Bangkok is wary of impairing its own fisheries industry.

A month after taking office, the Srettha administration said it would review the Fisheries Act, which had cracked down on illegal, unreported and unregulated fishing.

However, fishing industry bodies have said this has created too many regulations and is now impairing the industry, which was worth around €3.3 billion to the Thai economy in 2022.

But almost 90 nongovernmental organizations co-signed a letter in November that argued the Thai government’s potential deregulation of the sector risks seeing the return of day-rate salaries, permitting child labor and the weakening of the punitive measures designed to deter illegal, unregulated and unreported fishing.

In 2019, the European Commission delisted Thailand from the group of "warned countries" in recognition of its progress in tackling illegal, unreported and unregulated fishing, having previously been given a so-called yellow card in 2015.

"Despite the challenges, the Thai government considers establishing the Thailand-EU free trade agreement a top priority," Chotima said.

"Thailand is eager to engage in productive discussions with the EU in the upcoming meetings, aiming to explore innovative and mutually beneficial solutions. Thailand’s preliminary goal is to conclude the deal by 2025," she added.

Edited by: Wesley Rahn

 source: DW