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FTA with European Union should get the green light

The Nation, Bangkok

FTA with European Union should get the green light


16 August 2012

Reduction of tariffs between Thai and European markets can be beneficial but only if the concerns of all groups and sectors are heeded and acted upon

A free-trade agreement between Thailand and the European Union seems to be on the cards, offering the prospect of an end to tariff barriers for exports to the EU market. But the devil is in the details. Both sides should weigh the potential benefits to ensure that the proposed agreement is acceptable to all stakeholders.

The scope of the talks and the details should be sufficient to facilitate more open business opportunities on both sides, but the agreement should not require Thailand to enter into a commitment that could adversely affect some sectors. Concerns over the prospective intellectual property protection requirements under the FTA should be incorporated into the formulating of the agreement.

The Thai parliament is set to endorse the scope of the FTA talks in the near future, and will outline the substance of the bilateral trade pact. The parliamentary debate, as required by Section 190 of the Constitution, should allow all parties concerned to air their opinions and offer either approval or dissent on the details of the agreement.

The prospective Thai-EU FTA should help facilitate the flow of goods between the Kingdom and the main European markets after Thailand graduates to tariff privileges under the Generalised System of Preferences by 2014. It is estimated that more than 700 products will be affected after that date.

In theory the Thai agricultural sector should benefit from the establishment of an FTA because Thai farmers have traditionally exported a high volume of produce to the EU markets. The FTA should lower the tariffs for our farm exports and give a price-competitive edge for Thai goods.

In fact, the advent of the FTA is almost inevitable because other countries in the region are trying to come to similar agreements with the EU. Singapore is likely to be the first Asean member-country to strike an agreement there, followed by Malaysia. Vietnam recently announced that it would start FTA talks with the EU. Indonesia and the Philippines are set to start negotiations soon.

The prospective EU FTAs with individual countries have come after the suspension of negotiations between the EU and Asean as a whole. The two sides began discussing an FTA in 2007 but negotiations stalled due to Asean’s insistence on including Myanmar. In addition, the diverse levels of economic development in Asean member-nations make some members wary about entering any agreement as a group.

Since the EU’s FTA negotiations are a comprehensive package covering the liberalisation of trade in goods, investment and services, some sectors have voiced concern that any agreement may affect the livelihood of certain groups of people. Activists have already voiced concern, for example, that stricter intellectual-property protection under an EU FTA could affect the public’s access to affordable pharmaceutical products.

Others are concerned that, even though in theory an agreement should require the EU to lower tariffs for Thai farm produce, in reality this may not be the case. Critics say this is because some EU governments could cite barriers to maintain protection of their own local produce. They might also raise issues such as standards for environmental protection or sanitation. Current economic conditions among EU countries meanwhile could make it difficult for European regional politicians to convince constituents about the benefits of FTAs with individual Asian countries. Under the present circumstances, some Europeans might not be receptive to an inflow of foreign goods and services.

Nonetheless, the prospective agreement will be important for bilateral trade. The EU has been one of Thailand’s traditional markets over the years, and the Western bloc is the second-biggest investor in Thailand after Japan. An agreement could promote further trade and investment between the two sides. The challenge is for governments on both sides to explain to their people the benefits that can be derived from an agreement, and to incorporate and address the concerns of citizens that might arise during FTA talks.