A recent study has found that the implementation of a free-trade agreement (FTA) between Thailand and the European Union (EU) would boost both economies by 2.32 to 3.7 per cent, depending on the scope of trade liberalisation.
A scenario in which Thailand does not have an FTA with the EU but Malaysia and Vietnam do, however, would cost both economies 4.1 per cent, the study found.
The Thailand Development Research Institute (TDRI) study showed that a bilateral FTA with the EU would create tremendous benefits for Thailand within eight years. Not implementing such a pact would see Thailand lose competitiveness to Vietnam and Malaysia, TDRI said, as they have made more progress in negotiating agreements with the bloc.
The feasibility study by the TDRI was funded by the Trade Negotiations Department to assess the possible impacts, positive and negative, of such a pact on Thai businesses.
The study looked at several scenarios. The first assumed that the EU has FTAs with Malaysia and Vietnam, but not with Thailand. TDRI found that the GDP of both the EU and Thailand would be hurt. The EU would have a trade surplus with Thailand of US$513 million (Bt16.5 billion), while imports from Thailand to the EU would drop by 0.4 per cent.
The second scenario assumes Thailand has an FTA with the EU, but retains tariffs of more than 20 per cent on a list of sensitive goods, including rice, bovine meat products, vegetable oil and fats, dairy products and sugar. TDRI found that Thai GDP would increase by 2.32 per cent. The EU would log a trade deficit of $6.9 billion, while imports from Thailand would grow 5.37 per cent. In particular, Thai exports to the EU of cereal grains, as well as meat, leather and food products, would benefit.
The third scenario assumes that tariffs on both sides are eliminated, with liberalisation of seven service industries including air transport, financial services and communication. TDRI found that the GDP would increase by 3.22 per cent. The GDP of the construction sector would increase 17.2 per cent, due mainly to higher domestic sales, while the GDP of the communication sector would grow by 15.4 per cent.
The last scenario envisions additional tariff reductions in the service sector of 40 per cent. GDP would grow by 3.7 per cent, TDRI said, while the EU would face a larger trade deficit with Thailand of $7.5 billion, while its imports of Thai goods would grow by 7.23 per cent.
The TDRI study concludes that an FTA with the EU is advisable. However, to ensure the competitiveness of Thai enterprises after liberalisation, the government must eliminate tariffs gradually and restrict some businesses to Thais, it said. Such businesses would include some in the cultural and social fields. Foreigners wanting to operate in these areas should be required to pass a Thai language test, TDRI advised.
The institute also suggested |the government review the Foreign Business Act.
The study showed that free-trade pact between Thailand and the European Union will help boost the both economy by 2.32-3.7 per cent depending on the tariff deduction and liberalisation, while both economies could drop by 4.1 per cent if Thailand has not had the FTA with the European Union, while Malaysia and Vietnam have.
The study of the Thailand Development Research Institute (TDRI) released recently showed that this bilateral FTA will create highly benefit for Thailand in the next eight years if we signed the contract with the EU. Unless, the FTA would conduct, Thailand may loss our competitiveness to Vietnam and Malaysia as they have further negotiate the agreement with the EU.
The feasibility study by the TDRI is funded by the Trade Negotiations Department aimed to assess the possible impact of this bilateral agreement, both positive and negative on Thai businesses.
Based on different scenarios, the first scenario assumed that the EU has FTA with Malaysia, and Vietnam, while Thailand did not. The study showed the EU and Thailand GDP will drop by 4.1 per cent. The union will obtain larger trade surplus with Thailand worth US$513 million, while import from Thailand will drop by 0.4 per cent.
The second scenario assumed Thailand has FTA with the EU, but still remain some sensitive lists with tariff higher than 20 per cent on rice, bovine meat products, vegetable oil and fats, dairy products and sugar. The GDP will be increased by 2.32 per cent.
The EU will log into trade deficit with Thailand worth US$6.9 billion, while import from Thailand will grow 5.37 per cent. Products export to EU that will enjoy higher opportunities are meat products, leather products, food products, and cereal grains.The third scenario assumed that tariff between both sides will be eliminated to zero with service liberalisation on seven businesses including air transport, financial services, trade, electricity, sea transport, business services, and communication.
The GDP will increase by 3.22 per cent. GDP of the construction sector will increase 17.2 per cent, due mainly higher demand for domestic sales, while GDP for communication sector will surplus by 15.4 per cent.
The last scenario showed additional tariff reduction on service by another 40 per cent. The GDP will grow by 3.7 per cent. The EU will face higher trade deficit with Thailand to $7.5 billion, while import will also grow by 7.23 per cent.
In conclude, the TDRI suggested Thailand to have the FTA with the union. However, to ensure competitiveness of Thai enterprises under the liberalisation, the government needs to gradually eliminate tariffs and restrict some businesses for Thais only. Businesses that should reserve for Thai are a particular career involved with culture and social. If any foreigners would like to do the jobs, they must pass on Thai language testing.
It also suggested the government to review Foreign Business Act and accelerate enforcement the Trade Competition Act.