Exporters press EU buyers to raise prices to compensate
July 12, 2014 00:00 By Petchanet Pratruangkrai
Thai exporters say they are negotiating with European buyers on increasing retail prices by 3-5 per cent next year, after Thailand loses its tariff privileges under the European Union's Generalised System of Preferences.
Vallop Vitanakorn, vice chairman of the Thai National Shippers Council, said exporters had started to plan for the reality of trading in the EU without the GSP. Some have negotiated with buyers in advance on increasing retail prices because Thailand will need to pay higher tariffs next year.
The EU is scheduled to cut GSP tariff privileges for 723 Thai products on January 1, 2015, after 50 products have already lost the benefits.
However, some European buyers have refused to agree to price increases next year, as their customers are reluctant to pay more amid the continent’s slow economic recovery. That means Thai traders will have to shoulder higher costs from rising tariffs, or risk losing business as European importers seek cheaper goods in other countries.
For some Thai exporters, Vallop said, this would mean shunning the European market, as their profits would be too low.
To ensure business survival, some European importers have suggested that Thai manufacturers move their plants to neighbouring countries such as Cambodia, Laos, Myanmar and Bangladesh, as these are still categorised as least developed countries and will still get GSP privileges in the EU.
Vallop suggested that Thai exporters accelerate shipments before November 25, ensuring that their goods reach EU customs before December 31 – the last day on which the EU will exempt taxes for 723 products from Thailand.
This year, 50 products exported to the EU from Thailand lost their GSP benefits because the export value of each product was higher than US$3 billion (Bt96 billion). They included meat products, bananas, papaya, sugar, processed fishery products, canned fruits, flour, rubber, motorcycles, garments, electronic goods, and automobiles and parts.
The other 723 products will lose GSP privileges next year because Thailand has been re-categorised as a middle-income nation, with average income per capita slightly above the World Bank’s cut-off level for three consecutive years. Currently, annual income per capita is $4,150, above the $3,975 mark.
Vallop said some Thai manufacturers from various industries – garments, footwear, and electronics –planned to expand into neighbouring countries.