At the beginning of March the Thai prime minister will make an official visit to Brussels. The agenda for the visit is packed but the core reason is the upcoming EU-Thai Free Trade Agreement (FTA). An extremely important and difficult negotiation process
Even though preparations for the trade agreement started in 2012, with first drafts of an agreement circulating in the Thai ministries, the official announcement in March will mark the opening of the official negotiation rounds.
The EU has been pursuing an FTA with the Association of Southeast Asian Nations (Asean) since 2007. However, in 2010 the trade talks were temporarily suspended and superseded by bilateral talks between the EU and individual Asean member states.
The FTA between the two partners is of high importance for economic, but equally political, ties between the two partners. The EU is Thailand’s second-largest trading partner after Asean. Bilateral trade between the two partners was reported to stand around US$35 billion in 2010.
The EU has already concluded bilateral trade negotiations with Singapore (expected to be ratified this year), while negotiations with Malaysia and Vietnam are envisaged. Indonesia and the Philippines are also preparing for negotiations.
At the moment the EU works closely with Thailand under the framework of the EU-Asean Cooperation Agreement. Thailand enjoys trade preferences with the EU under the Generalised Scheme of Preferences (GSP).
But now it is time to get serious. There is a sense of urgency now on Thailand’s side to get things going. “If FTAs with other Asean nations are completed, Thailand will be left out. Moreover, Thailand faces the possibility of graduating from the GSP programme in 2015, whereby all tariff privileges would be revoked,” the Thai Commerce Ministry said in December last year. A Thai-EU FTA would cover agreements in the trade of goods and services, investment and economic cooperation in 17 areas.
The EU-Thai trade agreement has to be seen in the context of the political developments in Asean as well as in Europe. Europe seems to be slowly emerging from the financial and economic crises, which have cost thousands of jobs and left the EU not only in a financial and economic slump, but also in a fundamental crisis about the direction the EUas an organisation should pursue. In this situation the EU needs stable and reliable trade partners.
Thailand, at the same time, seeks a bigger role in concert with Asean member countries. The Asean region is a dynamic market with some 580 million consumers. And Thailand aims to become the hub and centre of the region.
The negotiations are expected to be tough. While in the past sustainability and environmental aspects played only a subordinate role, these issues are becoming increasingly important in trade negotiations. One can draw some experience from the recent trade negotiations between Europe and Singapore. The agreement highlighted for the first time “green growth,” and has been designed to meet the EU’s “2020 strategy” for a competitive economy. Part of this green approach to trade negotiations is to simplify rules to boost trade and investment in environmental technologies and to promote green public tendering.
This green approach might be a dimension in the trade talks that could be of great benefit for Thailand, which is starting to build a reputation for promoting green aspects of the economy.
Thailand should be confident when going into the official trade talks with the EU. Thailand has proven to be a dynamic economy even in difficult times, quickly recovering from environmental disasters and financial crises alike. Successful negotiations with the EU will bring Thailand one step closer to its aim of becoming the main hub in Southeast Asia.
Alexander Mohr, PhD, is partner for international relations at the European government relations firm Alber & Geiger in Brussels, and was a lecturer on international relations at the Institute d’etudes Politiques de Paris (Sciences Po).