A free trade agreement between Thailand and the European Union would see new production bases established in Southeast Asia that could also bring down prices of some imports in Australia, according to economists.
Negotiations for the landmark agreement, which aims to improve market reach and promote sustainable development between the two parties, is expected to be finalised by the end of this year.
Warattaya Chinnakum, an assistant professor in Chiang Mai University’s economics faculty, said the deal will benefit Thailand’s position in global markets and increase the EU’s engagement with the Asia-Pacific region.
“This agreement will act as a gateway for Thai businesses to expand their trade with the EU and establish production bases despite geopolitical challenges and conflicts that complicate cross-border operations,” she told Central News.
“This FTA is more comprehensive than earlier ones. It includes sustainable development, government policy reform, intellectual property protection and e-commerce, which will introduce Thailand to new innovations and opportunities for growth.”
This potential trade agreement with Thailand may be able to bring back some of [that] competitiveness.
Both Thailand and the EU are likely to benefit the most from the agreement through their agriculture sectors, Chinnakum said, given their agricultural trade value during the first 10 months of 2024 totalled nearly 136 billion Thai baht, according to Thailand’s Office of Agricultural Economics. She also believed the market reach of the electronic goods and automotive industries would be boosted.
Stanley Cho, an associate professor of economics at the University of New South Wales, said the FTA could allow European car manufacturers to have easier access to the Asia-Pacific market, therefore resulting in lower prices for Australian drivers.
“If [the EU has] a free trade agreement with Thailand and sets up a manufacturing base in Thailand, it might be easier for [car manufacturers] to ship their goods from Thailand rather than from Turkey or Portugal,” he said.
“It might actually also be beneficial for Australian consumers because [of] the lowering of transaction costs.”
However, Cho warned imports are subject to ‘rules of origin’ requirements, meaning they may not get preferential tariff treatment if they were then shipped from Thailand to other countries in the region.
Associate professor Stanley Cho. Photo: supplied.
He also pointed to an existing FTA that Vietnam signed with the EU, which came into effect in 2020, that he said had reduced competitiveness.
“The exports of Thailand were losing their competitiveness because Vietnamese exporters were able to tap into the European Union market without the tariff barriers,” he added.
“This potential trade agreement with Thailand may be able to bring back some of [that] competitiveness.”
The agreement could impact further trade between the EU and Australia, Cho added. Both parties have previously explored the possibility of finalising an FTA to boost exports and job creation, but negotiations collapsed in late 2023.
Other barriers to the agreement being finalised, Chinnakum said, include human rights and environmental challenges, especially given Thailand’s status as a developing nation. She also said measures like the EU’s Carbon Border Adjustment Mechanism – a tariff imposed on carbon-intensive imports, such as steel or cement – can “increase production costs [in Thailand], which can make exports more expensive in the EU market”.
Cho believes the deal could lead to more dialogue within the Association of Southeast Asian Nations, particularly due to their strained relationship with China, and “lead to productivity increases in those markets”.
“Given China’s conflict with its neighbouring countries … it could also be strategically important for the European Union to have better economic ties with Southeast Asian countries,” he said.
Negotiations are expected to continue in Belgium’s capital, Brussels, from March 31.
Main photo courtesy Ted McGrath/Flickr.
UTS journalism students travelled to Thailand as part of The Foreign Correspondent Study Tour, a University of Technology Sydney programme supported by the Department of Foreign Affairs and Trade’s New Colombo Plan, and working with Chiang Mai University strategic communications students in association with Chiang Mai University.
