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Talking Free Trade

The launch of Thai-EFTA Business Circle in 2020 to push forward the Thailand-EFTA Free Trade Agreement.There is optimism Thailand and the EFTA countries will resume negotiations on a free trade agreement shortly.

Talks have been on ice since 2006, but recent constructive dialogues mean a return to the table is possible in the coming months. When the second round of free trade agreement (FTA) negotiations between Thailand and the European Free Trade Association (EFTA) states were concluded in January 2006, a third session was scheduled for April that year. Political instability in Thailand meant those talks were shelved with little traction being made until recently.

In 2020, the Department of Trade Negotiations hired a firm to study the benefits and impacts of a free trade agreement between Thailand and the EFTA countries. This was a move welcomed by the bloc which already has agreements in force with Indonesia, the Philippines, and Singapore. The study, which was carried out by the Institute of Future Studies for Development, uncovered a number of key benefits. For example, an FTA would grow Thailand’s GDP by 0.179 percent. Under an agreement, Thai exports to the EFTA countries would increase by 38 percent while imports from the EFTA countries would rise by 14.8 percent.

However, implementing an agreement would also come with impediments.“The study has also identified the challenges of an FTA regarding the high expectations on standards and trade regulations, which may result in an obstacle to trade,” Khun Auramon Supthaweethum, Director-General of the Department of Trade Negotiations, pointed out. “An FTA may require an upgrade of certain standards, rules, and regulations in which Thai stakeholders may need some time to adjust and develop capacity as well as to utilise its benefits,” DG Khun Auramon stated. “Therefore, Thai entrepreneurs must prepare to develop and upgrade the standard of production to meet international standards, in which an appropriate adjustment period should be provided.”

She continued, “At present, Thailand is discussing with the EFTA countries on the expectations of the issues to be discussed in the potential FTA and both sides’ readiness to launch an FTA.” This early discourse has been positive and there is a belief that negotiations could be initiated sometime in the next few months.“The discussions are constructive, and the parties are working together to agree on the remaining outstanding issues required before the negotiations can be resumed, including on the scope of and guiding principles for the negotiations,” Norwegian Ambassador to Thailand and Cambodia, H.E. Ms Kjersti Rødsmoen, explained. “We are hopeful that the negotiations can be launched in early 2022.”

According to Ambassador Rødsmoen, negotiations will aim to cover areas such as trade in goods and services; investment; intellectual property rights; competition; government procurement; and trade and sustainable development as well as legal and horizontal issues. “An FTA will remove barriers to trade between the EFTA countries and Thailand, strengthen the economic cooperation, improve the market conditions for businesses and establish a predictable framework to facilitate more trade between our respective countries. Our aim is to conclude a comprehensive and mutually beneficial agreement,” Ambassador Rødsmoen noted.

In addition to being mutually beneficial from a trade and economic standpoint, it is also desirable that an FTA will have a positive impact on the environment. DG Khun Auramon believes it is an excellent opportunity to strengthen cooperation on the Bio- Circular-Green (BCG) economic model by transferring knowledge and expertise about green businesses as well as sharing innovation and advanced technology between entrepreneurs.

“While aiming to promote bilateral trade between the EFTA countries and Thailand, the EFTA countries want to make sure that such increased trade does not come at the expense of people and the environment,” Ambassador Rødsmoen detailed. “Ambitious provisions on trade and sustainable development should therefore be included in the agreement.” Negotiations need to address delicate sectors and industries that each party will want to protect. While these aren’t major obstacles, time is required to find solutions that work for everyone.“The negotiations should also take into account sensitivities on both sides. The EFTA countries are traditionally sensitive in agricultural sectors where local production exists and where, due to challenging farming conditions, producers are not able to compete with world market prices,” Ambassador Rødsmoen stated. “Those issues will nevertheless be addressed during the negotiations to find mutually acceptable solutions.”

Moving Quickly

“We hope that once the FTA negotiations are launched, it will not take too long to finish the negotiations so that we could soon enjoy the benefits of implementation,” DG Khun Auramon said. “We also put a great deal of emphasis on raising awareness and providing useful information on the benefits that could be acquired from an FTA to all stakeholders in order to promote the utilisation of agreements and trade cooperation which will stimulate economic activities and drive the country’s development effectively.”

This includes explaining how the FTA between Thailand and EFTA countries would expand trade and investment opportunities through the elimination and reduction of tariff and non-tariff measures. Another benefit that needs to be made clear to Thai stakeholders is how an agreement provides more choices for consumers and importers of raw materials. Ambassador Rødsmoen added an FTA would eliminate duties on industrial goods, making it easier and cheaper for businesses to export and import products. Its influence is expected to extend far beyond that as well.“Furthermore, it will open markets for service providers and give contractors access to each other’s government procurement markets. EFTA also supports the mutual protection of intellectual property rights and paves the way for investors,” the ambassador said.

Services Led

The services sector accounted for 61 percent of Thailand’s GDP in 2020 and DG Khun Auramon noted it will play a vital role moving forward. Expanding the services trade is a component of the 20- year National Strategy of Thailand with this being an area the EFTA countries have a wealth of experience in. “The services trade can contribute to country-wide competitiveness because of its critical linkages with other sectors of the economy,” DG Khun Auramon said. “Indeed, trade in services is essential for steering the economy and Thailand’s realisation of inclusive growth, enhanced social welfare, and sustainable development. The resumption of FTA negotiations between Thailand and the EFTA countries will undoubtedly make a substantial contribution to Thailand’s services-led growth strategy.”

The Director-General also believes the implementation of an FTA would enhance the level of market opening which can lead to a more stable and predictable business environment for the bilateral services trade.This will be welcomed by the EFTA countries with the Norwegian and Swiss business communities among those who have pushed for the liberalisation of Thailand’s service industry over the years. In particular, there has been a call to allow overseas firms to fully own their Thai subsidiaries without having to seek foreign business licenses or having to fulfil complicated regulations.

“An FTA between Thailand and the EFTA countries is expected to provide enhanced conditions and open up services investment for both markets. This will help unlock the great potential of growth in services trade and investment between Thailand and the EFTA countries,” DG Khun Auramon pointed out. She stressed that an FTA will stimulate more high-quality investments in the Kingdom’s Thailand 4.0 policy and the BCG economic model in addition to supporting the 20-year National Strategy of Thailand. A number of industries under the various plans have been highlighted as a priority. “These targeted industries are medical and healthcare services; tourism; bio-industry; aviation; logistics; and digital technology,” DG Khun Auramon said. “An FTA will also serve as an important opportunity for investors and entrepreneurs in both markets, especially in high-technology fields where the EFTA countries have expertise.”

Facts

  • FTA negotiations between Thailand and the European Free Trade Association could resume in early 2022 The last round of negotiations between the two sides concluded in January 2006.
  • Liberalisation of the services sector will be a key element of any free trade agreement.
  • There is hope a potential FTA will support Thailand’s Bio-Circular-Green Economic Model by transferring knowledge.
  • With an FTA in place, Thai exports to the EFTA countries would increase by 38 percent while imports from member countries would rise by 14.8 percent.
  • Norwegian exports to Thailand were up 34% in 2021 as compared to 2020.
  • Thai exports to Norway were up 98% in 2021 as compared to 2020.

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