The Thailand-EU free trade agreement (FTA), expected to be signed this year, will help double Thailand’s trade with the European Union (EU) from its current level, according to Somjai Phagaphasvivat, an independent political and economic analyst.
Thailand already signed a partnership cooperation agreement (PCA), which is a crucial first step towards a bilateral FTA.
Following the 2014 coup, the EU suspended negotiations with Thailand. The PCA points out that any country entering into an FTA with the bloc must be a free democracy that upholds human rights.
After Thailand enacted a new constitution and held elections, the EU resumed negotiations with the country.
Mr Somjai said a key factor accelerating the Thailand-EU FTA talks is growing pressure from US President Donald Trump’s trade policies, which have pushed both Thailand and the EU to expand their trade relations beyond the US.
He said the FTA between the EU and Uruguay, Paraguay, Argentina and Brazil, for instance, had been at the negotiation stage for more than a decade, with France obstructing its ratification.
However, pressure from Trump’s policies prompted the EU to expedite FTA negotiations with these countries to lessen its dependence on the US.
Thailand has long sought an FTA with the EU because it is at a disadvantage compared with countries that have such agreements, especially Vietnam. The Thai government has committed to securing an FTA with the EU.
“Both Thailand and the EU now have a strong political will to accelerate this FTA,” said Mr Somjai.
He attributed the delay in FTA negotiations with the EU not only to political issues, but also to Thailand’s reluctance to accept the costs associated with an FTA.
“Thailand’s previous approach to the agreement focused solely on the benefits, while resisting acknowledgment of the potential losses. From an absolute perspective, an FTA entails both gains and losses, but ultimately benefits both parties. This balanced approach is key to achieving a successful agreement,” said Mr Somjai.
He said he is confident that after the FTA is signed, two-way trade between Thailand and the EU will increase significantly, as import duties between the two sides will be eliminated, except for a few exceptions. This will enable Thailand to expand its trade volume with all 27 EU member states.
Trade with the EU accounts for 8% of Thailand’s global exports, and Thailand consistently enjoys a trade surplus with the bloc.
In terms of investment, EU investments in Thailand account for about 15% of total foreign direct investment. However, once the FTA is signed, exports to the EU are expected to double, said Mr Somjai.
He cited the example of the Asean Free Trade Area, which led to a sharp increase in exports to other Southeast Asian nations, rising from 8-9% to more than 20% of total exports.
In terms of investment, the Thailand-EU FTA will help boost investment in Thailand.
Countries investing in Thailand can use the country as a production base, establishing Thailand as the country of origin for their goods before exporting them to the EU market.
This is similar to how many countries have invested in Vietnam, which has already signed an FTA with the EU, allowing goods produced there to qualify as Vietnamese-origin products for export to the EU.
In addition, the Thailand-EU FTA will help elevate the technological standards of Thai products, as goods exported to the EU must meet EU-accepted standards.
This will effectively push Thailand to enhance its product standards to comply with the Carbon Border Adjustment Mechanism, the EU’s import standard framework.
However, Mr Somjai warned that some products may put Thailand at a disadvantage compared to the EU, such as wine and certain agricultural goods. Nevertheless, Thailand also has several competitive advantages, particularly in products like seafood.
Finance Minister Pichai Chunhavajira recently said Thailand has FTAs with 23 countries and the Thailand-EU FTA negotiations are expected to be completed this year, expanding Thailand’s market access.
This year Thailand set an export growth target of 4%, less than last year’s 5% growth.
Nalinee Taveesin, chair of the Thai Trade Representatives, said the Thailand-EU FTA negotiations are considered a priority for both parties, as the EU is a large market consisting of 27 countries with high purchasing power and the second-largest economy in the world.
Negotiations have already finalised two chapters: good regulatory practices, which focus on the dissemination and public consultation on regulations; and transparency, aiming to ensure transparency on laws, regulations and procedures related to this FTA.
Both sides are keen to conclude the negotiations as soon as possible, she said.
In 2024, the EU was Thailand’s fourth-largest trading partner, with a two-way trade value of US$43.5 billion, accounting for 7.17% of Thailand’s global trade.
The benefits Thailand will gain from this FTA, aside from expanding trade and investment opportunities with the EU, include enhancing Thailand’s competitiveness now that Thailand has not received the Generalized System of Preferences from the EU since 2015, while other countries in the region, such as Indonesia and the Philippines, still enjoy this benefit.
More importantly, Vietnam and Singapore already have FTAs with the EU.
The FTA should also help attract foreign investment and encourage Thailand to develop its domestic regulatory standards to meet international benchmarks, said Ms Nalinee.