Commerce Ministry targets FTAs with Israel and South Korea
Commerce Ministry, trade statistics over the past nearly 20 years show that Thailand's trade with FTA partner countries has significantly increased.
While the election of Thailand’s prime minister has still to be resolved, political pundits and economists are not expecting long delays in the formation of a new cabinet.
But while this can be considered good news, Thailand is facing new challenges in terms of international trade, both due to increasing trade agreements and an economic downturn in the next 1-2 years. These factors will have an immediate impact on Thailand's trade, which constitutes over 70% of its economy, and will deeply affect Thailand's competitiveness. It is therefore imperative that the new government sets a direction to confront these challenges.
According to Auramon Supthaweethum, director general of the Department of International Trade Negotiations under the Commerce Ministry, trade statistics over the past nearly 20 years show that Thailand's trade with FTA partner countries has significantly increased.
Data on average expansion rates from 2020 to 2022 compared to those of 2002 to 2004 show that Thailand's trade value with FTA partner countries has enjoyed a higher expansion rate than non-FTA trade, which remains lower than the global average. Non-FTA trade expanded by 176%, lower than FTA trade and the global average, which stands at 228%.
FTAs are crucial for Thailand's trade, and the department plans to increase the number of FTA agreements by selecting potential countries or markets assigned0 to various educational institutions or specialised institutes in international trade. They aim to choose eight countries, such as Israel, which has a trade value with Thailand of nearly US$1.4 billion and a GDP of U$522 billion with a relatively small population of 9.9 million. This suggests that the trade value between the two countries can increase in the future.
For South Korea, with a trade value of U$16.52 billion and a population of 51 million, the proportion of trade with Thailand is only 2.8%. However, if GDP is taken into account, it has the potential to reach U$1.66 billion. By having an FTA, Thailand can further increase its trade proportion with South Korea and consequently enhance overall trade value.
Auramon emphasised that current FTA negotiations differ significantly from the past as they now include topics related to the environment. This should make it easier for Thailand to comply with new trade conditions as trade partners.
The expertise of the Thai negotiation team also gives the country a competitive advantage. Thailand already has 14 FTAs with 18 countries and the new government has the capability to initiate nine more new FTA negotiations and elevate existing FTAs, which have been in use for more than 20 years, according to the set objectives.
FTAs in effect cover 61% of global trade and 48% of the world's population. Those under negotiation make up 14%, and those planned for negotiations constitute 11% of Thailand's trade. The goal is to raise the proportion of Thailand's trade covered by FTAs to 82% by 2027. Each ongoing FTA negotiation has a timeframe of 1-2 years, such as the UAE closing in 2023 and the EU closing in 2025.
Considering these factors, the context of using FTAs will adapt to meet new global trade challenges. It involves strengthening the domestic economy by reducing foreign competition through non-tax measures while creating space for competition on the global stage. FTAs are a great opportunity for Thailand to adapt to technological changes and environmental concerns.
Having learned from the past, while there is no surefire formula for success, experience and expertise will allow Thailand to utilise FTAs as a weapon to confront new trade challenges and secure a favourable position in the global trade arena.
