Vietnam's EU deals imperil Thai trade

Thai-made vehicles await shipment at Laem Chabang port in Chon Buri. The government says automotive suppliers should prepare for many car makers to relocate manufacturing facilities to Vietnam.

Thai exports of cars, computers and electric circuits are at risk from Vietnam's trade and investment deals with the EU, says the Trade Policy and Strategy Office.

Thailand has no free trade agreement (FTA) with the EU, which cut the Generalized System of Preferences for Thailand in 2015, so all Thai export products are subject to EU tariffs.

The European Union-Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement (EVIPA) were signed on June 30 in Hanoi with an effective period in 2019.

"This FTA is the most ambitious and comprehensive that the EU has made with a developing country," said Pimchanok Vonkorpon, the office's director-general. "So Vietnam can gain more advantages and benefits than Thailand from both agreements."

In the EVFTA, there is a reduction of customs duties for both territories. Vietnam's tariffs will decline for 65% of EU products, then for all the remainder within 10 years.

The EU will enjoy reduced tariffs on 71% of Vietnamese products, with the remainder getting tariff reductions within seven years.

"The EVFTA covers 99% of exported products from both territories," Ms Pimchanok said.

Under the EVIPA, the EU will help Vietnam develop in terms of investment, law enforcement and transparency in order to attract investment flows.

Ms Pimchanok said automotive suppliers in Thailand should prepare for many car makers to relocate manufacturing facilities to Vietnam.

The local industry must improve efficiency and speed up production of new-generation vehicles, she said.

In addition, the Vietnamese government has been enforcing Decree 116 as a non-tariff barrier to Thai-made automotive products.

Ms Pimchanok said computers, related components and electric circuits also face relocation to Vietnam because the country is now competitive enough to develop its own electronics industry.

Other sectors that could see an impact include garments/textiles, jewellery/accessories, rice and processed seafood. Vietnam has lower wages than Thailand.

The Trade Policy and Strategy Office will monitor the impact of the EU-Vietnam agreements, Ms Pimchanok said.

"Thailand needs to develop skilled labourers and adopt higher technologies and innovations to add value to products and maintain competitiveness," she said.

The office is optimistic that the EU will engage in similar negotiations with Thailand because the bloc wants access to the local market's medicines, cars and alcoholic beverages.

The office said Vietnam-EU trade value in 2017 stood at US$50.43 billion, a 11.6% rise. Vietnam had a trade surplus of $26.17 billion.

Thailand-EU trade value was $44.54 billion in 2017, up nearly 11%. Thailand had a trade surplus of $2.89 billion.