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EU and Thailand cap turbulent decade by boosting ties

September 5, 2022

The deal serves the EU's ambitions to increase its influence in Southeast Asia, as Thailand seeks out diverse trade links. The deal was delayed by almost a decade in the wake of a military coup.

Thai and EU flags
Thailand has sought closer ties with the EU amid the rivalry between Washington and BeijingImage: Viacheslav Chernobrovin/Zoonar/picture alliance

The EU has finally sealed a Partnership and Cooperation Agreement (PCA) with Thailand, its sixth with a Southeast Asian country, as both sides seek to repair relations that frayed following a military coup in Bangkok eight years ago

It may provide the needed momentum to relaunch talks over a full free trade agreement. 

The PCA, which is still awaiting a formal signing, improves bilateral ties on a range of issues, from human rights to counterterrorism. Brussels sees it as yet another step in its path to boosting relations with countries in Southeast Asia, an increasingly important region economically and geopolitically for the bloc. 

Negotiations for an EU-Thailand Free Trade Agreement (ETFTA) were launched in March 2013 but put on hold following a military coup in Bangkok in May 2014, after which bilateral relations remained frosty for several years. The coup also put the brakes on the initial PCA deal — more limited than a full free trade agreement — which had been agreed in 2013. 

Partnership agreement returns to the table

The European Council, the EU's main decision-making body, gave the green light in late 2019 to restart formal talks again following a long-delayed general election in Thailand, which was won by the same military leaders who took power during the coup. 

The first round of preparatory talks for the revised PCA began in July of last year. It was concluded after a seventh meeting this June. The two sides also renewed talks regarding the possible ETFTA. 

EU looks East for free trade deals

"The PCA will enhance the political dialogue on issues of global concern and will give more scope for mutually-beneficial cooperation in a wide number of policy areas," the European External Action Service (EEAS), responsible for the EU's foreign and defense policies, said in a statement. 

"It will be a roadmap, which will positively frame EU-Thai relations in the years to come," it added.

Paola Pampaloni, the deputy managing director of the EEAS, and Chulamanee Chartsuwan, deputy permanent secretary to Thailand's Foreign Ministry, closed the negotiating process for the PCA deal on Friday. 

Pending institutional procedures from the EU and Thailand, it will be formally signed at a later date, David Daly, EU ambassador to Thailand, told DW.

Mutually beneficial deal

The PCA is an "important vehicle to strengthen the dialogue in the economic and trade domain," said Guillaume Rebiere, executive director of the European Association for Business and Commerce in Thailand.

Bilateral trade in goods between the EU and Thailand rose to €35.4 billion ($35.16 billion) in 2021, up from €29.3 billion the previous year, according to EU data. The EU is the second-largest investor in Thailand, after Japan. 

"Thailand is an important trade and political partner and, therefore, this agreement is also important in strengthening the role of the EU within Southeast Asia," Rebiere added. "Both businesses and investors will be encouraged by the signing of this agreement."

The deal makes sense for both sides, noted Trinh Nguyen, a senior economist covering Emerging Asia at Natixis, an investment management firm. "It would signal a boost to relations from both sides as they both are more willing and eager to work with one another to diversify sources of growth and investment," she added.  

An infographic showing economic figures for three Southeast Asian countries

Partners in diversification

For Thailand, long reliant on its vast tourism industry, the decline of Chinese visitors since the pandemic has forced it to rethink its dependence on Beijing and find other sources of growth. Bangkok is also conscious of the need to seek out trade links away from the US and China, two of its main partners. 

"Expanding access to trade and investment with the EU, the largest economic bloc in the world, is part of that strategy," said Nguyen.

The EU is also "warming up" to Thailand as it seeks to diversify from China as geopolitical risks rise and as Brussels increasingly views Beijing as a competitor, she added.

"The willingness to negotiate with Thailand through the signing of the Framework Agreement is part of that growing closer in relations not just to Thailand but also to the rest of Southeast Asia and India," Nguyen said.

In December, the European Union and the Association of Southeast Asian Nations (ASEAN) will hold a summit of national leaders for the first time in Brussels, a milestone in bloc-to-bloc relations that celebrate their 45th anniversary this year. 

A free trade agreement next?

The PCA's conclusion may also indicate that both sides are inching closer toward a free trade agreement (FTA), which would be the third the EU has struck with a Southeast Asian country after landmark deals with Singapore and Vietnam. 

"There is no immediate link between the PCA and the FTA process," stressed Daly, the EU ambassador to Bangkok.  

But judging by how the EU has negotiated FTAs with other Asian countries, the timeline would suggest that a trade deal with Thailand would follow a PCA, said Nguyen. Vietnam, for instance, signed a similar PCA with the EU in 2015, four years before their landmark FTA was approved. "We've still got other hurdles to cross but certainly [an FTA] is closer," she added.

Thai PM Prayut Chan-O-Cha attending a parliamentary debate
The EU restarted talks following a general election in Thailand, which was won by the military leader Prayuth Chan-ochaImage: Chaiwat Subprasom/ZUMA Wire/imago images

Bryan Tse, lead analyst for Thailand at the Economist Intelligence, reckons the FTA would be signed between 2024 and 2026 unless politics "gets in the way."

Bangkok is currently on edge after the country's Constitutional Court ruled last week that Prayuth Chan-ocha, the prime minister, must temporarily step down as it considers whether he has exceeded an eight-year term limit in office that his own government introduced. Prayuth was the military chief who took power after the 2014 coup. 

"The EU and Thailand are not particularly close economically, compared to China, US or other ASEAN members, so this is more of a diversification tactic for both parties and a reflection of the growing importance of Southeast Asia in terms of global trade for other countries," said Tse.

Edited by: Alex Berry