Thailand risks falling behind in trade agreements with the west unless it fixes its democratic deficit

Diplomatic relations between Thailand and the European Union fractured following the 2014 military coup in Thailand, whereupon negotiations for the EU-Thai Free Trade Agreement Negotiations were put on hold. Talks were only reconsidered after the 2019 general elections. 

Now, the potential for a Thai-EU Free Trade Agreement has fractured again, with the German Bundestag’s recent consideration to halt free trade talks between Thailand and the European Union. An MP cited a democratic deficit in Thailand. 

The significance of this debate cannot be overstated.

As a key member of the European Union, Germany can influence other EU member states to halt FTA talks with Thailand. Even if the EU decides to continue talks, the Court of Justice of the European Union had previously held that the EU alone does not have exclusive competence to conclude the EU-Singapore FTA. In other words, all EU member states, including Germany, must also jointly agree to the FTA. 

Although the provisions of the agreement may not be identical to that of an EU-Thai FTA, such a precedent sets gloomy prospects.

According to the European Commission, the EU is Thailand’s third-largest trading partner after China and Japan. The FTA negotiations cover important topics on tariffs, investment, intellectual property, regulatory issues, competition, and sustainable development – all key aspects of the Thai economy. Imports of high-technology parts from the EU, in particular, are crucial for the government’s “Thailand 4.0” long-term industrial policy. 

Furthermore, as negotiations stall, neighboring countries including Vietnam and Singapore have already established FTAs with the EU. Other countries, namely Indonesia and the Philippines, are in the process of negotiations.

The importance of instilling democracy in Thailand is a given. As commonly cited, it is a system that rules by the voice of the majority and supports our basic rights and freedoms. There is however an arguably less discussed but just as critical consequence: democratic domestic regulations ensuring human rights and political stability are amenable to Western investment. 

These principles – liberty, democracy, human rights (including the right to assembly and expression) – are core values of the European Union. Naturally, their common commercial policy required for market integration – the EU’s first and foremost raison d’être – is based on these “uniform principles” per Article 207 of the Treaty on the Functioning of the European Union.

The provision further adds that EU policy will be conducted “in the context of the principles and objectives of the Union’s external action.” In other words, the principles are not only a core part of their internal identity but also of their normative policy outside of the EU. As stated in the 2010 EU Commission Communication Towards a Comprehensive European International Investment Policy, “A common investment policy should also be guided by the principles and objectives of the Union’s external action more generally, including the promotion of the rule of law, human rights, and sustainable development.”

Of course, this policy is not free from controversy – the European Union has been criticized for promoting a moral high ground when there are conflicting positions among member states. This is best seen in the context of the EU-China Comprehensive Agreement on Investment, where the EU’s effort to advocate its values in China has been mostly half-hearted and its empirical policy differs greatly from its documents.

The same argument, however, will not work in the context of the Thai-EU FTA.

Unlike China, Thailand does not have as much leverage. China is a key player in multilateral institutions such as the World Trade Organisation and an indispensable trading partner of the EU. This is best exemplified during the Eurozone debt crisis, when European states actively courted China to buy sovereign bonds. As such, China can refuse to accommodate the EU, citing the principle of non-interference in national issues. By contrast, Thailand is the EU’s 25th largest trading partner, while the EU is Thailand’s 3rd largest trading partner as aforementioned. With such an asymmetrical relationship, political compromise for Thailand will prove much harder. 

What does this mean for Thailand? Essentially, the more we align our democratic values to that of the EU’s, the easier it will be to conclude FTA and other trade issues at large. Indeed, this is not the first, nor second, time that the Thai economy has taken a hit due to socio-political issues. In 2015, the EU issued a “yellow card” after Thailand violated international fishery norms; sanctions were only lifted last year after the Thai government cracked down on Illegal, Unreported and Unregulated Fishing. In that same year, the United States’ State Department put Thailand on Tier 3 of the Trafficking in Persons Report.

Trade and democracy as well as human rights are no longer discrete, binary areas; rather, they are inescapably intertwined. There is a social expectation for FTAs and other forms of trade and investment agreements not to be treated merely to serve business interests. As succinctly put by the 2015 Organisation for Economic Co-operation and Development Policy Framework for Investment, “investment should not be seen as an end in itself.” Democracy, thus, may be the push Thailand so desperately needs to revitalise its floundering economy after the pandemic.

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