Although Thai products will generally face higher tariffs in the 10 countries joining the European Union next month, exporters may benefit by using the new member states as a gateway to the rest of the market, trade experts say.
The tariff structures will be a mixed bag for Thai products, with some enjoying lower rates in the new member states and others being slapped with hefty increases, said Thai Trade Representative Dr Kantathi Suphamongkhon. But Thai companies may be able to compensate by registering their firms in some of the former Eastern bloc countries.
Thai businesses will also have to deal with a plethora of new non-tariff barriers that benefit European companies and can make products from Thailand face the same strict rules that currently apply in existing EU member states. And they will likely face increased competition from firms in those countries, which will no longer be subject to duties from the EU.
The enlargement of the European Union, which takes place on May 1, will add 10 countries: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia.
After expansion the EU's total population will grow to 470 million from 370 million.
The EU's purchasing power as measured by gross domestic product will increase an estimated 4.8 per cent - or another 440 billion euros (Bt20.6 trillion). The GDP of the existing 15 EU members is about Eur 9.1 trillion.
Depending on their products, Thai exporters will find that the EU tariff structure adopted by new members will cut both ways. Kantathi said canned food products including tuna, pineapple and shrimp, which currently enjoy zero-per-cent tariffs in the Czech and Slovak markets will next month face the same 24-per-cent tariff that the rest of the EU applies now.
On the flip side, the current 2.3-per-cent tariff applied to rubber products in the two countries will be reduced to zero and the 7.2-per-cent tariff on silver jewellery products will be lowered to 2.5 per cent. But there is recourse for companies that suffer under expansion of the duties.
â€If we happen to find out that the loss outweighs the benefit from tariff change, we can ask for compensation under the WTO [World Trade Organization] framework from the EU. The EU is willing to provide the compensation if we can prove that our products have really been affected by the enlargementâ€, Kantathi said.
Kantathi said Thai businesses could get around some of those barriers by establishing companies in new member states such as in the Czech Republic and Slovakia, both of which do not require foreign firms to have European partners.
By registering companies and starting manufacturing ventures there, firms would have access to the rest of the EU as well as various forms of funding support from EU authorities.
The biggest threat Thailand faces from the expansion is in its agricultural sector with the EU's addition of Poland. The country, a major agricultural exporter, will have a chance to increase its market share in the EU after it gains membership. In addition, more non-tariff barriers could hurt Thai exports, given that the measures will be applied to 25 countries instead of 15 countries. Agricultural subsidies will cover the new members as well, said Dr Nithinant Visavesuan, economics professor at Thammasat University. “The Thai agricultural sector will surely be affected since the price for agricultural commodities would be reduced if Poland, which is the biggest agriculture producer in the EU, receives the subsidy and dumps its production into the world market,†she said.
The agricultural industry will be affected by the expansion of other more complex non-tariff barriers such as eco-labeling, environmental protection rules, rules of origin and hygienic standards.
â€Those new member states were not our competitors in the said industries but after gaining full EU membership, they will receive benefits from quotas and other non-tariff barriers, the same as existing members receive,†she said.
Nithinant said Thai exporters might not gain as much as expected. “Although a larger number of people will be added [to the EU's population], it does not mean there will be an increase in the purchasing power since the 10 new member states are still less prosperous,†she said.
Source: Thai Press