The entry of 10 new member nations into the European Union will benefit both Thailand and the EU in terms of foreign investment rather than providing a boost to trade volume, academics said yesterday.
Thammasat University political scientist Dr Somjai Phagaphasvivat said that despite the increase in the population of the EU after its enlargement on May 1, trade relations between the EU and Thailand would not increase significantly.
â€Trade will increase within the bloc more than it will between the EU and external nations. However, in order to trade with Asean, they will increase their investments in Asean countries in order to benefit from low-tariff privileges under Afta (Asean Free Trade Area) rather than export directly from the EUâ€, he said.
Somjai added that with the opportunity of single-market enlargement, Thai businesses would face challenges from increasing trade barriers, including higher tariff levels for some products such as canned tuna and tapioca, and also non-tariff barriers such as high standards on imported products.
With low labor and transportation costs in the new member states, Somjai said he expected companies from existing EU member states to increase their investments and sourcing of materials within the 10 new members rather than outsourcing to other regions like Asia.
He added that although China would continue to be of interest to European investors, they would prefer to invest within the bloc in order to avoid exposing trade secrets to China and face the risk of piracy and lower-priced competing products.
He suggested that Thai businesses adjust their strategies by investing in Eastern European countries such as Estonia, Hungary, Latvia, Slovakia and Slovenia, which still have low labor and transportation costs.
Using such countries as production bases would reduce the cost of exporting to the EU, because investing in those countries would also give access to support and lower tariff levels.
Chulalongkorn University economist Dr Sompop Manarungsan said Asean's negotiating power with the EU would be reduced after enlargement, since the focus for trade would initially be within the bloc.
He said the EU would emphasize investment in new member states, since they are in a strategic position to trade with existing EU states. â€With supporting factors of low labor costs and transportation links within the enlarged EU, trade and investment within the bloc will increase tremendously,†he added.
Source: The Nation - Thailand