Thai Officials Say FTA with EU will be Concluded in Less than Two Years

A "Thai government delegation [to Europe]" announced that a "Thai-EU free trade agreement will be concluded in less than two years, as part of Thailand's commitment towards free trade and competitiveness enhancement" (bolded for emphasis), a 7 March 2013 front page cover story in The Nation reports.  The Bangkok Post also reported on 7 March that free trade talks with between EU and Thailand are "firm" and went on to say: "Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong said the first negotiations on a proposed free trade agreement will take place in Brussels in May. Talks will then be organised at least every quarter, including in Bangkok." 

Past efforts by Thailand to negotiate a comprehensive free trade agreement (FTA) with a major economy have been subject to domestic controversy and have led to mixed results.  Thailand was unable to conclude negotiation of a FTA with the U.S., which insisted on a very robust and comprehensive agreement.  Thailand was able to negotiate a form of FTA with China, but that "FTA" limited to trade in agriculture produce.  Still, Thailand was able to conclude fairly robust FTAs with Australia and Japan.  And now Japan has announced it will join the Trans-Pacific Partnership (TPP) negotiations.  If successful, the TPP will lead to the largest free trade pact in Asia-Pacific.  The U.S. and E.U. are already in free trade negotiations where "everything is on the table".

Notwithstanding these developments, many groups within Thaland have expressed opposition to the proposed FTA between the EU and Thailand.  The Bangkok Post has editorialized against this proposed FTA.  The Bangkok Post, in its article announcing that free trade talks with the EU are "firm", also says many groups are opposed to this FTA because they are: 

…concerned the EU is likely to introduce investor-state dispute provisions. Under these provisions drug companies could claim government health regulations undermine their IP-related investments. This could lead to drug firms suing the government, and may limit the chances of the government taking measures to reduce the cost of medicines.

Actually, an investor-state dispute provision would likely extend to all investors, including particularly foreign participants in Thailand's ambitious plans to improve its infrastructure.  This is an area where Thailand has actually experienced contentious investor-state disputes in the past.

An investor-state dispute provision is a provision in an international trade treaties or international investment agreements that grants investors the right to initiate dispute settlement proceedings against foreign governments in their own right under international law.  Although not without controversy, investor-state dispute resolution provisions are a common feature of the current international commercial terrain.  There are at least 2,000 agreements worldwide with such provisions. And Thailand is already a party to several agreements containing such provisions.  Indeed, Thailand lost one investor-state dispute with a German company.  And, as explained here, Thailand has sent mixed messages on its receptivity to international arbitration in disputes between private parties and Thai government agencies.

To reach agreement on any truly comprehensive FTA, the Thai government will almost certainly need to agree to some form of investor-state dispute resolution mechanism.  The TPP also contains investor state dispute provisions.  Japan's announcement that it will join the TPP negotiations places additional pressure on Thailand to ask to join those negotiations. The Thai government's announcement that it is serious about negotiating an FTA with the EU and its apparent interest in the TPP may signal its recognition that, for Thailand to remain competitive, it must recognize international arbitration as a legitimate means to resolve disputes between private parties and Thai government agencies and discard or make serious reforms to laws such as the Foreign Business Act.

Last Updated: 15 March 2013