EU-Thailand FTA negotiations resume as Bangkok prepares for elections


The EU recently resumed talks with Thailand on a free trade agreement, while Bangkok is preparing for the elections. Economic relations are an essential part of the European strategy for the Indo-Pacific.

On 15 March, the Commission announced that negotiations on a free trade agreement (FTA) with Thailand would resume after a stop of almost ten years. In 2014, just a year after they were launched, the talks had been suspended in response to the military coup that ended the political crisis generated by the clash between the Cabinet, led by the family of tycoon and former Prime Minister Thaksin Shinawatra, and the ultra-conservative establishment linked to the Monarchy and the Army. Since then, the country has been led by the military's political proxies, who reformed the Constitution in 2017, strengthening the royal powers and putting the Senate under the firm grip of the Army, which appoints all senators. In this scenarioi, pro-Army forces won elections in 2019 and the European Council recommended reviving the cooperation with Bangkok and FTA negotiations ‘in light of Thailand's advances on the democratisation process'. A few days ago, after the announcement of the relaunch of FTA negotiations, Prime Minister Prayut Chan-o-cha (in power since the 2014 coup) dissolved the House of Representatives and started the process that will take the country to the polls in a few months.

It is said that History repeats itself, but this would be an understatement when it comes to Thai politics. FTA negotiations stopped when Thailand's democracy was suspended by the military and are now resuming a few months away from a major test for the country's Institutions. However, it is difficult to share the European Council's optimism: between 2019 and today, Bangkok has been shaken by intense protests calling for curbing the power of the Army and Monarchy and more democracy. These protests have gradually died down after the repressive reaction of the ultra-conservative forces. Therefore, it seems legitimate to ask whether a 'democratisation process' is really underway in Thailand, as European leaders believe. To answer this question, one has to look at the last decades of history of the ‘land of the free’. Elections are held regularly in the country and, almost always, won by supporters of the Thaksin family. The parliamentary majority is able to govern for a few years, even if clashing politically with the supporters of the Army and the Monarchy, but almost never manages to complete a full term. At that point, the incumbent government tries to force its hand by going to snap elections, but the political-institutional clash escalates and causes the military to intervene and overthrow it. A military junta governs for a few years and then allows new elections to be held, with new and suitably modified rules, in the hope that their political proxies will prevail over the pro-Thaksin forces, which, however, almost never happens. This script was repeated with disarming regularity in 2006 and 2014 and may now repeat itself in 2023.

In this context, looking at the health of Thai democracy, it is hard to believe that anything has actually changed since the years immediately preceding 2014. What would happen to the FTA negotiations if yet another coup takes place in Bangkok? Would the EU halt them once again? This is not an easy dilemma for Brussels decision-makers, and one that comes up often, especially in South-East Asia, where trade policy becomes even more 'political'. On the one hand, liberalising trade brings undoubted economic benefits for both sides. Thailand is the second largest economy in ASEAN and currently the fourth largest regional partner for the Union. Like other ASEAN members, Thailand's economy is very promising for highly innovative sectors (renewable energy, electric vehicles, semiconductors and other electronic products). The country could become a key supplier for European companies, but also a market for expansion. For an export-oriented economy like Europe (and Italy), reducing trade barriers is almost always a good opportunity for growth, and Brussels is keen to revive its FTA-based strategy to try to overcome the economic difficulties caused by the energy crisis.

But trade policy goes beyond economic interests. Europe must also take political decisions that require a difficult balancing act. On the one hand, deepening trade ties with countries with 'flickering' or 'apparent' democracy risks legitimising authoritarian regimes and undermining Brussels' international standing. Moreover, trade policy remains a polarising issue between European voters and Member States. On the other hand, recent FTAs contain rules that commit the partners to cooperate in sustainable development (i.e. economic, but also socio-political and environmental) and can positively affect the growth of Thai society. The Commission is well aware of the delicacy of this balance and requires a Sustainability Impact Assessment to be prepared during the negotiation of each FTA in order to better consider the opportunities and risks of trade liberalisation. However, there is a further political aspect to consider in order to understand the recent choice of Brussels. In 2021, the EU launched its strategy for the Indo-Pacific and strengthening (economic and political) ties with the region has become essential in the context of growing international tensions. Trade almost becomes ‘the continuation of politics by other means’. In particular, to contain the Chinese "systemic rival", which is in turn active in strengthening trade relations with ASEAN countries. On this level, Brussels must also adapt to the ongoing trade and technological clash between the United States and China. The political scenario is increasingly complex, but it brings also economic opportunities for ASEAN countries, which can replace Chinese companies in the supply chains that end up in Europe and America. However, the risk remains that the European and American governments, moved by the desire to involve Asian democracies in their action (and trade agreements) to contain the ‘authoritarian’ powers, end up underestimating or, worse, ignoring the difficulties and risks faced by the truly democratic forces of these countries. Future developments in the Thai case will be very important for understanding how Brussels intends to resolve this dilemma.

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