EVFTA to put Thai automotive and computer suppliers at risk?

Thai automotive producers may relocate manufacturing activities to Vietnam

Thai exporters' prospects were anatomised by newswire Bangkok Post which on July 6 cited the assessment of the Trade Policy and Strategy Office (TPSO) of Thailand’s Ministry of Commerce that the nation’s exports have been suffering from tariffs in the EU because the two sides currently do not have a free trade agreement, a situation exacerbated by the EU"s 2015 withdrawal from the Generalised System for Preferences (GSP).

"These agreements are the most ambitious and comprehensive that the EU has made with a developing country," Pimchanok Vonkorpon, the TPSO's general director, said about the EVFTA and the EVIPA. "So Vietnam can gain advantages and benefits over Thailand from both agreements.”

In the afternoon of June 30, Vietnam officially signed the EU-Vietnam Free Trade Agreement (EVFTA) after seven years of negotiation. Accordingly, as soon as the agreement comes into force, the EU will eliminate 85.6 per cent of tariff lines, covering 70.3 per cent of Vietnam’s export turnover to the EU. After seven years since the agreement's entry into force, the EU will abolish import duties on 99.2 per cent of tariff lines, covering 99.7 per cent of Vietnam’s export turnover. For the remaining 0.3 per cent of export turnover, the EU also pledged to provide Vietnam with 0 per cent tariff-rate quota.

Thus, nearly 100 per cent of Vietnamese exports to the EU are set to receive tariff exemption in a short roadmap. This is the most favourable commitment by free trade agreements for Vietnam so far.

Pimchanok also said that Thailand’s automotive suppliers should prepare for many car makers relocating manufacturing activities to Vietnam. In addition, computer and related components, as well as electric circuit production may land in Vietnam because the country has been strong enough to develop its own electronics industry.

"Thailand needs to develop skilled labourers and adopt higher technologies and innovation to add value to products and maintain competitiveness," she said.