EU-Vietnam FTA: Implications for Thailand

Abstract

In 2007, the EU launched a region-to-region Free Trade Agreement (FTA) with the ASEAN; however, negotiations were suspended in 2009, and the EU subsequently decided to negotiate bilateral FTAs with individual ASEAN member states. Thailand, a parliamentary democratic country, launched the first round of trade negotiations with the EU in 2013, but they were put on hold due to the military coup in 2014. On the other hand, the EU still continued to negotiate and ultimately concluded the FTA with Vietnam in 2020 despite the fact that Vietnam is one of the world’s five remaining communist states. This has raised skepticism among academics and cast doubt on the EU’s values and its pragmatism. This study aims to find the reason why the EU preferred to negotiate an FTA with Vietnam. The study analyzes the data from historical, geopolitical, and economic perspectives, covering EU’s trade and investment policy after 2012 and assess their implications for Thailand in any future FTA negotiation with the EU.

The findings of the study offer insight into how historical, geopolitical, and economic factors have all influenced the EU’s decision-making processes in negotiating the FTA with Vietnam. From the historical standpoint, history shapes the relationship between EU and Vietnam, in particular the relations between Vietnam and France which acts as the bridge between Vietnam and the EU and vice versa. This also applies to ASEAN as a whole. From geopolitical standpoint, Vietnam’s strategic location in the Southeast Asia and the engagement with Vietnam is an interesting policy option for the EU that wants to play a more proactive role in the region. This engagement would allow the EU to project its influence in the Southeast Asia region and balance against growing Chinese power. From political standpoint, the EU’s adoption of “Principled Pragmatism” as a new guiding principle for its foreign policy and using trade as one of its foreign policy tools, coupled with historical and geopolitical contexts, have underpinned EU’s efforts to conclude trade negotiations with Vietnam. As far as economy is concerned, the study reveals that Vietnam and Thailand share similar attributes to a certain extent as both countries mostly import and export the same type of products to the EU with only some slight differences. It can thus be concluded that the EU’s decision to conclude trade negotiations with trading partners such as Vietnam and Thailand are largely attributed to political reasons as opposed to economic interests. In assessing the implications for Thailand, the study indicates Vietnam’s efforts in negotiating FTA with the EU in various areas. Internal trade promotion policies, politics and international relations play an important role in determining trade negotiations with the EU. Rapidly changing global trends such as Green Deal and Friend-Shoring have amplified the complexity of conditions and factors that determine the pace of FTA negotiations with the EU, which could present a challenge for Thailand.