UK heads towards Brexit and Thailand ponders an FTA with Britain
Thailand is pondering the possibilities of creating a free trade agreement with the UK after British PM Boris Johnson’s historic victory in the UK election last week, which is expected to pave the way for the passage of the ‘Brexit’ separation form the EU soon. The UK will then have to make separate agreements with each individual country. Traditionally these FTA agreements can take up to five years or more to create.
The Thai Director-General of Department of Trade Negotiations, Auramon Supthaweethum, says they now plan to study benefits and impacts from the prospect of the UK leaving the European Union. They will then conduct hearings with all parties involved in order to formulate a strategy on a future FTA with the UK.
On December 12 the British Conservative party won a comfortable majority, winning 364 seats of 650 seats in the House of Commons. PM Boris Johnson is claiming the win as a mandate from the UK voters to go ahead with leaving EU trade bloc by January 31, 2020.
The Conservative Party’s triumph is interpreted as the British voters’ wish to leave the EU in an election that decimated the Labour Party whose Brexit policy was ‘unclear’. The UK government will now have to amend and pass several pieces of law and alter regulations to get the Brexit completed, all in the middle of the holiday ‘silly’ season, as well as speed up the negotiations to start negotiations for an FTA with the EU before the end of next year.
Meanwhile, the Thai government is speeding up the Thai-EU free trade negotiations. Brexit will also prompt Thailand and the EU to renegotiate some trade deals such as the export quota for processed chicken into the EU. Thailand will then have to negotiate a separate chicken export deal with the UK after the UK separation from the EU.
UK is the top 20 trading partners of Thailand, and the second of all EU members after Germany. During the first 10 months of this year, the Thai-UK trade totalled US$5.28 billion. Thailand also exported US$3.28 billion to the UK. Major export items include car and parts, processed chicken, motorcycle and parts, gems and jewelery and integrated circuit board, according to Thai PBS World.
Thailand imported US$2 billion from the UK. Major import items include machinery and parts, crude oil, integrated circuit board, beverages, electrical machinery and parts, medical products and pharmaceuticals.
But the uncertainty surrounding the Brexit and the lacklustre economic performance caused by delays, has dampened Thai trade with the UK over the past year. In the first 10 months of 2019, Thai consignments to the UK contracted by 4.7% compared year on year.
Ms. Auramon says the result of the UK election has sent a positive signal to the market as seen by a rise in pound sterling by almost 2% against the US dollar.
Kasikorn Research Centre says the clearer outlook on Brexit may improve the UK economic sentiment. A more stable UK pound will also ease the inflation pressure because it will reduce the import costs into the UK. Additionally, it will enable the Bank of England to undertake an expansionary monetary policy to boost the economy.
SOURCE: Thai PBS World
