When thinking of Thailand, one may think of its rich cultural heritage and unique history, or maybe of its soulful cuisine and pristine beaches.
Thailand’s coastline certainly does have beautiful vistas. But it is also the host to a strong logistical network and outward-looking markets. Thailand’s geographic position puts it at the cross-roads of major maritime trading routes that span from the Pacific Ocean to Europe and the Persian Gulf, via the Indian Ocean and place it central within a region that is steadily becoming the engine of global economic growth.
The Thai economy is at the heart of a sophisticated and multi-layered international trading system. That is not solely due to visible factors such as its favourable geography. Thailand also offers a legal environment with robust rules for international trade.
Thailand has spearheaded the ASEAN integration process as one of its founding members and the bloc’s second largest economy. This organisation played a crucial role in the shedding of Cold War tensions in Southeast Asia in the 1990s and since then has become the central union for economic cooperation in the entire Asia-Pacific region. On 15 November 2020, ASEAN brought together its external partners within the region (Australia, China, Japan, Korea, and New-Zealand) to sign the Regional Comprehensive Economic Partnership, or RCEP.
The signature ceremony marked a new era for intra-Asian trade. The fifteen Asia-Pacific nations involved agreed to one of the biggest free trade deals in history, due in no small part to the size of the parties involved. RCEP covers a market of 2.2 billion people with a combined size of $26.2 trillion – 30% of the world’s GDP – making it larger in terms of combined output than NAFTA or the EU. RCEP will make the East Asian economic bloc more efficient: estimates say that the agreement could add $209bn to world incomes and $500bn to global trade by 2030.
The legal text of the agreement contains rules which should facilitate the integration of RCEP participants and incentivise companies to expand their global value chains within the Asia-Pacific region. These rules will make deeper integration possible by simplifying importing and exporting and by protecting foreign direct investments amongst its members. RCEP will also play a complementary role to the physical infrastructure projects in Asia that will increase connectivity within the Indo-Pacific.
But the most important aspect of RCEP may yet prove to be something not found within the text of the agreement itself. The agreement was heralded as a “triumph of ASEAN’s middle-power diplomacy.” The economic partnership will lay the basis for strong regional cooperation throughout North- and Southeast Asia.
Importantly, RCEP also marks the first time China is participating in a multilateral trade agreement. Since economic integration is driven by underlying economic forces, the gravitational pull exerted by the economies of heavyweights within the RCEP membership will influence the geopolitics of the region. And Asian regionalisation does not come without its own set of challenges for Europe.
Europe should challenge itself to be proactive in the Indo-Pacific. There have already been encouraging signs, with several European countries such as France and Germany placing ASEAN at the centre of their Indo-Pacific strategies. The EU has concluded bilateral agreements first with Singapore and later with Vietnam in 2019, but a free trade agreement with ASEAN as a bloc remains, for the moment, unrealistic.
In October 2019, the Council of the EU declared that it considers it appropriate for the EU to take steps towards broadening its engagement with Thailand and possibly re-open FTA negotiations.
Thailand has proven itself to be a dynamic force for regional multilateralism through the construction of ASEAN, and more recently through the negotiation of RCEP. The country will continue to shape modern, comprehensive, high-quality, and mutually beneficial trading rules and can do so on a global scale with its European partners. EU-style free trade agreements have the potential to unlock the largest gains for Southeast Asian economies. A trade agreement with Thailand would allow the EU to obtain binding and enforceable commitments on issues such as sustainability.
It only seems a logical next step that Thailand and the EU should re-open trade talks.