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19 Jan 2009


EU’s New GSP Program: Opportunities amid Crisis for the Thai Automobile Industry (Business Brief No.2407)

The EU is one of the major economies that Thailand has established automobile trade in both exports and imports over a long time. However, the ongoing global recession that has hit the EU economy is inevitably having an impact on the Thai automobile industry in 2009. Nevertheless, the EU's new Generalized System of Preferences (GSP) program, which came into force recently, should offer some benefits to the Thai automobile industry in the years to come. KASIKORN RESEARCH CENTER (KResearch) has studied the benefits the industry can derive from these GSP privileges, as summarized in the following notes:
In 2009, the EU reinstated their tariff preferences as part of their new GSP program for the period from January 1, 2009, to December 31, 2011, where Thai products in the automotive and transport equipment categories mentioned in their Customs tariff items HS 86 to 89 – particularly item 87, which covers pick-up trucks, passenger cars, vans, motorcycles and parts, etc. – reinstates GSP privileges that were stripped off during 2006-2008. In effect, it is expected that Thailand will have the opportunity to expand exports during the current economic downturn, which can cushion the impact of slowing exports to the EU, to a degree. The export categories where we are expected to gain the most from these new GSP benefits are vans, pickups and motorcycles. Thailand has carried out marketing there on these products for some time, so they are familiar to the EU market. The highest export volume to this region, relative to other regions, can prove this fact and will also facilitate the additional market expansion. GSP tariff reductions will enhance our price advantage, so we seem to be gaining on China, which is a major rival, because their GSP privileges for vehicles have been cut by the EU.
In addition, relevant auto-parts and accessories will gain direct benefits because of the tariff reductions that help decrease the cost of products, thus facilitating market expansion. There are also indirect benefits as cars and motorcycles penetrating the EU market can pave the way for Thai auto-parts and spare parts to the EU in the near future.

Amid the global economic downturn, EU market expansion under the new GSP schedule will be a chance to lessen the impact of the automobile export situation that has been expected. In 2010, when the economy will likely recover, Thai automobile exports to the EU might improve if we maximize the benefits received for this year. For sustainable benefit, it is necessary to be careful and support the use of GSP privileges by monitoring and managing their use overall to ensure that the specified terms and conditions are met, thus preventing GSP cuts in the future.

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